2017-perc-definitive-is

PETROENERGY RESOURCES CORPORATION 7th Floor, JMT Building, ADB Avenue Ortigas Center, Pasig City

637-2917 Telephone Number

31 December 2016 Fiscal Year Ended

Notice of Regular Annual Stockholders’ Meeting

SEC Form 20-IS Information Statement Pursuant to Section 20 of the Securities Regulation Code Form Type

RATIONALE AND BRIEF DISCUSSION OF THE AGENDA OF THE 2017 ANNUAL STOCKHOLDER’S MEETING (THE “ANNUAL STOCKHOLDERS’ MEETING”)

1.

Call to Order The Chairman of the Board of Directors (or the Chairman of the meeting, as the case maybe) (the “Chairman”) will call the meeting to order.

2.

Determination of Quorum/Report on Attendance The Corporate Secretary (or the Secretary of the meeting, as the case may be) (the “Secretary”) will certify the date when the written notice of the Annual Stockholders’ Meeting was sent to the stockholders as of the record date of May 25, 2017 and the date of publication of the notice in the newspapers of general circulation.

The Secretary will likewise certify the presence of a quorum. Under the By-Laws of the Corporation (the “Corporation’s By-Laws”), the holders of a majority of the issued and outstanding capital stock of the Corporation entitled to vote shall, if present in person or by proxy, constitute a quorum for the transaction of business.

Voting Procedures - Cumulative Voting for Directors Only Section 7 of Article III of the By-Laws of the Corporation provides that at all elections of Directors, each stockholder may vote the shares registered in his name in person or by proxy for as many persons as there are Directors, or he may cumulate said shares and give one candidate as many vote as the number of Directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit, provided, however, that the whole number of votes cast by him shall not exceed the number of shares owned by him as shown on the Company’s stock transfer books multiplied by the whole number of Directors to be elected.

In the same vein, Section 24 of the Corporation Code of the Philippines provides that each stockholder may vote in any of the following manner: 1) 2) 3)

he/she may vote such number of shares for as many persons as there are Directors to be elected; he/she may cumulate said share and give one candidate as many votes as the number of Directors to be elected multiplied by his/her shares; he/she may distribute them on the same principle among as many candidates as he/she may see fit. In any of these instances, the total number of votes cast by the stockholders should not exceed the number of shares owned by him/her as shown in the books of the Corporation multiplied by the total number of Directors to be elected.

The voting procedure for election and approval of corporate actions in which Stockholders’ approval will be required shall be by “viva voce”, unless voting by ballot is decided upon during the meeting.

If by ballot, the external auditor of the Corporation will be requested to supervise the voting procedure.

Question and Answer The Chairman of the meeting will advise the stockholders of the holding of an open forum after the Management’s Report was delivered by the President of the Corporation.

3.

Approval of the Minutes of the last Stockholders’ Meeting held on July 21, 2016 The Minutes of the meeting held on July 21, 2016 are posted at the PetroEnergy Resources Corporation website, www.petroenergy.com.ph. Copies of which will also be distributed to the stockholders before the meeting.

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4.

Approval of Management Report and the 2016 Audited Financial Statements The Company’s audited financial statements as of December 31, 2016 is integrated and made part of the Company’s Information Statement. The Information Statement will be sent to the stockholders at least fifteen (15) business days prior to the ASM, and the same will be posted at the Company’s website at www.petroenergy.com.ph.

A resolution approving the Management Report and the 2016 Audited Financial Statements shall be presented to the stockholders for approval.

The stockholders will be given the opportunity to ask questions or raise concerns.

5.

Confirmation and Ratification of all acts, contracts and investments made and entered into by Management and Board of Directors during the period July 21, 2016 to July 26, 2017 The resolutions approved by the Board in its regular and special meetings refer to acts done by the Board, Corporate Officers and Management in the ordinary course of business. The Company also regularly discloses material transactions approved by the Board. These disclosures are available for viewing and downloading at the Company’s website at www.petroenergy.com.ph.

The stockholders will be requested to ratify all acts of the Board of Directors and Management since the last stockholders’ meeting in 2016.

6.

Election of Seven (7) members of the Board of Directors (including Independent Directors) for the year 2017-2018 At its meeting held on June 15, 2017, the Nomination Committee, as the standing committee of the Board of Directors constituted for the purpose of reviewing and evaluating the qualifications of persons nominated to become members of the Board of Directors (including the independent directors) and pursuant to the provisions of the Corporate Governance Manual of the Company and rules of the Nomination Committee, reviewed the candidates for director to ensure that they have all the qualifications and none of the disqualifications for nomination and election as members of the Board of Directors.

The seven (7) nominees will be submitted for election to the Board of Directors by the stockholders at the Annual Stockholders’ Meeting. The profiles of the nominees are provided in the Definitive Information Statement for the Annual Stockholders’ Meeting.

7.

Appointment of the Company’s External Auditors The Company’s Board Audit Committee assessed and evaluated the performance for the previous year of the Company’s external auditor, SYCIP GORRES VELAYO & CO. (SGV). Based on the Board Audit Committee recommendation, the Board of Directors will recommend the reappointment of SGV as the Company’s external auditor for 2017.

SGV is one of the top auditing firms in the country and is fully accredited by the Securities and Exchange Commission (SEC).

A resolution for the appointment of the Company’s external auditor for 2017 shall be presented to the stockholders for approval.

8.

Fund-raising transaction of up to One Billion Pesos (P1,000,000,000.00) to fund the Renewable Energy Projects of the Company’s subsidiaries and/or affiliates and for general corporate purposes The Company plans to raise up to One Billion Pesos (P1,000,000,000.00) by offering unissued primary common shares at terms and conditions to be determined and disclosed accordingly. The contemplated fund-raising transaction may be undertaken through any of the following exercises: a. Stock Rights Offering, or b. Follow-on Offering, or c. Private Placement Transaction.

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The shares subject to the planned fund-raising will represent 20% to 35% of the issued and outstanding common shares of the Company after the offer.

The proceeds from such fund-raising will be utilized to fund the construction of new and expansion of existing renewable energy projects and for general corporate purposes. The Company's Board of Directors will be tasked to assess and decide on the type of fund-raising exercise, offer parameters, and such other details related to the fund-raising transaction.

The new shares that would be issued arising from the aforementioned fund-raising activity shall be subject to the registration requirements of the SEC and listing and disclosure rules of the PSE. 9.

Other Matters The Chairman of the meeting will inquire whether there are other relevant matters and concerns to be discussed.

10. Adjournment Upon determination that there are no other relevant matters to be discussed, the meeting will be adjourned on motion duly made and seconded.

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PETROENERGY RESOURCES CORPORATION INFORMATION STATEMENT

A. GENERAL INFORMATION

1.

Date, Time and Place of Meeting of Security Holders

The Regular Annual Stockholders’ Meeting of PetroEnergy Resources Corporation will be held at Rooms 526-528 YIAS, Level 5, Podium 4, RCBC Plaza, Ayala Cor. Gil J. Puyat Avenues, Makati City on Thursday, July 26, 2017 at 1:30 p.m.

Mailing Address – 7th Floor, JMT Building, ADB Avenue, Ortigas Center, Pasig City The approximate date on which this Information Statement is first to be sent or given to security holders is on July 5, 2017.

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

2.

Dissenter’s Right of Appraisal

There are no corporate matters or actions that will entitle dissenting stockholders to exercise their right of appraisal as provided in the Title X of the Corporation Code.

Although the following actions are not among the matters to be taken up during the 2017 Regular Annual Stockholders’ Meeting, the stockholders are herein apprised of their appraisal rights pursuant to Title X of the Philippine Corporation Code. A stockholder shall have the right to dissent and demand payment of fair value of the share in case he voted against the following proposed corporate actions: (a) in case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholders or class of shares, or of authorizing preferences in any respect superior to those outstanding shares of any class, or extending or shortening the term of corporate existence; (b) in case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets; and (c) in case of merger or consolidation.

The appraisal right may be exercised by the dissenting stockholder by making a written demand for payment of the fair value of his shares on the company within thirty (30) days after the date on which the vote was taken and within ten (10) days after demanding payment on his shares, he shall submit the certificate of stocks representing his shares to the company for notation thereon that such shares are dissenting shares. If the proposed corporate action is implemented and if there is agreement as to the fair value of the shares, the company shall pay the fair value of the shares to such stockholder upon surrender and transfer of the certificate of stocks. The fair value of the share shall be determined as to the day prior to the date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate actions. Provided, that no payment shall be made to any dissenting stockholder, unless the company has unrestricted retained earnings in its books to cover such payment. If within a period of sixty (60) days from the date of the corporate action was approved, the withdrawing stockholder of the company cannot agree on the fair value of the shares, it shall be determined and appraised by three (3) disinterested persons, one of whom shall be named by the dissenting stockholder, another by the company and third by the two previously chose. The findings of the majority of the appraisers will be final and the award shall be paid by the company within thirty (30) days after the award is made. Upon payment of the agreed or awarded price, the stockholder shall forthwith transfer his share to the company. From the time of demand for payment of the fair value of the stockholder shares, all rights accruing to such shares, including voting and dividend rights shall be suspended.

None of the items in the Agenda of the meeting entitles a dissenting stockholder to appraisal right.

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3.

Interest of Certain Persons in Matters to be Acted Upon

The incumbent directors or officers of the Company, since the beginning of the last fiscal year, do not have substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon.

None of the incumbent directors informed in writing that he/she intends to oppose any action to be taken during the annual meeting of the stockholders.

B. CONTROL AND COMPENSATION INFORMATION

4.

Voting Securities and Principal Holders Thereof: a)

Number of Shares Outstanding as of May 31, 2017:

410,736,330

Number of Vote each share is Entitled:

One (1) vote per share

b)

All stockholders as of May 25, 2017 are entitled to notice and to vote at the Regular Annual Stockholders Meeting.

c)

Of the total outstanding common capital stock as of May 31, 2017, 409,260,246 or 99.64% are owned by Filipino citizens, while 1,476,084 or 0.36% are owned by Foreigners.

d)

Manner of Voting

Section 7 of Article III of the By-Laws of the Corporation provides that the stockholders may vote at all meetings the number of shares registered in their respective names either in person or by proxy executed in writing. Section 6 of the same Article provides that no proxy shall be recognized unless presented to the Secretary for inspection and registration at least three (3) calendar days before the date of said meeting. The By-Laws of the Corporation does not require notarization of proxies.

In the same vein, Section 24 of the Corporation Code of the Philippines and Section 7, Article III of the Corporation’s By-Laws provide that each stockholder may vote in any of the following manner: 2)

he/she may vote such number of shares for as many persons as there are Directors to be elected;

3)

he/she may cumulate said shares and give one candidate as many votes as the number of Directors to be elected multiplied by his/her shares;

4)

he/she may distribute them, on the same principle, among as many candidates as he/she may see fit. In any of these instances, the total number of votes cast by the stockholders should not exceed the number of shares owned by him/her as shown in the books of the Corporation multiplied by the total number of Directors to be elected.

e) Security ownership of certain record and beneficial owners and management.

1)

Security ownership of certain record and beneficial owners of more than 5% of Registrant securities as of May 31, 2017:

Title of Class Common

Common

Common TOTAL

Name, Address of record Owner and relationships With the Issuer PCD Nominee Corp.

G/F MSE Bldg., 6767 Ayala Ave., Makati City House of Investments, Inc. 3rd Flr., Grepalife Building, 221 Sen. Gil J. Puyat Ave. Makati City Others

Name of Beneficial Owner and relationship with the record owner PCD Nominee* (Various stockholders)

Citizenship Filipino

No. of Shares Held 373,809,014

% 91.01%

House of Investments, Inc. (Mr. Medel T. Nera, President and Chief Executive Officer)

Filipino

21,805,861

5.31%

(Various stockholders)

Filipino

15,121,455 410,736,330

3.68% 100.00%

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*Under

i.

PCD account, the following companies owned more than 5%: RCBC Securities – 187,123,498 or 45.56% of the Company’s outstanding capital stock. The current nominee of RCBC Securities, Inc. is Mr. Raul M. Leopando. (Under RCBC Securities, Inc. with 5% of the Registrant securities). The breakdown of the shareholdings are as follows: a. b. c. d.

GPL Holdings, Inc. – 80,418,121 shares or 19.58% House of Investments, Inc. – 70,223,705 shares or 17.10% RCBC Capital, Inc. – 23,403,105 shares or 5.70% Other Stockholders – 13,078,567 shares or 3.18%

ii.

RCBC Trust and Investment Division – 59,917,115 or 14.59% of the Company’s outstanding capital stock. RCBC Trust and Investments are Trust Accounts between RCBC and Beneficial Owners. The corporate acts of RCBC are carried out by its management through the guidance of its Board of Directors. Ms. Helen Y. Dee is the current Chairman of the Company.

2)

Security Ownership of Management (as of May 31, 2017):

The following are the number of shares owned and of record by the Directors, the Chief Executive Officer and each of the key officers of the Company and the percentage of shareholdings of each: Title of Class Common Common

Common Common Common Common Common Common Common Common Common Common

Name of Beneficial Owner Name and Position Helen Y. Dee Chairman Milagros V. Reyes President/Director Basil L. Ong Independent Director Cesar A. Buenaventura Independent Director Raul M. Leopando Director Yvonne S. Yuchengco Director/Treasurer Eliseo B. Santiago Independent Director Francisco G. Delfin, Jr. Vice President Samuel V. Torres Corporate Secretary Arlan P. Profeta Asst. Corporate Secretary Carlota R. Viray AVP for Finance Maria Victoria M. Olivar AVP for Technical

Total

Amount and Nature of Beneficial Ownership Direct 15,993 Indirect 3,316,168

Citizenship

Percent of Class

Filipino

0.81%

Indirect

105,695

Filipino

0.03%

Direct Direct Indirect

1 1,300 85,110

Filipino

-

Filipino

0.02%

1

Filipino

-

Indirect

252,746

Filipino

0.06%

Direct Direct Indirect

1 55,000 27,500

Filipino

-

Filipino

0.02%

-

Filipino

-

-

Filipino

-

Filipino

0.01

Filipino

-

Direct

Direct Indirect Indirect

6,216 48,108 10,000 3,923,839

0.95%

As of May 31, 2017, the Company’s directors and executive officers owned an aggregate of 3,923,839 shares equivalent to 0.95%. f)

Voting Trust Holders of 5% or more

The Company is not aware of any voting trust or similar arrangement among persons holding more than 5% of a class of shares. g)

Changes in Control

There had been no change in the control of the Company since the beginning of last fiscal year. The Company has no existing voting trust or change in control agreements.

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5.

Directors and Executive Officers:

The members of the Board of Directors are elected at the general meeting of stockholders, who shall hold office for a term of one (1) year or until their successors shall have been duly elected and qualified.

The Board Committee members and other Officers of the Company, unless removed by the Board of Directors, shall serve as such until their successors are elected or appointed. a.

Directors and Executive Officers

The following are the names, ages, positions and periods of service of Directors and Executive Officers: Name Helen Y. Dee Cesar A. Buenaventura Basil L. Ong Milagros V. Reyes Yvonne S. Yuchengco Raul M. Leopando Eliseo B. Santiago Francisco G. Delfin, Jr. Samuel V. Torres Arlan P. Profeta

Age 73 86 64 75 63 65 66 54 52 43

Position Chairman Director / Independent Director / Independent Director / President Director / Treasurer Director Director / Independent Vice President Corporate Secretary Asst. Corporate Secretary

Citizenship Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino

Period of Service 2001 to present 1998 to present 2011 to present 1998 to present 2004 to present 2010 to present 2013 to present 2008 to present 2006 to present 2008 to present

Business Experiences During the Past five (5) Years: Directors Ms. Helen Y. Dee, 73, Filipino, is presently the Chairman of House of Investments, Inc., Rizal Commercial Banking Corporation, RCBC Excom Forex Brokers Corporation, Landev Corporation, Mapua Information Technology, Inc., Hi-Eisai Pharmaceuticals, Inc., Pan Malayan Realty Corporation, RCBC Savings Bank, Merchants Bank, La Funeraria Paz-Sucat, Malayan Insurance Company, National Reinsurance Corp of the Philippines, Xamdu Motors, Inc., Seafront Resources Corporation, Manila Memorial Park Cemetery, Inc., Petrowind Energy Inc. and Malayan High School of Science, Inc. She is the Chairman/President of Hydee Management & Resources, Inc.; Financial Brokers Insurance Agency, Inc., RCBC Leasing and Finance Corporation and Mijo Holdings, Inc.; She is also Chairman and CEO of Tameena Resources, Inc. She is the President of Moira Management, Inc., YGC Corporate Services, Inc. and GPL Holdings, Inc. She is the Vice Chairman of Pan Malayan Management and Investment Corporation and West Spring Development Corporation and Vice President of A.T. Yuchengco, Inc. She is also a Member, Board of Trustees of Mapua Institute of Technology, Inc. a leading engineering school in the Philippines, Malayan Colleges Laguna, Inc and Philippine Business for Education, Inc. She also sits in the Board of the following companies, Phil.

Long Distance Telephone Company; South Western Cement Corp., Great Life Financial Assurance Corp., MICO Equities, Honda Cars Philippines, Inc., Isuzu Philippines, Inc., EEI Corporation, A.Y. Holdings, Inc. Pan Malayan Express, Honda Cars Kalookan, Sun Life Grepa Financial, Inc., Philippine Integrated Advertising Agency, Inc., iPeople, Inc., Y Realty, Inc., Luis Miguel Foods.

Mr. Cesar A. Buenaventura, 86, Filipino, O.B.E., has been holding the following positions: Chairman at Buenaventura, Echauz and Partners, Inc., Mitsubishi Hitachi Power Systems (Phils.), Inc. Vice Chairman of DMCI Holdings, Inc. He is a director of various companies such as: Pilipinas Shell Petroleum Corporation, DM Consunji, Inc., iPeople, Inc., Semirara Mining Company; Concepcion Industrial Corp. and The Country Club. He is also a Founding Chairman of Pilipinas Shell Foundation, Inc. Mr. Cesar A. Buenaventura has always possessed the qualifications and none of the disqualifications of an independent director.

Mr. Basil L. Ong, 64, Filipino, currently member of the board of several companies such as:

Transnational Diversified Group, Inc., Adventure International Tours, Inc. (Philippine representative of American Express, Inc.), Planet Sports, Inc. (Philippine Licensee and Operator of Athlete’s Foot Stores, Nike Stadium Stores and Kidz Station Stores) and Wordtext Systems, Inc. (WSI) and W.S. Pacific Publications, Inc.

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Ms. Milagros V. Reyes, 75, Filipino, currently holds the following positions: President and Director of Seafront Resources Corporation; PetroWind Energy Inc., PetroSolar Corporation, President/Chairman of PetroGreen Energy Corporation, Chairman of Maibarara Geothermal, Inc., Director of iPeople, Inc., Director and Treasurer of Hermosa Ecozone Development Corporation. She previously served as President of Petrofields Corp. (now iPeople, Inc.); Senior Vice President of Basic Consolidated, Inc. (formerly Basic Petroleum and Minerals, Inc.); Vice President and Chief Operating Officer of Mapua Institute of Technology, Inc.; Director and Consultant of PNOC-EC. Yvonne S. Yuchengco, 63, Filipino, is the President/Director of Malayan Insurance Company, Inc., Mico Equities, Inc., Philippine Integrated Advertising Agency, Inc., Alto Pacific Corporation, RCBC Land, Inc. She also holds the position of Chairperson of First Nationwide Assurance Corporation, The Malayan Plaza Cond. Owners Association, Inc., RCBC Capital Corporation and XYZ Assets Corporation. Chairperson/President of Royal Commons, Inc., Y Tower II Office Cond Corp., Yuchengco Tower Office Condominium Corp. Director/Treasurer and CFO of Pan Malayan Mgm’t. & Inv’t. Corp., Director Seafront Resources Corporation; Honda Cars Kalookan, Mona Lisa Development Corporation, Asst. Treasurer, Enrique T. Yuchengco, Inc.; Member, Board of Trustees AY Foundation, Inc, Mapua Institute of Technology, Inc., Phil-Asia Assistance Foundation, Inc., Yuchengco Museum, Inc. She is a member of Advisory Committee of Rizal Banking Corporation. She also sits in the board of several companies such as: House of Investment, Inc., HYDee Management and Resource Corp., iPeople, Inc., La Funeraria Paz, Inc.-Sucat, Luisita Industrial Park Corp., Malayan College Laguna, Inc., Malayan Colleges, Inc., Malayan High School of Science, Inc., Malayan Insurance (H.K.), Malayan International Insurance Corporation, Manila Memorial Park, Inc., National Reinsurance Corporation of the Philippines, Pan Malayan Express, Inc., Pan Malayan Realty Corporation, Asia-Pac Reinsurance Co., Ltd., AY Holdings, Inc., DS Realty, Inc., Pan Pacific Computer Center, Inc., Shayamala Corporation and YGC Corporate Services, Inc. Mr. Raul M. Leopando, 65, Filipino, is currently the Consultant of RCBC Capital Corporation, Chairman of the Board and Nominee to the Philippine Stock Exchange of RCBC Securities, Inc., Former President and Director of Investment Houses Association of the Philippines (IHAP), Former President and CEO of RCBC Capital Corporation, Member, Board of Directors of the following, RCBC Capital Corporation, RCBC Securities, Inc., Maibarara Geothermal, Inc., RCBC Bankard Services, Inc.. and Seafront Resources Corporation.

Mr. Eliseo B. Santiago, 66, Filipino, was former Chairman of the Board of Clark Development Corporation. He sits in Board and is a member of the Executive Committee of Isla Petroleum and Gas Corporation. He is also an Independent Director of Supply Oilfield Services, Inc. Formerly, Chief Executive of the Shell Eastern Caribbean Group of Companies covering Supply & Trading, Sales & Marketing and Chemicals businesses of the Shell Group in 15 island countries, based in Barbados; Managing Director of Pilipinas Shell Petroleum Corporation; Senior Adviser to the Regional Managing Director for Asia Pacific, based in London; Country Chairman of the Shell companies in Thailand and concurrently the Vice President for Retail for the ASEAN countries and Hongkong, based in Bangkok; Country Chairman of the Shell companies in the Philippines in addition to his regional Retail Sales and Operations for the East, based in Manila.

Executive Officers: MILAGROS V. REYES, 75: Other Business Experience: President/ Director President/Chairman Chairman/Director Director Director/Treasurer Former Senior Vice President Former Director

President and CEO (1998 to present)

Seafront Resources Corporation, PetroWind Energy Inc. PetroSolar Corporation PetroGreen Energy Corporation Maibarara Geothermal, Inc. iPeople, Inc. Hermosa Ecozone Dev’t. Corporation Basic Petroleum and Minerals Corporation PNOC-EC

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FRANCISCO G. DELFIN, JR. 54: Other Business Experience: President / Director Vice President / Director Former Undersecretary Former Assistant Secretary Former Professor, Public Administration & Governance Geophysics Supervisor

SAMUEL V. TORRES, 52

Vice President (2008 to present)

Maibarara Geothermal, Inc. PetroGreen Energy Corporation, PetroWind Energy Inc. and PetroSolar Corporation Department of Energy Department of Energy University of the Philippines, Diliman PNOC-EDC

Corporate Secretary (2006 to present)

Other Business Experience: General Counsel/Corporate Secretary AY Foundation, Alto Pacific Company, Inc. (Formerly: The Pacific Fund, Inc.), Bankers Assurance Corp., FBIA Insurance Agency, Inc., Bluehounds Security & Invt.

Agency, Enrique T. Yuchengco, Inc., First Nationwide Assurance Corp., GPL Holdings, Inc. GPL Cebu Tower Office Cond. Corp., GPL Holdings, Inc., Grepaland, Inc., Grepa Reality Holding Corporation, Hexagon Integrated Financial & Insurance Agency, Hi-Eisai Pharmaceutical, Inc., Honda Cars Kalookan, Inc, House of Investments, Inc., Hexagon Integrated Fin. Ins. Agency, Inc., Hexagon Lounge, Inc., iPeople, Inc., Investment Managers, Inc., Landev Corporation, La Funeraria Paz-Sucat, Inc., Malayan High School of Science, Inc., Malayan Insurance Co., Inc., Mico Equities, Inc., Malayan Colleges, Inc., Malayan Colleges Laguna, Inc., Malayan Securities Corporation, Mapua Information Technology Center, Inc., MJ888 Corporation, Mona Lisa Development Corporation, Pan Malayan Management & Investment Corporation, Pan Malayan Realty Corporation, Pan Malayan Express, Inc., Pan Pacific Computer Center, Inc., People eServe Corporation, PetroEnergy Resources Corporation, Philippine Integrated Advertising Agency, Inc., Royal Commons, Inc., RCBC Forex Corporation, RCBC Realty Corporation, RCBC Land, RCBC Securities, Inc., RCBC Bankard Services Corporation, RCBC Securities, Inc., RP Land Development Corporation, Sun Life Grepa Financial, Inc., Yuchengco Museum, YGC Corporate Services, Inc., Y Realty Corporation, Y Tower II Office Condominium Corp., Yuchengco Tower Office Condominium Corp. and Xamdu Motors, Inc.

ARLAN P. PROFETA, 43 Other Business Experience: Corporate Secretary

Asst. Corporate Secretary (2008 to present)

Corporate Secretary and AVP

Maibarara Geothermal, Inc. PetroGreen Energy Corporation PetroSolar Corporation PetroWind Energy Inc.

Asst. Corporate Secretary Formerly, Tax Manager

Seafront Resources Corporation Punongbayan & Araullo

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b.

Legal Proceedings

The Company is not aware of any legal cases, presently or during the last five (5) years, involving the present members of the Board of Directors or Executive Officers or their property before any court of law or administrative body in the Philippines or elsewhere. Moreover, the Company has no information that the above named persons have been convicted by final judgment of any offense punishable under the laws of the Philippines or of any other country. c.

Significant Employees

The Corporation has no employee who is not an executive officer that is expected to make a significant contribution to the business. The Corporation values its human resources. It strives to develop and maintain a safe, healthy, challenging, rewarding, participative, and fair working environment for all employees, and intends to utilize their full talents and expertise through effective selection, mentoring and development. The Company likewise seeks to offer career opportunities to qualified employees, regardless of gender, belief, ethnic or regional origin, and physical condition. It expects each employee act as a team player and do his or her share in achieving the Corporation’s set goals. d.

Family Relationships

Ms. Helen Y. Dee and Ms. Yvonne S. Yuchengco are siblings. e.

Certain Relationships and Related Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions or the parties are subject to common control or common significant influence (referred to as ‘Affiliates’). Related parties may be individuals or corporate entities.

Significant transactions with related parties are as follows:

Transactions for the Years Ended DecemberOutstanding Balance 31 Receivables (Payables) Terms and Related Party/Nature 2016 2016 Conditions 2015 2015 Stockholder HI $− $700,000 $− Loans payable $− Note a − Interest expense − 3,267 − Note a (8,166) Internal audit services (20,052) 14,770 (3,570) Note b (20,052) (8,166) 718,037 (3,570) Joint Venture PetroWind $− Due from PetroWind $828,293 $849,979 $849,979 Note c 49,657 − Interest income 29,803 29,803 Note c − Management income 169,376 189,532 − Note d 90,159 1,854 Advances 5,390 − Note e $1,137,485 $1,074,704 $1,854 $879,782

a.

On July 19, 2015, PERC availed of a $0.70 million loan from House of Investments, Inc (HI), payable on December 9, 2015 at 1.12% interest. These loans have been fully paid as of December 31, 2016 and 2015.

b.

PetroEnergy has engaged HI to perform internal audit services. HI charges retainer fee of P = 56,000 ($1,180) per month. Also, on March 22, 2016, PetroEnergy engaged HI for IT General Controls and System Implementation Review.

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c.

In March 2015, PWEI availed of a P = 20 million (or $0.42 million) loan from PGEC at 5.6% annual interest payable in June 2016. This was rolled-over and paid on December 29, 2016. On May 4, 2015, PWEI availed of an additional loan from PERC amounting to P = 20 million (or $0.42 million) payable in May 2016 at an annual interest rate of 6.104%. This was rolled over and paid on December 29, 2016.

d.

Management income refers to timewriting charges, management fees for accounting, legal, management and other support services rendered by PetroEnergy and PetroGreen to PetroWind.

e.

Advances are minimal reimbursement of costs and expenses.

Terms and conditions of transactions with related parties Outstanding balances at year-end are unsecured, interest-free and settlement occurs in cash.

There have been no guarantees provided or received for any related party receivables or payables.

The Group has not recognized any impairment on amounts due from affiliated companies for the years ended December 31, 2016 and 2015. This assessment is undertaken each financial year through a review of the financial position of the related party and the market in which the related party operates.

Compensation of Key Management Personnel PetroEnergy has a profit-sharing plan for directors, officers, managers and employees as indicated in its by-laws. The amount, the manner and occasion of distribution is at the discretion of the BOD, provided that profit share shall not exceed 5% of the audited income before income tax and profit share.

The remuneration of the Group’s directors and other members of key management are as follows:

Salaries and wages and other shortterm benefits (Note 24) Directors’ fees (Note 24) Retirement expense

g.

2016

2015

2014

$320,822 6,561 27,261 $354,644

$320,586 90,578 29,071 $440,235

$389,256 192,307 32,141 $613,704

Disagreement with the Company

No Director has resigned from the Board of Directors since the date of the last meeting of shareholders due to disagreement with the Company on any matter relating to its operations, policies and practices.

6. Compensation of Directors and Executive Officers Summary of Annual Compensation Table Name and Principal Position

Year

Top 5 Highest paid key officers: Milagros V. Reyes President Francisco G. Delfin Vice President Carlota R. Viray AVP - Finance Arlan P. Profeta AVP - Legal and Administration Maria Victoria M. Olivar AVP - Technical Affairs Total salaries top 5 highest paid officers 2014 2015 2016 2017est All Directors and Officers as a group 2014 2015 2016 2017est

Salary

206,093 216,803 223,186 245,505 206,093 216,803 223,186 245,505

Bonus

136,745 68,104 37,198 40,918 136,745 68,104 37,198 40,918

Other Annual Compensation

46,419 35,679 60,438 60,438 238,726 126,257 66,999 66,999

Total

389,257 320,586 320,822 346,860 581,564 411,164 327,383 353,421

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The Company’s fiscal year ends in the month of December of every year. Estimated compensation of all Directors and officers for the year 2017 is US$353,421.

There are no other arrangements pursuant to which any director of the Company was compensated, or is to be compensated, directly or indirectly.

Section 3 of Article VII of the By-Laws of the Company provides that the Board of Directors, Officers and employees shall share in the profit in the amount of five (5%) percent of the audited income before tax and profit share of the Corporation. The Board of Directors receives a per diem of P5,000.00, or its dollar equivalent, per meeting attended. No warrants or options were granted to the Directors and Officers from 2001 to 2016.

There are no other arrangements pursuant to which any director of the Company was compensated, or is to be compensated, directly or indirectly, other than those stated in the above table during the Company’s last completed fiscal year, and the ensuing year, for any service provided as an executive officer or member of the Board of Directors.

There is no director, executive officer, nominee for director, beneficial holder and family member involved in any business transaction of the Company.

7.

External Auditors a.

Appointment of External Auditors

The external auditor of the Corporation is the firm SyCip Gorres Velayo & Co. (SGV & Co.), with address at SGV Building, 6760 Ayala Avenue, Makati City, Philippines. The same auditing firm has been reappointed during the scheduled annual meeting on July 21, 2016. The representatives of SGV & Co. have always been present at the shareholders’ meeting held during prior years and shall likewise be present during this year’s stockholders’ meeting to respond to appropriate questions or make statements with reference to matters for which their services were engaged.

The Company is in compliance with SRC Rule 68 requiring the rotation of external auditors or engagement partners who have been engaged by the Company for a period of five consecutive years or more. The engagement partner who conducted the audit for 2016, Mr. John T. Villa, has not been involved as engagement partner for more than five (5) years. b. Audit and Other Related Fees Audit and Other Related Fees External audit fees (inclusive of VAT) of the Parent Company amounted to $71,241 and $36,359, for the years ended December 31,2016 and 2015, respectively. Said fees are broken down as follows: Particulars SGV - Audit and review of the registrant’s annual financial statements and other services rendered in connection with filing of said financial statements with SEC and BIR. SGV - Review of quarterly and annual summary of application of proceeds in stock rights offering SGV - increase in cap Ernts & Young - Filing of tax return to the Gabonese Government and other services Total

2016

2015

$15,363

$15,628

7,187 -

7,331 1,895

48,691 $71,241

11,505 $36,359

The Audit Committee approved the above fees based on the services rendered and the amount paid from the previous year’s audit fees.

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c.

Changes and Disagreements with Accountants on Accounting and Financial Disclosure.

The Company has not changed SGV & Co. as its auditor and has not had any disagreements on any matter relating to accounting principles or practices, financial statement disclosures, or auditing scope or procedure during the last three years or any subsequent interim periods.

8. Compensation Plans No action is to be taken with respect to any plan pursuant to which cash or non-cash compensation may be paid or distributed.

C. ISSUANCE AND EXCHANGE OF SECURITIES

9. Authorization or Issuance of Securities Otherwise than for Exchange The Company plans to raise up to One Billion Pesos (P1,000,000,000.00) through a follow-on offering to fund the construction of new and expansion of existing renewable energy projects. The conduct of followon offering will be presented for approval during the stockholders’ meeting.

The Company plans to offer approximately One Hundred Two Million Six Hundred Eighty-Four Thousand One Hundred (102,684,100) to Two Hundred Twenty-One Million One Hundred Sixty-Five Thousand Seven Hundred (221,165,700) primary common shares with a par value of P1.00 per share (the “Offer Shares”), at an Offer Price to be determined and disclosed accordingly. The Offer Shares shall be issued out of existing unissued shares, and no secondary shares shall form part of the Offer. The Offer Shares will represent 20% to 35% of the issued and outstanding Common Shares of the Company after the Offer.

10. Modification or Exchange of Securities No modification of Outstanding Securities 11. Financial and Other Information The Company’s financial statements for the year ended December 31, 2016 and Management’s Discussion and Analysis or Plan of Operations are contained in the Management Report portion of this Information Statement.

11. Mergers, Consolidation, Acquisition and Similar Matters Not Applicable 12. Acquisition or Disposition of Property Not Applicable 13. Restatement of Accounts None

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D. OTHER MATTERS 15. Actions with Respect to Reports During the scheduled regular annual stockholders’ meeting, the following shall be submitted to the stockholders for their approval: a)

The Minutes of the Annual Stockholders’ Meeting held on July 21, 2016;

b)

Approval of Management Report and the 2016 Audited Financial Statements contained in the 2016 Annual Report.

c)

Confirmation and Ratification of all acts, contracts and investments made and entered into by Management and/or Board of Directors during the period of July 21, 2016 to July 26, 2017.

1.

Constitution of various Committees and Appointment of Chairman and Members: (Organizational Meeting held on July 21, 2016), such as: Nomination Committee Chairman - Helen Y. Dee Members - Yvonne S. Yuchengco - Cesar A. Buenaventura (Independent Director) Compensation and Remuneration Committee Chairman - Helen Y. Dee Members - Milagros V. Reyes - Cesar A. Buenaventura (Independent Director) Audit Committee Chairman Members

- Cesar A. Buenaventura (Independent Director) - Basil L. Ong (Independent Director) - Helen Y. Dee

Corporate Governance and Risk Management Committee Chairman - Basil L. Ong (Independent Director) Members - Cesar A. Buenaventura (Independent Director) - Eliseo B. Santiago (Independent Director) 2.

Approval of the Ratification of the Execution of the Omnibus Credit Line Agreement and Renewal Agreement with the Development Bank of the Philippines. (BOD July 21, 2016).

3.

Approval of the Second Quarter 2016 Financial Statements (SEC Form 17-Q). (BOD July 21, 2016).

4.

Approval of the Investment in Sun Life Financial Product. (BOD November 10, 2016).

5.

Approval of the Third Quarter 2016 Financial Statements (SEC Form 17-Q). (BOD November 10, 2016).

6.

Approval of the Appointment of Ms. Milagros V. Reyes as the Acting Chairman to sign the Statements of Management Responsibility for 2016 Parent and Consolidated Audited Financial Statements of the Corporation. (Special BOD April 10, 2017).

7.

Approval of the 2016 Audited Financial Statements. (BOD February 23, 2017).

8.

Approval for the renewal of Directors’ and Officers’ Liability Insurance. (BOD February 23, 2017).

9.

Approval of the 1st Quarter 2017 Financial Statements (SEC Form 17-Q). (BOD May 5, 2017).

10. Approval for the holding of Regular Annual Stockholders’ Meeting on July 26, 2017 at 1:30 p.m. (BOD May 5, 2017).

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16. Matters Not Required to be Submitted a) Proof of the required notice of the meeting. b) Proof of the presence of a quorum.

17. Amendments of Charter, By-Laws and Other Documents None 18. Other Proposed Action None 19. Voting Procedures Section 7 of Article III of the By-Laws of the Corporation provides that: “At all elections of Directors, each stockholder may vote the shares registered in his name in person or by proxy for as many persons as there are Directors, or he may cumulate said shares and give one candidate as many vote as the number of Directors to be elected multiplied by the number of his shares shall equal, or he may distribute them on the same principle among as many candidates as he shall see fit, provided, however, that the whole number of votes cast by him shall not exceed the number of shares owned by him as shown on the Company’s stock transfer books multiplied by the whole number of Directors to be elected.”

With respect to amendments to various provisions of Articles of Incorporation, the approval of the stockholders owning two-thirds (2/3) of the outstanding capital stock is required. Other items that need action of the stockholders require simple majority.

The voting procedure for election and approval of corporate actions in which Stockholders’ approval will be required shall be by “viva voce”, unless voting by ballot is decided upon during the meeting.

The methods by which votes will be counted, except in cases where voting by ballots is applicable, voting and counting shall be by “viva voce”. If by ballot, counting shall be supervised by external auditors.

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MANAGEMENT REPORT TO STOCKHOLDERS PART I - BUSINESS AND GENERAL INFORMATION Item 1 - Business Development PetroEnergy Resources Corporation (“PERC”, “PetroEnergy” or the “Company”), formerly Petrotech Consultants, Inc., was organized on September 29, 1994 to provide specialized technical services to its then parent company, Petrofields Corporation, and to companies exploring for oil in the Philippines.

In 1997, the Company’s name was formally changed into “PetroEnergy Resources Corporation”, simultaneous with the change in its primary purpose from rendering technical services to oil exploration and development and mining activities.

On June 25, 1999, the Department of Energy (DOE) authorized the assumption by the Company of Philippine oil exploration contracts. The Ministry of Energy of Gabon, West Africa had also been duly notified of the transfer to PERC of Petrofields’ Production Sharing Contract covering the Etame discovery block in the Atlantic shelf.

On May 23, 2003, the Securities and Exchange Commission (SEC) approved the Company’s application for a decrease in authorized Capital from One Billion (1,000,000,000) common shares at a par value of One Peso (P1.00) per share to Three Hundred Thirty Million (330,000,000) shares at a par value of One Peso (P1.00) per share.

On July 28, 2004, the Philippine Stock Exchange, Inc. (PSE) approved the Listing by Way of Introduction of the entire issued capital of the Company.

On August 4, 2004, the SEC issued to the Company the certificate of permit to offer securities for sale. This certifies that the shares of the Company have been registered and licensed for Listing by Way of Introduction and by then be sold or offered for sale in the Philippines.

On August 11, 2004, the Company’s shares were listed at the PSE. On July 22, 2009, the Board of Directors (BOD) and Stockholders approved the amendment of the articles of incorporation of the Company to include the business of generating power from conventional sources such as coal, fossil fuel, natural gas, nuclear and other viable sources of power and from renewable sources such as, but not limited to, biomass, hydro, solar, wind, geothermal, ocean and such other renewable sources of power.

The amendment to the Company’s Articles of Incorporation was approved by the SEC on September 23, 2009.

On February 23, 2010, the BOD Approved a 1:1 Stock Rights Offering (SRO). Under the SRO, the shares were offered at P5.00 per share, giving a net proceeds of P683.436 million, which was used for the 20MW Phase 1 of the Maibarara power Project (MGPP). The SRO was undertaken during the period June 28, 2010 to July 5, 2010.

On December 5, 2014, the BOD approved a 2:1 SRO. The SRO was undertaken during the period May 11 to 15, 2015. The proceeds of the SRO amounted to P599.675 million. The proceeds from the SRO were used to partially finance the expansion, construction and development of renewable energy projects, such as the MGPP (Phase 2) and Solar Power Project, as well as the expansion of the Etame Project in Gabon, West Africa.

On June 03, 2015, SEC approved the Company’s application for an increase in Authorized Capital from Three Hundred Thirty Million (330,000,000) shares at par value of One Peso (P1.00) to Seven Hundred Million (700,000,000) shares at par value of One Peso.

Subsidiaries of the Company: In order to insulate PetroEnergy’s core oil business from its renewable energy ventures, PetroEnergy, with the approval of the BOD on February 23, 2010, created a wholly-owned subsidiary called PetroGreen Energy Corporation (PetroGreen or PGEC). PetroGreen shall carry-out the renewable energy projects of PetroEnergy.

The SEC approved the incorporation of PetroGreen on March 31, 2010.

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On May 19, 2010, PetroGreen signed a Joint Venture Agreement (JVA) with Trans-Asia Oil and Energy Development Corporation (Trans-Asia), now PHINMA Energy Corporation and PNOC Renewables Corporation (PNOC RC) (collectively the “JV Partners”), whereby the JV Partners agreed to pool their resources together to develop and operate the MGPP through the formation of a joint venture corporation to be named Maibarara Geothermal, Inc. (MGI). Pursuant to the JVA, PetroGreen holds a 65% interest in MGI, while Trans-Asia and PNOC RC hold 25% and 10% interests, respectively. On August 11, 2010, the SEC approved the incorporation of MGI, whose principal business is to develop and operate geothermal steam fields and power plants. On January 5, 2011, the DOE approved the transfer of the Maibarara GRESC from PERC to MGI. In January 2013, through a Special Meeting of the Board of Directors, PetroGreen created a subsidiary, PetroWind Energy Inc. (PetroWind or PWEI) that will undertake the Nabas Wind Power Project (NWPP).

PetroWind was incorporated on March 6, 2013, wherein PetroGreen initially held 100% interest. On July 15, 2013, EEI Power Corporation (EEIPC) subscribed to a 20% equity share in PetroWind. EEIPC formally became a stockholder of PertroWind upon the SEC’s approval of PetroWind’s increase in authorized capital stock on August 23, 2013. Effectively as of December 31, 2013, PetroGreen holds 80% equity share in PetroWind.

On November 21, 2013, PetroGreen and CapAsia Asean Wind Holdings Cooperatief U.A. (CapAsia) entered into a Share Purchase Agreement (SPA) which sets out the parties’ mutual agreement as to the sale of 2,375,000 shares in PetroWind held by PetroGreen, which is equivalent to 40% of the total issued and outstanding shares of PetroWind. The purchase price for the sale of shares, as set out in Section 3 of the SPA, shall be $5,337,079 upfront payment and a premium of $2,600,000, payable on a staggered basis.

Simultaneously, on November 21, 2013, PetroGreen, CapAsia and EEIPC entered into a Shareholders’ Agreement (SA). The SA will govern their relationship as shareholders of PetroWind, and provides their respective rights and obligations in relation to PetroWind. Further, the SA contains provisions regarding voting requirements for relevant activities that require unanimous consent of all the parties. PetroGreen, CapAsia and EEIPC agree that their equity ownership ratio in PetroWind are at 40%, 40% and 20%, respectively.

Although the SPA and the SA were executed on November 21, 2013, these did not immediately result in PetroGreen’s loss of control over PetroWind. The loss of control did not happen until February 14, 2014, the Closing Date.

On February 14, 2014, the Closing Date, the payment has been received from the sale of the shares as executed in the Deed of Assignment covering the transfer of shares from PetroGreen to CapAsia and all the conditions precedent have been satisfactorily completed. As such, PetroGreen lost its control over PetroWind while CapAsia was given full voting and economic rights as a 40% shareholder. The transaction made PetroWind a joint venture between PetroGreen, CapAsia and EEIPC by virtue of the SHA signed between the three parties governing the manner of managing PetroWind.

As of December 31, 2014, MGI was effectively a subsidiary of PetroEnergy through PetroGreen, since PetroEnergy wholly owned PetroGreen and PetroGreen owned majority of the voting power of MGI. PetroEnergy, PetroGreen and MGI are collectively referred to as the Group.

On June 9, 2015, EEIPC acquired 10% of PetroEnergy’s share in PetroGreen, leaving PetroEnergy with 90% share in PetroGreen.

On March 19, 2015, PetroGreen was awarded by the DOE with the Solar Energy Service Contract (SESC) No. 2015-03-115 giving it the right and obligation to explore, develop and utilize the solar energy resource within the service contract area located in Tarlac City. By virtue of the Tarlac SESC, PetroGreen commenced the pre development activities for the 50 MW Tarlac Solar Power Project (TSPP) to be constructed within a 55 hectare property in Cenral Technopark, San Miguel, Tarlac City.

On June 17, 2015, PetroSolar Corporation (“PetroSolar”) was incorporated. PetroGreen has 56% shareholdings in PetroSolar, while EEIPC owns the remaining 44%.

On June 19, 2015, by virtue of the Deed of Assignment and Assumption, PetroGreen transferred its interest in the SESC to PetroSolar. The assignment was approved by the DOE on September 15, 2015.

The DOE confirmed the commerciality of the TSPP on September 24, 2015. Construction of the TSPP commenced by the third quarter of 2015 which was completed in January 2016. The TSPP started commercial operations on February 10, 2016.

21

As of December 31, 2016, MGI and PetroSolar are effectively subsidiaries of PetroEnergy through PetroGreen, which is 90% owned by PetroEnergy. PetroGreen owned majority of the voting power of MGI and PetroSolar.

PetroEnergy, PetroGreen, MGI and PetroSolar are collectively referred to as the Group.

The Company has not been subject to any bankruptcy, receivership or judicial proceedings nor has it ever been a party to any merger or consolidation.

Business of Issuer Description of Business A.

Oil Exploration

Oil and gas are usually buried several thousand meters underneath the earth. The explorationist, therefore, neither sees nor touches his objective. This lack of physical access, however, is compensated by the employment of state-of-the art technology in remote sensing via seismology, geology, and chemistry.

In the actual testing of prospects, computer-guided drills dig rock layers several kilometers below the surface.

In offshore exploration and production, robot submarines are used to emplace and control subsea equipment and materials. The intensive application of modern technology is supported by large amounts of capital. Oil exploration companies worldwide had adopted the prudent strategy of pooling together, as consortia, in pursuing their projects in order to distribute risk and minimize financial exposures.

The common financial arrangement between host countries and the exploration companies is the sharing in costs and revenues from the sale of the hydrocarbon products. The host country partakes in the costs by allowing the explorationists to recover an agreed percentage of the historical costs before the net proceeds are divided between the government and the consortia.

Oil Exploration and Development Projects The principal properties of the Company consist of various oil areas located in the Philippines and in Gabon.

Petroleum production is on-going in the Etame (Gabon) concession, while the other petroleum concessions in the Philippines are still in the advances exploration stages or pre-development stages The following is a brief description and update of each.

Foreign Operations Gabon, West Africa Update on Production Total crude production in 2016 reached 6.15 million barrels of oil (MMBO), with daily oil production ranging from 11,740 – 22,910 barrels of oil per day (BOPD) from four oil fields (Etame, Avouma, Ebouri and North Tchibala). Two (2) Avouma wells were worked-over in 2016, stabilizing overall production.

Update on Development Etame Expansion Project (EEP) The EEP, which commenced in 2010, aims to increase crude oil production to ~25,000 - 30,000 BOPD and maximize the life of the Etame Marin field by 1) optimizing the available recoverable oil reserves in the existing production fields by installing two (2) offshore production platforms and the subsequent drilling from these platforms, and 2) exploring for new petroleum prospects which can add to crude production.

After the Gabon government approved the platform construction for the Etame and Southeast Etame/North Tchibala (SEENT) expansion program on December 27, 2012, the platform topsides facilities design and fabrication were undertaken in 2013, while the transport and installation of parts were done in 2014. After an 18-month construction period, the Etame and SEENT Platforms arrived in Gabon and were installed in September 2014, in time for the drilling of three (3) Etame production wells and another three (3) SEENT wells.

22

After drilling operations at the SEENT Platform, the Constellation II rig moved to the Avouma Platform in early January 2016 to conduct workover operations on two (2) Avouma wells with defective submersible pumps. As a strategic move to cope with falling oil prices, the consortium decided to conclude the drilling program at this point. The Constellation II rig was demobilized on January 25, 2016.

Despite the natural depletion of the field, increased gas and water contents in some of the wells, mechanical failures and transient production downtimes, the daily production ranged from 11,740 – 22,910 BOPD compared to 2015’s range of 13,780 – 22,140 BOPD. Nonetheless, the Consortium managed twelve (12) liftings for the year 2016, resulting in a net crude export of 6.02 MMBO. Crude oil market prices for the year 2016 ranged from US$27.80 - US$56.80 per barrel.

Avouma Hydraulic Workovers To maintain stable overall production of the Etame field, workover operations were conducted on two (2) Avouma wells (ETBSM-2H and EAVOM-2H) to replace their defective submersible pumps. These workovers aimed to bring back ~4,200 BOPD to the overall production of the field.

The workover operations on the ETBSM-2H well, which started on November 19, 2016, were concluded on December 06, 2016 with completed Dominator-type ESPs. The well was handed over to Production and initially produced ~1,500 bbls on December 07, 2016. The Hydraulic Workover Unit (HWU) skidded to EAVOM-2H on December 07, 2016, and its workover was completed on December 20, 2016. The well was put on-line on December 21, 2016 at a stable rate of ~3,300 BOPD. Field Life Extension and Integrated Field Development Plan Gabon recently passed a new Hydrocarbon Law which introduces new fiscal terms for all upstream operators which include increased government share and royalties, decreased cost recovery, and the imposition of 35% income tax on profit oil. In the light of these changes, the Etame Consortium has been conducting a comprehensive economic modeling and valuation of the Etame Marin reserves, which will be subject to the provisions of the new Gabonese Production Sharing Contract (PSC) system.

The new fiscal regime will take effect once the first of the exploitation licenses (Etame) expires in July 2021 (Avouma will expire in 2025, while Ebouri will expire in 2026). After July 2021, the Consortium will apply for a new PSC merging the three (3) fields, which will already be based on the new fiscal regime.

The current economic models are based on drilling of three (3) wells in the Etame license before July 2021, with further drilling programs from 2021-2024. The Consortium is currently examining the most optimal drilling program to ensure maximum recoverable oil while ensuring positive returns for the consortium members.

Shallow Water Exploration Project (SWEP) In an effort to maximize the remaining recoverable oil reserves within the Etame Marin concession, the Etame Consortium kicked off a Shallow Water Exploration Program in 2011 to identify petroleum prospects for future drilling in the shallower parts of the block.

Using the available 3D seismic data acquired in 1997 and 2011, the Consortium was able to map out drillable prospects in these shallower areas, and by 2013, the Consortium committed to drill two shallow water prospects, namely Ovoka and Dimba. The Ovoka prospect was drilled in August 2013, while Dimba was drilled in February 2014. Both wells had oil shows, but were deemed non-commercial.

Crude Sweetening Project One challenge that has come up in the Gabon concession is the emergence of H2S gas in the produced oil of four (4) wells. In July 2012, two (2) wells in the Ebouri field manifested H2S in their production, while two (2) wells in Etame field yielded H2S in 2014. Since the Ebouri field still contains substantial unrecovered oil, the study of the sweetening process which aims to address the gases from these sour wells, was started in 2012.

However, due to the recent decline in oil prices, the project was put on hold.

Brownfield Projects Upgrade In 2013, a Water Knock-Out System was installed in the Avouma Platform to optimize the extracted crude going to the Floating Production Storage and Offloading (FPSO) vessel.

23

FPSO Integrity Assessment In order to further maximize the long-term usability of the existing FPSO, the Petroleo Nautipa, a Topsides Integrity Assessment was jointly carried out in 2013 by Allied Marine Services and BASS to identify corrective actions to maintain the vessel’s structural integrity and ensure continuous operation throughout the life of the field. The DNV Class Renewal 2012 for the Nautipa vessel was approved in full terms in mid-October 2013, with the certification valid until August 2, 2017.

Philippine Operations A. Oil Projects SC 6-A - Octon-Malajon Block In July 2011, Pitkin Petroleum Plc entered a farm-in agreement to acquire 70% participating interest in SC 6A block. Furthermore, Pitkin was assigned as the new Operator of SC 6A in December 2011.

As its farm-in obligation, Pitkin, acquired, processed and interpreted 508 sq. km. of 3D seismic data for Phase 1. The seismic acquisition was completed in November 2013. After which, Pitkin began processing and interpreting the seismic data in 2014.

On August 27, 2014, Pitkin sent a letter to inform the Filipino JV partners of its intent to withdraw from the consortium after completing Phase 1 (i.e. interpretation of 3D seismic data) at the end of December 2014 without payment of penalty. Pitkin will turn over all data, reports and analysis generated during Phase 1 and will submit to DOE all records related to Phase 1 work program for cost recovery. The partners approved Pitkin’s withdrawal upon fulfilment of all the above conditions.

During the SC 6A Technical and Operating Committee Meetings (TCM/OCM) on November 24, 2014, the partners approved the proposed 2015 Work Program and Budget (WP&B), composed mainly of Geological and Geophysical studies, with a total budget amount of US$ 178,170. Former SC 6A operator The Philodrill Corporation was also unanimously elected to re-assume the operatorship from Pitkin.

The Philodrill Corporation presented the results of their ongoing Geological & Geophysical (G&G) evaluation of the northern portion of SC6A block. Towards the middle of the 2015, Philodrill proposed the conduct of Broadband Processing for the 2013 3D seismic data, to be followed by a Quantitative Interpretation (QI) workflow, in order to enhance the prospectivity of the identified prospects. The Partners unanimously approved these activities as part of the 2016 Work Program & Budget. The DOE approved the 2016 SC6A Work Program and Budget (WP&B) amounting to US$ 759,990.50.

Throughout 2016, Philodrill conducted Geological and Geophysical (G&G) works for the Octon block, as part of the DOE-approved Work Program for 2016. These include 1) broadband reprocessing of the 2013 3D seismic dataset, which Philodrill received from DownUnder Geosolutions (DUG) last September 05, 2016, 2) on-going seismic interpretation works on the newly processed data, and 3) on-going Quantitative Interpretation (QI) works on the Octon datasets.

On December 02, 2016, the SC 6A consortium discussed Philodrill’s proposed WP&B for 2017 to be submitted to the DOE. The 2017 SC 6A WP&B has a total budget of US$ 454,767.20, with a Firm program of US$ 416,013.50 for the conduct of data processing of the 2013 3D seismic data and Quantitative Interpretation works over that processed dataset, and a Contingent program of US$ 38,753.70 for preliminary well design studies for prospect(s) that can be matured to drillable status.

PERC and the other Partners approved the said WP&B on December 20, 2016, and Philodrill has since submitted this WP&B to the DOE on December 21, 2016. On February 13, 2017, the DOE approved the SC 6A 2017 WP&B, comprising of a Firm budget with budget of US$ 416,013.50 for the conduct of data processing of the 2013 3D seismic data and Quantitative Interpretation works over that processed dataset. In addition, a Contingent budget of US$ 38,753.70 for preliminary well design studies for prospect(s) that can be matured to drillable status is included.

To date, contractor DownUnder Geosolutions is continuing with the reprocessing of the 2013 3D seismic data over the Octon block, with the commencement of tomography and velocity modelling. Overall, reprocessing works are expected to finish by mid-July 2017.

PetroEnergy’s Participating Interest in SC 6A block increased to 16.667% from 5.001%, with the exit of Pitkin Petroleum on May 14, 2015.

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SC 14-C2 - West Linapacan, Northwest Palawan On January 3, 2013, Operator RMA (HK) Ltd. applied with the DOE for a transfer of operatorship of SC 14C2 from RMA (HK) Ltd. to its newly formed Singapore-based subsidiary RMA West Linapacan Pte. Ltd. (RMA West), which request the DOE approved on May 24, 2013. By the first half of 2013, RMA continued its review work for reserves certification and reservoir simulation, alongside further mapping of the West Linapacan field for additional leads and prospects. In parallel, well trajectory and drilling objective planning were also conducted towards early production and full field development in West Linapacan.

RMA West sent the final Independent Expert Report of the West Linapacan “A” Reserves (Gaffney Cline & Associates) on September 5, 2013. The WLA field has Proved (1P) oil reserves of 9.6 MMBO and a Proved + Probable (2P) reserves estimate of 16.5 MMBO. This is based on a two-multilateral well development program scheduled in 2014-15.

In March 2014, RMA shared with partners the final report of Gaffney, Cline and Associates (GCA) on the certification of the reserves of the West Linapacan A structure. According to the report, the West Linapacan A structure has Proved (1P) reserves of 11.6 Million barrels, with Proved + Probable (2P) reserves of 18.2 Million barrels, and Proved + Probable + Possible (3P) reserves of 22.8 Million barrels. Further, GCA indicated that all three cases assume reserved from a three-well development which was agreed upon by the Consortium during the Technical and Operating Committee Meetings (TCM/OCM) held at RMA offices in Melbourne, Australia on March 5-6, 2014.

On February 5, 2015, the DOE granted incumbent operator RMA West an additional one-month extension until March 5, 2015 to show proof of financial capability, which RMA West failed to provide. This prompted the DOE to terminate the Farm-in Agreement (FIA) between Pitkin and the Filipino partners on March 12, 2015. This also effectively terminates the Pitkin-RMA FIA, also stripping RMA West of its involvement in the block.

From April to May 2015, the remaining Consortium members sought DOE’s formal approval of the reversion of participating interests in SC 14C2 following the exit of Pitkin and RMA West. While such approval was sought, newly appointed Operator Philodrill presented its proposed 2015 Work Program and Budget for the block consisting of technical and commercial audit of RMA West’s completed works throughout its Operatorship, totaling US$59,950 over five (5) months. Following Philodrill’s re-assumption of Operatorship of the West Linapacan block, they made a formal request to former operator RMA West on June 1, 2015 to cooperate with Philodrill in the hand-over of all technical, legal and financial documents in RMA West’s possession during its operatorship.

With oil prices continuing to drop throughout the end of 2015, the Consortium was in general agreement to postpone any further development in the block. However, the consortium agreed to continue to keep the SC active by submitting a Work Program for 2016. This will entail an abandonment study with a minimum financial commitment.

On December 18, 2015, Philodrill submitted to the JV Partners their proposed 2016 Work Program & Budget (WP&B) for SC 14C2, which consists of the conduct of an ROV (remotely operated vehicle) downhole survey of the old West Linapacan wells in preparation for abandonment procedures. The technical and commercial audit of the block will continue in 2016, alongside continuing efforts to secure the G&G data generated by previous operator RMA West Linapacan. The total budget for the abovementioned activities is US$628,890.

PetroEnergy share is US$27,150.

In early 2016, Philodrill sought approval from the JV Partners for the conduct of a downhole survey of the old West Linapacan wells using an ROV (remotely operated vehicle), in preparation for eventual field abandonment. The JV partners instead opted to reclassify this work as contingent of the on-going technical and commercial audit of RMA and other contractual obligations to the DOE. Throughout 2016, Philodrill has been conducting its G&G studies on the block to further strengthen the West Linapacan block to be revived for production. Towards the end of 2016, the consortium discussed Philodrill’s proposed WP&B for 2017 to be submitted to the DOE. Note that in 2014, previous operator RMA engaged contractor DownUnder Geosolutions (DUG) to reprocess a 3D seismic dataset over the West Linapacan block as part of their farm-in works, but was not able to settle the remaining balances. After RMA’s subsequent exit from the block in 2015, DUG kept hold of the processed 3D dataset.

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As part of the 2017 SC 14C2 WP&B with a total budget of US$ 472,924, the remaining Consortium members allocated a Firm budget of US$ 174,659 to pay RMA’s outstanding balance of acquiring this dataset from DUG. A Contingent program of US$ 298,265 for possible Quantitative Interpretation (QI) works using the DUG 3D dataset is aimed to update/modify the JV’s well design / development plans or to formulate entirely new plans for the block.

PERC and the other Partners approved the said WP&B on December 20, 2016, and Philodrill has since submitted this WP&B to the DOE on December 21, 2016. After the DOE approved the SC 14C2 2017 WP&B last January 25, 2017, Operator, The Philodrill Corporation, issued on February 15, 2017 an Authorization for Expenditure (AFE) covering the Firm commitment of US$ 174,659.00 for: 1) the acquisition of a legacy 3D seismic dataset from DownUnder Geosciences which previous Operator RMA failed to acquire, and 2) Geological & Geophysical (G&G) evaluation work on the West Linapacan block. PERC approved the said AFE on February 17, 2017, with its 4.137% share amounting to US$ 7,225.64.

Operator The Philodrill Corporation completed the acquisition of the 2014 raw West Linapacan seismic dataset from DownUnder Geosolutions last May 16, 2017. These data will now be reviewed by the Consortium for further interpretation and formulation of the next field development plans.

After the termination of the FIA with Pitkin, PERC’s participating interest in SC 14C2 is back to 4.137% from 1.03725%.

SC 47 - Offshore Mindoro and Panay In 2012, the consortium requested from the DOE an extension of SubPhase 2. During the year, farm-out efforts have been carried out by the operator. The farmout terms include seismic processing and drilling of one well.

In January 2014, the DOE approved a three-year extension to the 7-year Exploration Phase of SC 47, to which PNOC-EC submitted a Work Program for SubPhase 2, including the reprocessing and interpretation of 2D lines and prospect maturation which may lead to drilling of the Macadamia prospect.

However, on February 25, 2015, the SC 47 consortium agreed to relinquish the SC 47 block, with an option to reapply for the same contract once it is offered again by the DOE. This decision was based on the existing high geological risk of the current prospect and lead inventory, lack of interest from farminees, and given the DOE requirement of drilling one well for SubPhase 3.

A Letter of Withdrawal of the Joint Venture was sent to DOE on July 28, 2015. In a letter from the DOE dated January 16, 2016, the DOE no longer recognized SC 47 as among the service contracts in which PetroEnergy is a member. The DOE formally approved the JV’s relinquishment of SC 47 on March 10, 2016, with the official termination date reckoned at the end of the 7-year Exploration Period on January 10, 2012.

SC 51 - East Visayas On August 5, 2005, SC 51 members (Alcorn Gold Resources, Trans-Asia Oil, and PERC) signed a farm-in agreement with NorAsian Energy Ltd. (later changed name to Otto Energy Investment Ltd, OEIL). 80% participating interest in SC 51 will be earned by NorAsian upon successful acquisition of 3D seismic data and drilling of 2 exploratory wells.

For Subphase 2 commitment, the 3D seismic data over Argao was acquired in June 2007. Through its own G&G evaluation, Operator OEIL decided to focus on the northern block (NW Leyte) and to relinquish all its interest in the southern block (Offshore Cebu).

Otto Energy drilled two well but both were unsuccessful. Filipino farmors (Cosco Capital, Trans-Asia & PERC) did not credit the wells as earning wells. Similarly, DOE did not credit the wells as compliant to the SC commitment, but gave Otto 6 months to conduct post-well analysis.

The post-well analysis of Duhat-2 commenced on February 20, 2014, and the results were presented during the OCM on April 28, 2014. OEIL concluded that it is not safe to drill anywhere on the Duhat prospect. OEIL also expressed its intention to withdraw from the SC 51 and to resign from Operatorship. The following day, a formal letter of withdrawal and resignation was submitted by OEIL to the SC 51 JV partners (Trans-Asia, Cosco and PetroEnergy) and to the DOE. On June 10, 2014, OEIL submitted a legal document to the DOE to appeal the status of Duhat-2. The legal document aimed to point out to DOE that the operator has drilled the well to standards and that the high pressure saltwater blow-out constituted a fortuitous event which rendered impossible the fulfilment of the objective of the well.

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In 2015, most of the activities for SC 51 focused on the administrative transition brought about by OEIL’s exit.

DOE recognized that Duhat-2 well was non-compliant due to its failure to reach the objective drilling depth. The remaining partners (TAO, Cosco and PERC) met with DOE and informed them of the Consortium’s plan to continue with the SC, with the proposed Work Program: (1) Conduct pore pressure study using the drilling results of Duhat-1 and 2 and existing seismic data to establish that drilling in the area is not feasible; and (2) conduct detailed gravity survey within previously identified structures SE of the North Block. The Partners also requested for an extension of the Service Contract.

On February 15, 2016, a meeting was held among the SC 51 JV Partners to discuss the current situation of the Service Contract after former Operator Otto Energy officially expressed its intention to leave the block. TransAsia informed the partners that the DOE is amenable to give clearance to Otto once the remaining partners assume all the rights and obligations under SC 51. In lieu of drilling a well, the partners would proposed a revised Work Program which will help determine if there are still other drillable prospects aside from the Duhat structure.

On April 11, 2016, the DOE requested the Filipino consortium members (Trans-Asia, Alcorn and PERC) to furnish documentary requirements to formalize the transfer of outgoing Operator Otto Energy’s 80% Participating Interests and their exit from the block. Assuming Operator Trans-Asia formally submitted the consortium’s documents to the DOE on May 18, 2016, with the DOE approving the submission on June 09, 2016.

From July to October 2016, the DOE has maintained communication with Otto over unsettled Training Fund payments during their Operatorship over the block, totaling US$ 124,763. It was resolved that the Filipino consortium members may execute a Letter of Undertaking to settle Otto’s remaining Training Fund balance of US$ 124,763, only when the DOE has exhausted its legal measures against Otto’s refusal to pay such balance.

Upon execution of such undertaking, the consortium can undertake the Subphase 5 Work Program for the remaining two (2) years of the Service Contract until 2019 – which includes a Pore Pressure study and a Gravity survey over SC 51.

On January 27, 2017, the DOE met with the SC 51’s Filipino consortium members (Trans-Asia, Alcorn and PERC) to discuss the unsettled Training Fund payments by former Operator Otto Energy to the DOE. It was resolved that the Filipino consortium members may execute a Letter of Undertaking to settle Otto’s remaining Training Fund balance of US$ 124,763.00, only when the DOE has exhausted its legal measures against Otto’s refusal to pay such balance. Upon execution of such undertaking, the consortium can undertake the Subphase 5 Work Program for the remaining two (2) years of the Service Contract until 2019 – which includes a Pore Pressure study and a Gravity survey over SC 51.

PetroEnergy’s Participating Interest in SC 51 increased to 20.05% from 4.012% upon OEIL’s resignation and exit from SC 51, with new Operator Trans-Asia Petroleum Corporation at 33.35% and Alcorn Petroleum & Minerals Corporation at 46.60%.

SC 75 – Offshore Northwest Palawan The joint study and bid group consisting of Philex Petroleum Corporation, PNOC-EC and PetroEnergy was notified by the DOE that the group won the bidding for Area 4 of the Philippine Energy Contracting Round 4 (PECR 4) last February 14, 2013. The block is located in deepwater areas offshore Northwest Palawan. After finalization of contract terms, the consortium formally signed Service Contract 75 on December 19, 2013.

Secretary Petilla then signed on behalf of DOE on December 27, 2013. Under the newly-executed Service Contract, the first Sub-phase will consist of Geological & Geophysical (G&G) studies of the Northwest Palawan Basin and the conduct of a 2,200 line-km 2D seismic survey over SC 75 for the duration of 24 months at an estimated cost of US$3.50 million.

Following the execution of Service Contract 75 on December 27, 2013, the SC 75 consortium (Philex Petroleum, PNOC-EC, PetroEnergy) held a kick-off meeting on January 16, 2014 to discuss the way forward.

Operator Philex Petroleum presented the forward plan to conduct a 2D seismic survey over SC 75 as part of Subphase 1.

The M/V Voyager Explorer vessel of Seabird Exploration commenced the SC 75 2D seismic survey on March 31, 2014. After 16 days of line acquisition, the vessel completed the 2,237 line-km survey on April 17, 2014.

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Throughout the second half of 2014, CGG Mumbai was commissioned for the processing of the newly-acquired 2D seismic data. ARKeX Ltd. completed the processing of the supplementary gravity and magnetics data on June 20, 2014, with copies of the newly-completed gravity and magnetics data sent to the consortium by endJune 2014. The decision of the Joint Venture for the way forward, either to acquire more seismic data or get new partners to drill, will depend on the results of the interpretation of the lines to be conducted in 2015. In August 2014, the SC 75 consortium approved the application of the broadband processing to the entire 2014 2D seismic data set to enhance the quality of data. Additional cost for broadband processing amounted to US$44,140.

Activities for SC 75 in 2015 focused on the on-going Geological & Geophysical (G&G) works for Subphase 1.

Results of the marine gravity survey acquired in 2014 were presented to the Partners on January 12, 2015; while the interpretation of the 2D seismic data were presented on May 22, 2015.

On September 9, 2015, the DOE placed SC 75, along with adjacent blocks SC 58 and SC 72, under Force Majeure due to the geopolitical tensions in the West Philippine Sea. By this time, the Consortium has already fulfilled its Work Program for Subphase 1, consisting of the acquisition, processing and interpretation of 2,200 line-km of 2D seismic data over SC 75.

On December 4, 2015, the DOE approved the Revised SC 75 Work Program & Budget (WP&B) for 2016, which consists of a ~1,000 sq.km 3D seismic survey with a budget of US$3.50 MM. Due to the enforcement of Force Majeure by the DOE which started at the end of Subphase 1 on December 27, 2015, no exploration work will be done in the block within the West Philippine Sea’s disputed waters until the Force Majeure is lifted.

To date, the block is still under Force Majeure, putting exploration activities on hold.

Philex Petroleum is the Operator of SC 75 with 50% participating interest, PNOC-EC with 35%, and PetroEnergy with 15%.

Summary of Petroleum Properties:

Production Sharing Contract (PSC) 93 - Etame Marine Service Contracts (SC) - Philippines SC 6A - Octon Malajon Block SC 14C2 - West Linapacan SC 51 - East Visayas SC 75- NW Palawan

2021 2024 2025 2019 2020

2.525% Gabon Offshore 16.670% 4.137% 4.010% 15.000%

Northwest Palawan Northwest Palawan East Visayan Sea East Visayan Sea

The oil revenues are derived from Gabon Operations. All contractual obligations with the Gabonese Government are complied with. The Philippine contracts are in exploration stage and some contracts are being farmed out to reduce risk inherent to the business.

B. Renewable Energy Maibarara Geothermal Power Project Geothermal Renewable Energy Service Contract (GRESC) No. 2010-02-012 PetroEnergy signed the Service Contract for the MGPP on February 1, 2010. After which, PERC conducted pre-development activities in 2010 until 2011. Also, PERC formed a Joint Venture company, Maibarara Geothermal Inc. (MGI), with Trans-Asia and PNOC-RC. During the latter part of 2011, the DOE confirmed the commerciality of the 20-MW Maibarara Geothermal Power Project, which allowed MGI to proceed to the project’s development stage, involving 1) the drilling of two (2) wells to complete the steam production and reinjection well capacities, and 2) the construction of the steamfield and power plant facilities.

The completion of the steam requirement for the 20 MW MGPP was successfully achieved when MGI drilled its first production well, MB-12D, in July to August 2012 to a total depth of over 2,000 m. Similarly, the drilling of new condensate injection well MB-14RD to a depth of 1,900 m in October, 2012 with resulting good permeability satisfied the well requirement for condensate fluid reinjection. Along with the 2011 work-over of wells Mai-6D, Mai-9D and Mai-11D, MGI had the necessary wells for the 20 MW facility.

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MGPP’s 115kV Transmission Line system was successfully connected to the existing MERALCO line on September 10, 2013. Upon completion of the reliability and performance testing, the MGPP went on commercial operations on February 8, 2014.

MGI drilled two new wells in 2014 to confirm the expansion of the Maibarara resource. Well MB-15RD was successfully completed on October 6, 2014, while well MB-16D was drilled and completed on November 16, 2014. Due to very good flow test results, MB-15RD was later decided to be the production well for the expansion (now renamed as MB-15D), and MB-16D as the reinjection well (now renamed as MB-16RD).

With the stable performance of the reservoir, MGI decided to pursue an expansion of the Maibarara Project (M2). There is at least 5 MW excess steam supply from the 20 MW wells, and with the ~6 MW capacity of MB15D, an expansion to 12 MW was decided and approved in 2015. The preparations for the expansion took off in 2015 with initial discussions with potential suppliers and contractors. Discussions with potential offtakers were also conducted during the year.

The MGPP had its first scheduled Preventive Maintenance Shutdown (PMS) from March 07–28, 2016 - the first major PMS since the plant’s commercial operations in February 2014. Major components on the Steamfield and Power Plant were refurbished. The MGI team completed all shutdown activities as programmed. The power plant was synchronized to the grid on March 29, 2016 at 5:16 AM and resumed normal full load 20MW gross output by 7:15 AM, about 12 hours ahead of the original schedule.

MGI drilled the new Maibarara-2 (M2) reinjection well, MB-17RD, to a total depth of 1,900 meters on July 08, 2016 using DESCO Rig 30. Drilling and completion test results indicated that the well requires a pump in order to be utilized for brine injection. Currently, MB-17RD is being injected with power plant condensates in attempt to enhance its capacity, similar to what was done on MB-14RD during its early operations.

On the Steamfield and Reservoir side, well MB-15D - intended as production well for the 12-MW Maibarara-2 expansion project - was on continuous discharge testing since October 20, 2016. The discharge testing of well MB-15D was concluded on January 16, 2017. The well MB-15D has an output of about 14 MWe. Further testing would be performed once construction activities for the M2 Steamfield have been completed.

The MGPP operated at full load without any interruption except for load reduction only during a 1-hour monthly automatic valve test (AVT) of MCVs and MSVs on February 14, 2017. The power plant had a scheduled minor maintenance shutdown on April 4-6, 2017. Activities included checking the turbine condition using a borescope camera, replacement of insulators on several transmission line poles and maintenance activities in the switchyard.

Production wells MB-12D and Mai-6D are still operated at fully-open condition while the separated brine is reinjected to MB-17RD and intermittently to MB-14RD; the latter also serves as reinjection well for power plant condensate. MB-16RD was also utilized for a short period only - from April 20, 2017 up to May 5, 2017 during the conduct of reservoir recovery test activities.

The combined reinjection load for Maibarara-1 and Maibarara-2 totals to 74 kg/s and the combined capacity of wells MB-14RD and MB-17RD (78 kg/s) is enough to accept all of the reinjection load. Well MB-16RD will be used as a standby reinjection well when needed.

M2 construction is ongoing. Major power plant components from Fuji Electric Co. Ltd. were unloaded at the port of Manila and were subsequently delivered to the site on March 19, 2017.

Production well MB-15D for the 12-MW Maibarara-2 (M2) facility was quenched from May 16-18, 2017 to facilitate the conduct of downhole viewer (DHV) camera survey on May 18, 2017 by Scientific Drilling, Inc. This was done to verify the presence of mineral deposits along the casing and the likelihood of casing break prior to the scheduled workover of the well in the second week of June 2017. The workover activity includes mechanical clearing of the wellbore from mineral scaling and re-lining of the production casing from 9-5/8” to 7”.

The construction of the M2 power plant Control Annex Building (CAB) extension being done by Phesco, Inc. is almost complete. On the other hand, the integral components of the condenser are already installed in the turbine-generator (T/G) foundation, subject to checking of the alignment by Fuji Technical Field Advisor who arrived on May 24, 2017.

Construction of the Cooling Tower (CT) basin is likewise complete and erection of the CT structure has been started. Switchyard equipment foundations and cable trenches are also underway. Over-all Phesco’s progress on civil-structural-piping-mechanical works is 80.9%.

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From January 01 to December 31, 2016, the total energy exported to the grid was 153,067.70 MWh. This was sold to MGI’s Offtaker, Trans-Asia.

Nabas Wind Power Project Wind Energy Service Contract (WESC) No. 2009-09-002 On November 4, 2013, Development Bank of the Philippines (DBP) granted to PetroWind a P = 2.8 billion loan for the project payable in 15 years. Following this, PetroWind signed key construction and supply contracts covering the switchyard and transmission line with Cendaur Engineering, civil works on the wind farm including internal roads, turbine foundations, and control room buildings with EEI Corporation, and wind turbine supply, installation, and maintenance and operation with Gamesa Eolica S.L. Unipersonal of Spain.

Construction of the Phase 1 of the wind farm (36 MW) started in December 2013 with EEI commencing with the project access road at entry point from the Provincial highway. The access roads were completed by 2nd quarter of 2014, while the internal roads for the first eight WTG (Wind Turbine Generator) towers were completed by 3rd quarter of the year. On December 19, 2014, PetroWind also obtained two (2) key approvals from Energy Regulatory Commission (ERC). ERC approved PetroWind’s application for a two-month testing and sales of generated power of the first eight (8) WTGs. PetroWind also received the approval to develop, own, and operate a dedicated point-to-point transmission facility connecting the Nabas Wind Farm to the NGCP’s Nabas-Caticlan 69 kV overhead transmission line.

The first half of 2015 was devoted to completion of the construction of the wind farm in Nabas, Aklan. On March 24, 2015 PWEI successfully energized and dispatched power from eight (8) WTGs (WTG’s 1-8) to the Visayas grid. On April 17, 2015, the DOE issued its “Nomination for FIT Eligibility” of Nabas-1. The DOE also released on April 30, 2015, its Certificate of Endorsement of Nabas-1 which is one of the requirements for the ERC to process PWEI’s Certificate of Compliance (COC) for the power facility and for FIT eligibility. By June 2015, all eighteen (18) WTG’s become operational. On June 16, 2015, the Department of Energy (DOE) released the Certificate of Endorsement (COE) for FIT Eligibility endorsing the official start of commercial operation to be June 10, 2015. The ERC also completed the site visit for DOE’s COE-FIT validation on June 24-25, 2015.

On August 17, 2015, the ERC approved PWEI’s COC for Phase 1. This confirms the commercial operation date of the wind farm to be June 10, 2015. On September 3, 2015, PWEI received the Philippine Electricity Market Corporation’s (PEMC) acknowledgement of PWEI’s participation in the Wholesale Electricity Spot Market (WESM). Upon reliably operating all eighteen (18) WTGs and accomplishing consolidation of approved punchlists and other prerequisite documentations, PWEI accepted the Wind Farm Turnover Certificate from Gamesa on December 12, 2015.

To assist during the initial stage of the O&M, PWEI has engaged a consultant, Modern Energy Management (MEM), to do site audit/assessment, conduct windfarm management training for PWEI technical personnel, and evaluate Gamesa’s monthly reports for the first year of the O&M. The site audit and training was conducted by MEM last May 10 - 17, 2016.

The Preventive Maintenance Services (PMS) of the Windfarm Electrical Facilities (i.e., Substation and Switching Station, including Switchgears) were successfully conducted on May 21 – 22, 2016.

For the Operations and Maintenance (O&M) of the wind turbines, Gamesa had completed its 12-Month (12M) Maintenance on July 05, 2016, its 3-Month (3M) Maintenance activities on August 12, 2016, and will start with the 18-month preventive maintenance on October 03, 2016. The program for the 18-month maintenance works is for one (1) WTG per day for 8 hours over an 18-day period.

Maintenance works for the Balance of Plant (BOP), including electrical feeder cables, substation, etc., were done by Gamesa’s subcontractor - Airnergy and Renewables Inc. - from August 08 – 12, 2016, initial test results of which passed Gamesa‘s evaluation.

Slope protection works have been implemented throughout 2016, even during the typhoon season in August 2016, to which contractor GSI was able to assess the integrity of the completed works, and determine areas for further works.

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The NWPP was shut-down during the onslaught of Typhoon “Marce” on November 25, 2016 due to grid failures along the 138-kV Nabas-Panit-an line and the 69-kV Nabas-Caticlan line. On-site, the said typhoon caused minor soil erosion, minor damage on the access road canal and obstructed cross drains (especially those leading to WTGs 9, 14 and 16), but the rest of the site remained under normal operating conditions. Site clearing operations along the drainage canals and road resurfacing works were conducted from November 2629, 2016.

On February 7, 2017, NGCP formally issued PWEI with the Final Approval to Connect. Consequently, NGCP will reimburse to PWEI the SCADA and telecommunications equipment cost which PWEI advanced during the construction period. This is approximately PhP23.5 Million. As part of the physical verification of the said equipment with NGCP, PWEI and equipment supplier Nayon Kontrol Systems will conduct a user’s O&M training with the NGCP team during the 1st week of July, 2017.

On March 4 and 19, 2017, PWEI went into partial outages when the NGCP 138-kV Nabas-Panit-an line tripped for 3-5 hours, prompting grid maintenance shutdowns. This frequent tripping is caused by the on-going rehabilitation works on the said 138-kV line which was damaged by Typhoon Yolanda in 2013. The 69-kV Nabas-Caticlan line is connected to the 138-kV line and the NWPP transmission line is connected to the 69-kV Nabas-Caticlan line.

PWEI welcomed its new partner, BCPG Public Company Ltd (BCPG). In a signing ceremony held last May 16, 2017, BCPG formalized the acquisition of the 40% stake of CapAsia Asean Wind Holdings Cooperatief U.A. (CapAsia) in PWEI. BCPG, along with existing PWEI shareholders PetroGreen Energy Corporation (PGEC, 40%) and EEI Power Corporation (EEI Power, 20%), then signed a new Shareholders’ Agreement governing PWEI. From January 01 to December 31, 2016, the total energy exported to the grid is 103,495.76 MWh for the Project’s Phase 1, with revenue of PhP 765.8 MM based on the FiT price of PhP 7.40 / kWh. Tarlac Solar Power Project Solar Energy Service Contract (SESC) No. 2015-03-115 The Service Contract for PetroGreen Energy Corporation’s (PGEC) newest renewable energy project, the 50 MW Tarlac Solar Power Project (TSPP), was signed with the DOE on March 19, 2015. The solar project is situated in the central plains of Luzon consisting of flat terrain with high irradiation values making it highly favourable for photovoltaic (PV) solar power development.

PGEC awarded the major solar equipment supply contract for the TSPP to German firm Conergy on June 19, 2015. Conergy, through its local Onshore Contractor, Phesco Inc., commited to commence the solar farm construction activities by August 2015, with expected completion of the 50-MW solar farm by January 11, 2016.

PGEC awarded the Civil and Structural Works for the Tarlac site to Media Construction and Development Corporation on June 19, 2015. Philcantech Enterprises (an electrical firm based in Tarlac City) undertook the supply, delivery and installation of the 5.9-kilometer 69-kV transmission line linking the Tarlac solar farm to the NGCP grid.

On June 17, 2015, PGEC and affiliate company EEI Power Corporation (EEIPC), incorporated a joint venture project company, PetroSolar Corporation (PSC), to undertake the development of the TSPP. On June 22, 2015, PGEC and solar farm lot owners, Luisita Industrial Park Corporation (LIPCO) executed a Lease Agreement for the 55-hectar solar farm development. This was assigned to PSC on September 15, 2015. As the LIPCO property is within the Central Technopark, which is under the jusrisdiction of the Philippine Economic Zone Authority (PEZA), PSC was able to register as an Economic Zone Utilities Enterprise on July 28, 2015, entitling it to the incentives available to PEZA locators for the TSPP to benefit from an expedited issuance of the Environmental Compliance Certificate (ECC).

On August 4, 2015, the DENR-EMB Region III issued PSC with the ECC, an essential permit needed for ground works to commence on the solar park site. Also, on August 27, 2015, the National Commission on Indigenous Peoples – Region III (NCIP) issued the Certificate of Non-Overlap (CNO) to PSC, stating that no ancestral domains or indigenous peoples exist within the project site.

The DOE subsequently approved the assignment of the Tarlac Solar Service Contract to PSC on September 22, 2015. It also issued the Affirmation of Declaration of Commerciality for the TSPP on September 24, 2015, concluding the project’s Pre-Development Stage and commencing with the project’s Development Stage.

Between September and November 2016, PEZA issued several permits for TSPP construction, allowing development to go full-blast.

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Media Construction mobilized for the site clearing in early July 2015 and by November 2015, was able to complete much of the internal roads and foundation works for the solar farm and the control building. Conergy’s piling contractor, Conecon, initiated the piling works for the solar panel substructure in late September and completed it by mid-November. Phesco Inc, the onshore construction contractor, commenced with the installation of solar modules on October 13, 2015 and completed it on January 11, 2016.

Philcantech commenced the erection of the 69-kV T/L poles on October 3, 2015 and was able to complete the whole 5.9 km transmission line by the third week of December 2015. Philcantech was able to complete the switchyard by the third week of December. This followed from NGCP’s approval of the System Impact Study and Facilities Study by PSC. In the meantime, PetroSolar executed an Omnibus Loan and Security Agreement (OLSA) with joint lenders Development Bank of the Philippines (DBP) and Philippine National Bank (PNB) on November 12, 2015, covering a loan amount of P = 2.6 billion. The OLSA was registered with the Registry of Deeds on November 13, 2015.

By mid-December 2015, the solar farm and transmission facilities were 80% and 100% completed, respectively, prompting the DOE to nominate the TSPP to be FIT-eligible. The solar farm was completed by mid-January 2016 and was able to export power to the grid on January 27, 2016.

On March 7, 2016, the DOE issued the Certificate of Endorsement for Feed-in Tariff Eligibility (COE-FIT) of the TSPP, confirming that the project is qualified under the FIT system subject to compliance with the requirements of the Energy Regulatory Commission (ERC), and validating that February 10, 2016 is the start of the project’s commercial operation.

On April 6, 2016, PetroSolar executed its Renewable Energy Payment Agreement (REPA) with the National Transmission Corporation (TransCo), assuring the project’s revenues from the FiT payment of PhP 8.69/kWh from 2016 to 2036. The REPA took effect on May 10, 2016.

The Energy Regulatory Commission (ERC) approved on July 12, 2016 the Certificate of Compliance as a Feed-in-Tariff eligible power plant (COC-FIT) for the TSPP, which qualifies the plant to receive the FiT payments of PhP 8.69/kWh for 20 years.

PetroSolar completed the local Variable Renewable Energy (VRE) tests with NGCP for the TSPP last December 1 - 2, 2016 to ensure the compliance of the on-site electrical settings to Philippine Grid Code standards. Remote VRE tests were conducted with NGCP on December 27 - 28, 2016 to ensure effectiveness of the plant’s response to NGCP-controlled parameters. To address data polarity issues encountered during the remote VRE tests, PetroSolar and NGCP successfully completed last January 18, 2017 the final steps of the Variable Renewable Energy (VRE) tests required for compliance with the Philippine Grid Code. After passing these tests, NGCP will issue PetroSolar with the Final Approval to Connect certification.

PetroSolar executed its Co-Location Agreement with NGCP on December 27, 2016. This agreement allows PetroSolar to use NGCP’s 40-m Right-of-Way (ROW) over the 230-kV Concepcion-San Manuel line for the construction and utilization of PetroSolar’s 69-kV Switching Station, connecting the TSPP to the NGCP grid.

For the planned 49.25-MW(DC) expansion of the project (TSPP-2), PetroSolar is working to secure an offtake agreement for the project. In preparation for the full progression of pre-development activities, PetroSolar already secured the following permits for TSPP-2:  

Amended Environmental Compliance Certificate (ECC) from DENR-EMB Region III on February 01, 2017, and NGCP approval of TSPP-2 System Impact Study (SIS) on February 20, 2017.

On May 10, 2017, PetroSolar formally submitted its offer to supply MERALCO with electricity to be generated by its planned 49.25-MW(DC) TSPP-2. In parallel, PetroSolar is currently preparing documents for application of PEZA Permit to Locate and BOI Registration for TSPP-2. Upon securing the above permits, PetroSolar will lodge its application for TSPP-2’s Declaration of Commerciality with the DOE, a regulatory precondition to any actual development and construction.

In recognition of PetroSolar’s CSR efforts in the field of health, education and livelihood in its host communities, PEZA is awarding PetroSolar with the Outstanding Community Project Award for 2016. This will be personally awarded by DTI Secretary Ramon M. Lopez and PEZA Director General Charito B. Plaza to PetroSolar on April 4, 2017 in Pasay City.

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From February 10 to December 31, 2016, the total energy exported to the grid is 67,393 MWh, with revenue of PhP 558.7 MM based on the FiT price of PhP 8.69 / kWh.

Puerto Princesa Solar Power Project Solar Energy Service Contract (SESC) No. 2017-01-360 The Service Contract for PetroGreen’s (PGEC) newest proposed renewable energy project - the Puerto Princesa Solar Power Project - was signed by DOE Secretary Alfonso Cusi on February 27, 2017. The PPSPP aims to put up a 5-10 MW off-grid solar hybrid power facility in Puerto Princesa, Palawan to meet the increasing electricity demand and address the fluctuating electricity situation in the city through solar power.

PGEC has commenced its pre-development work program approved by the DOE, which includes technical and financial due diligence studies. After securing the favourable endorsement of host barangay Bahile last September 2016, PGEC has secured the Puerto Princesa City Environment & Natural Resources Office (City ENRO) certification for the PPSPP last March 10, 2017. This certification was prerequisite for PGEC to present the PPSPP to the Puerto Princesa City Council last March 27, 2017. Last May 10, 2017, PGEC secured the Puerto Princesa City Council’s favorable endorsement of the PPSPP. After which, the Palawan Council for Sustainable Development (PCSD) issued PGEC with the Strategic Environmental Plan (SEP) Clearance for the PPSPP on June 09, 2017, which is a prerequisite for its ECC application with the DENR-EMB Region IV-B. On March 17, 2017, PGEC met with Palawan Vice-Governor Dennis Socrates, PALECO Chairman Jeff Tan and Gen. Manager Ric Zambales, and Provincial Administrator Atty. Joshua Bolusa to discuss PGEC’s plans for PPSPP. Further on May 24, 2017, PGEC and technical consultants Conergy conducted an orientation lecture to the Palawan Electric Cooperative (PALECO) officials in Puerto Princesa on the application of energy storage systems and their possible uses to address the grid stability issues in Puerto Princesa. This will, in turn, aid both PGEC and PALECO to determine the most appropriate solar-hybrid solution for the project.

Summary of Renewable Energy Service Contract:

Wind Energy Service Contract No. 2009-09-002 Geothermal RE Service Contract No. 2010-02-012

Solar Energy Service Contract No. 2015-03-115 Solar Energy Service Contract No. 2017-01-360

2034 2035 2040 2042

Nabas -Buruanga-Malay, Aklan Maibarara,Batangas/Laguna Tarlac City, Tarlac Puerto Princesa City, Palawan

Products The Group’s main products are electricity generated sales from renewable energy projects and crude oil.

Electricity sales contribute 66.73% of the total revenues as of December 31, 2016. These are generated from the Maibarara 1, the 20 MW geothermal project in Sto. Tomas, Batangas and TSPP. Oil revenues are derived largely from PERC’s 2.525% share of producing offshore oil fields in Gabon, West Africa, which contributes 11.59% of the total revenues as of December 31, 2016. Apart from this, the Company has interests in other upstream oil projects within the Philippines such as Octon, West Linapacan, Offshore Mindoro, East Visayas, and Offshore Northwest Palawan, which may further enhance the Company’s income.

2.45% of the total revenues are from the Group’s share in net income of a joint venture, PWEI (NWPP), and other income.

Distribution Method A new sales method was put into effect in 2014 for the sale of Gabon crude oil. In an effort to maximize revenues from oil sale and to explore new markets for Etame crude, the Consortium adopted a new scheme where oil volumes for each month are put in the market for best price. This mode of marketing is stated in the new Crude Oil Share and Purchase and Services Agreement, effective from April 1, 2014 to March 31, 2015. Vitol SA was the chosen marketer of Etame crude oil under the new agreement.

After the termination of the marketing agreement - Crude Oil Sale and Purchase and Services Agreement (COSPA) with Vitol SA, the Consortium reverted to its previous crude sale agreement on May 2015. In the crude sale agreement, a single buyer commits to lift the volume of oil nominated by the sellers at a price scheme bench marked on Dated Brent and Rabi light. From May to July 2015, the Consortium had a crude sale agreement with Total SA. After Total, the Consortium entered into a 1-year crude sale agreement with Glencore on August 2015.

On June 28, 2016, the consortium signed a Deed of Amendment to extend the contract end date up to January 31, 2017.

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Physical transfer of the oil was effected at the offshore production site from the Floating Production Storage and Offloading Vessel (FPSO) to the buyer’s oil tanker.

For the Maibarara Geothermal Power Plant, which started commercial operations on February 8, 2014, all the energy exported is sold to Aggregator, Trans-Asia.

For the TSPP which started its commercial operations on February 10, 2016, all energy is exported to the grid and is distributed to various consumers who are connected to the grid. The Wholesale Electricity Spot market (WESM) facilitates the collection of payments from consumers and remits the same to Transco then to the generators.

Competition In the upstream (oil) local industry and energy industry, companies form a consortium or joint venture to explore certain areas due to high cost of exploration and development. Competition arises when two or more parties bid for a single block offered by the government and have to come up with the best program for exploration.

Sources and Availability of Raw Materials and Names of Principal Suppliers The Company is not into manufacturing and has no need for raw materials for its business.

Dependence on a single customer or few customers For the oil liftings, these are sold to a single buyer.

For Maibarara Geothermal Power Plant, an Energy Supply Agreement was signed with Trans-Asia Oil and Energy Development Corporation for a period of 20 years, wherein Trans-Asia will buy all of the energy exported for a fixed agreed price, re-priced every 5 years.

Transaction with and/or Dependence on Related Parties Please see “Item 12” for discussion on Related Party transactions.

Summary of principal terms and expiration dates of all patents, trademarks, copy rights, licenses, franchises, concessions and royalty agreements Aside from the Petroleum Properties and Renewable Energy Service Contracts discussed, there are no other patents, trademarks, copyrights, licenses, franchises, concessions, and royalty agreements entered into by the Group as of December 31, 2016 and 2015.

Need for Government approvals of Principal Products Oil industry in the Philippines is regulated by the policies and rules and regulations provided by government agencies like the Departments of Energy, Finance and Environment and Natural Resources. Moreover, generation and sale of electricity need prior approval from the Energy Regulatory Commission.

Effect of existing or probable governmental regulations and Costs and Effects of Compliance with Environmental Laws For the Renewable Energy Project, the Company conducted extensive studies to determine the environmental impact and possible mitigating actions to reduce, if not, eliminate potential threats to the environment connected with the conduct of geothermal operations. Active coordination and consultation with local government units and other stakeholders are also being carefully observed.

For the MGPP, the Company conducted extensive studies to determine the environmental impact and possible mitigating actions to reduce, if not, eliminate potential threats to the environment connected with the conduct of geothermal operations. Active coordination and consultation with local government units and other stakeholders are also being carefully observed. The ECC was released on August 10, 2010 to the Parent Company by the DENR. On December 29, 2010, the DENR approved the change in the proponent’s name for the Parent Company to MGI. The ECC for the 50 MW NWPP was released by the Department of Environment and Natural Resources (DENR) Region 6 office in June 2012. This gave PGEC clearance to proceed to site development, from road rehabilitation, access road construction, wind turbine installation, transmission line erection, and operation and maintenance of the facility subject to compliance to standard environmental regulations.

The ECC for the TSPP was released by the DENR-EMB Region III on August 4, 2015, prompting the commencement of ground works on the solar park site and project development.

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Tree planting activities were conducted in the Maibarara and the Nabas Wind areas. These were conducted in compliance with the requirements under the ECC and were undertaken in cooperation with the local government units of the areas and with DENR. Amount spent on research and development activities and its percentage to revenues A. Oil Exploration and development Year Amount % to Oil Revenue 2016 $ 1,239,641 23.22% 2015 $ 5,616,676 23.30% 2014 $ 7,715,361 69.30% Development costs for the oil projects are mainly from the development of Etame Expansion Project (Gabon) discussed above.

B. Renewable Energy Research and Development As of December 31, 2016, the Group has additions to construction in progress account amounting to $8.16 million. The bulk of the costs incurred is for the construction of the Maibarara Power Project Phase 2 (MGPP2).

Total Number of Employees and Number of Full-Time Employees As of December 31, 2016, there were 138 regular employees of the Group. The Group may hire employees in the next twelve (12) months due to increased volume of business, specifically for its renewable energy business.

Below is the break-down of regular employees of PERC and its subsidiaries PetroEnergy PetroGreen Maibarara PetroSolar Total Employees

17 24 93 4 138

Risk Factors Political, Economic and Legal Risks in the Philippines The Philippines has, from time to time, experienced military unrest, mass demonstrations, and similar occurrences, which have led to political instability. The country has also experienced periods of slow growth, high inflation and significant depreciation of the Peso. The regional economic crisis which started in 1997 negatively affected the Philippine economy resulting in the depreciation of the Peso, higher interest rates, increased unemployment, greater volatility and lower value of the stock market, lower credit rating of the country and the reduction of the country’s foreign currency reserves. There has also been growing concerns about the unrestrained judicial intervention in major infrastructure project of the government.

There is no assurance that the political environment in the Philippines will be stable and that current or future governments will adopt economic policies conducive to sustained economic growth.

Continuous and peaceful operations in the project areas are dependent on the Company’s good relationships with the host local government units. The Company’s renewable energy projects are located in three provinces: Batangas for its geothermal energy project; Tarlac, for its solar power project; and Aklan for the wind energy project. The local governments in these areas -- from the provincial, city, municipal and barangay levels -- are supportive of these projects, especially because these are renewable and clean energy projects. Local government endorsements and resolutions have therefore not been a problem in these areas. The Company’s oil projects, on the other hand are located in Palawan, Mindoro and Visayas. Since these are oil exploration projects, getting local government support have been challenging.

To ensure that host local government units give their support and to mitigate the risk of their withdrawal of support of the Company’s projects, the Company invests in corporate social responsibility projects. These projects are geared towards providing long term and sustainable development to the communities within the host local government units.

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Political, Economic and Legal Risks in Gabon Despite its internal problems, the State of Gabon is said to be politically stable by African standards. Gabon was led by President Omar Bongo, the continent's second longest-serving head of state, who has been in power since 1967 until his death in 2009. Through an election held soon after, his son, Ali-Ben Bongo Ondimba, succeeded him as President. Its political stability and ample natural resources have helped make Gabon a wealthy nation compared to the rest of Sub-Saharan Africa. It must be noted however that Gabon's wealth is not distributed equitably, and almost half of the population lives below the poverty line.

Gabon held a presidential election in August 2016, and the change in the administration also introduced new fiscal terms that will likewise change and could negatively impact the Company’s business. A new Hydrocarbon Law, which took effect since 2014, introduces new fiscal terms for all upstream operators – which include increased government shares and royalties, decreased cost recovery, and the imposition of 35% income tax on profit oil – all of which will significantly work in the favor of the Gabonese government.

The oil industry is the key to Gabon’s economy although the government is trying to distance itself from oil dependence and focus on non-oil businesses such as forestry products due to concerns over the life of the oil reserves.

The Company’s Gabon petroleum exploration and production operations (Gabon Operations) is among the Company’s major sources of revenues. The Company holds 2.525% participating interest in the Gabon production service contract with the following consortium partners: Addax Petroleum Etame, Inc. (formerly PanOcean Energy Gabon Corp.); Sasol Petroleum West Africa Limited; Tullow Oil Gabon SA and VAALCO Gabon (Etame), Inc., (collectively, the “Gabon Consortium”).

The general political situation in and the state of economy of Gabon may thus influence the growth and profitability of the Company. Any future political or economic instability in Gabon may have a negative effect on the financial results of the Company.

Furthermore, the continuity of the Gabon Operations is dependent on the validity of the permits and licenses issued the Gabon Consortium. A stable regulatory environment that would allow unhampered operations in Gabon is crucial to the Company’s continuous profitability.

Technical Risk The petroleum exploration industry is a high risk, capital intensive and highly speculative industry. Risks in upstream petroleum exploration include 1) prospectivity of the concession area in terms of actually finding oil in commercial quantity, 2) varying oil prices and project economics, 3) joint venture structuring and key personnel management, among others. Finding oil in commercial quantity is highly dependent on appropriate geologic conditions for oil to accumulate, and be able to be extracted by drilling. Once commercial oil is found, one has to make capital expenditures in terms of field appraisal (determining the extent of the reserves) for proper field development. The Company mitigates this high degree of technical risk through the use of advanced and sophisticated tools, engagement of experienced consultants, and constant intensive discussion and information-sharing with joint venture partners.

From late-2016 onwards, much of the discussions of the consortium has been over the economic life of the Etame Marin complex. To date, the consortium has already recovered 50% of the estimated ultimate recoverable reserves, which means that production from the Gamba sand reservoir will soon start to decline.

The planned future drillings in the area are mostly from the deeper Dentale sands. These sands are not as well characterized as the Gamba, thus, putting a lot of uncertainty in its production. We currently have two wells producing form these sands but with very low productivity.

Moreover, there is not much area to produce the Gamba from within the Etame Marin permit as some acreage has been relinquished to the government in 2012. There is also the current issue on production of sour gas (hydrogen sulfide gas) within the Gamba sands in the northern Ebouri production sector. Souring usually happens when extraction of oil has already reached deeper in the reservoir.

Souring of wells is a concern which may extend further to the other production fields as extraction continues.

Currently, all wells that turned sour are kept shut since the facilities are not designed to handle this corrosive oil. Production from these sour wells may be realized either thru installation of processing platforms or reinstallation of sour-resistant pipes at the surface facilities. Both options entail high costs.

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Operational Risk The Etame crude oil production in Offshore Gabon as of December 31, 2016 contributed 11.59% of the total consolidated revenues, whereas on December 31, 2015, the oil revenues contributed 27.27% of the total consolidated revenues. The production of crude oil may involve many risks such as breakdown of equipment, unexpected levels of output or efficiency, natural disasters, and the need to comply with further directions of the relevant government authority. Moreover, like most oil discovery areas, there are concerns over how long these reserves will last. Any of the foregoing circumstances could significantly reduce revenues or increase the cost of operating the contract area.

The Consortium entered into a crude sales agreement with Glencore where single buyer is committed to buy a minimum of 400,000 bbls per lifting based on a pricing scheme that is bench marked on Dated Brent and Rabi Light. Dated Brent and Rabi Light are prices of crude during particular dates or period. Dated Brent reflect the price of crude oil produced in the North Sea in Northern Europe while Rabi Light reflect the price of crude in Gabon. With this type of agreement, the Consortium will be assured of its crude oil being purchased at a fixed pricing scheme. Aside from this, the Consortium also plans to balance its operating expenses and to increase oil production to ensure that revenues do not drop drastically as a result of low oil prices.

The consortium is considering the application of a new contract merging all three licenses after July 2021 and will be under the new Gabonese fiscal terms. The consortium is currently examining the most optimal drilling program to ensure maximum recoverable oil while ensuring positive returns for the consortium members. This includes an optimal drilling program in which we can further extract as much of the Gamba reservoir and also the Dentale reservoir and also addressing the sour oil from the affected wells, while making capital expenditures and the accompanying operating expenses at manageable levels to hope for positive returns.

These are all heavily dependent on the global oil price trends, to which the consortium is hoping that prices will rise up to almost US$ 100/bbl in order to make this Integrated Field Development Plan technically and economically feasible for the DGH. Risk of Venturing into Renewable Energy Projects The following risks on the Group’s ventures in geothermal, solar, and wind energy development may have significant effect in the Group’s business, financial condition, and results of operations:                 

Offtake risks or market risks; Collection risks from offtaker and the FIT-Allowance Administrator; breakdown or failure of power generation equipment, steam supply equipment, transmission lines, pipelines or other necessary equipment or processes, leading to unplanned outages and other operational issues; flaws in the design of equipment or in the construction of an electric generation or steam supply plant; problems with the quality and quantity of geothermal and wind resources; material changes in law or in governmental permit requirements; operator error; performance below expected levels of output or efficiency; labor disputes, work stoppages, and other industrial actions by employees affecting the projects directly; pollution or environmental contamination affecting the operation of the plants; planned and unplanned power outages due to maintenance, expansion and refurbishment; the inability to obtain required governmental permits and approvals including the FIT allocation; opposition from local communities and special interest groups; social unrest and terrorism; engineering and environmental problems; construction and operational delays, or unanticipated cost overruns; and force majeure and other catastrophic events such as fires, explosions, earthquakes, floods and acts of terrorism and war that could result in forced outages, personal injury, loss of life, severe damage or destruction of a plants and suspension of operations.

The Group cannot assure that future occurrences of any of the events listed above or any other events of a similar or dissimilar nature would not significantly decrease or eliminate the expected revenues from any of its power or steam generating assets, or significantly increase the costs of operating any such assets.

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Foreign Currency Risk The revenues of PetroEnergy are predominantly denominated in U.S. Dollars. However, the obligation and expenses of the local areas which do not contribute revenues to the Company are denominated in Philippine Peso. In addition, a substantial portion of the PERC’s future capital expenditures in Gabon are denominated in currencies other than the Peso. During the last decade, the Philippine economy has from time to time experienced instances of devaluation of the Peso and limited availability of foreign exchange. Recurrence of these conditions may adversely affect the financial condition and results of operations of the Company. The Company does not normally hedge its foreign currency exposures as it believes that it has sufficient revenues in U.S. Dollar and/or Philippine Peso, as the case may be, to answer for corresponding obligations.

Equity Partnership Risk The Company has been participating in various oil exploration and development activities in Gabon and the Philippines with other parties. The Company is currently engaged in a production sharing contract with an equity share of 2.525% covering the Etame discovery block in the Atlantic shelf along with its Gabon Consortium partners. Such equity partnership requires the sharing in costs and revenues from the sale of the Etame crude oil. This situation may involve special risks associated with the possibility that the equity partner (i) may have economic or business interests or goals that are inconsistent with those of the Company; (ii) take actions contrary to the interests of the Company; (iii) be unable or unwilling to fulfill its obligations under the production sharing contract or sales contract; or (iv) experience financial difficulties. These conflicts may adversely affect the Company’s operations. To date, the Company has not experienced any significant problems with respect to its equity partners.

Financial Risk Management Objectives and Policies The Group’s principal financial instruments include cash and cash equivalents, trading and investment securities (financial assets at FVPL) and receivables. The main purpose of these financial instruments is to fund the Group’s working capital requirements.

The Group manages and maintains its own portfolio of financial instruments in order to fund its own operations and capital expenditures. Inherent in using these financial instruments are the following risks on liquidity, market and credit.

Please refer to the 2016 Consolidated Audited Financial Statements, Note 27 for the discussion of main financial risks arising from the Group’s financial instruments.

Capital Management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders’ value.

Please refer to the 2016 Consolidated Audited Financial Statements, Note 20 for the discussion the Group’s Capital Management.

There were no changes made in the objectives, policies or processes for the years ended December 31, 2016 and 2015, respectively.

Item 2 - Properties PERC owns a 714-square meter office unit located at 7th Floor, JMT Building, ADB Avenue, Ortigas Center, Pasig City. The title of the Company over the property is clean and free from any lien and encumbrance.

In April 2012, Maibarara entered into a 25-year Land Lease Agreement (LLA) for its steamfield and access road with Power Sector Assets and Liabilities Management Corp. (PSALM) and paid upfront fees for the entire term.

Also, Maibarara has a US$0.760 million worth of purchased lot to be used as MGPP plant site, access road and transmission line.

The Group may acquire additional property in the next twelve (12) months due to the increased volume of business, specifically for its renewable energy business.

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The principal properties of the Group consist of various oil areas located in the Philippines and in Gabon, and renewable energy service contracts, as follows: Petroleum Service Contracts (SC) EPSC SC 6A SC 14C2 SC 51 SC 75

– – – – –

Gabon, West Africa Octon, Northwest Palawan West Linapacan East Visayan Basin Offshore NW Palawan

Wind Energy Service Contract (WESC) WESC No. 2009-09-002 – (Nabas-Malay-Buruanga, Aklan) Geothermal Renewable Energy Service Contract (GRESC) GRESC No. 2010-02-012 – (Laguna and Batangas) Solar Energy Service Contract (SESC) SESC No. 2015-03-115 – (Tarlac) Solar Energy Service Contract (SESC) SESC No. 2017-01-360 – (Puerto Princesa)

Participating Interest 2.525% 16.670% 4.137% 4.010% 15.000% Participating Interest

40% (through PetroGreen)

Participating Interest

65% (through PetroGreen) Participating Interest 56% (through PetroGreen)

Participating Interest 100% (through PetroGreen)

For details on the above Production Sharing Contact in Gabon and Service Contracts in the Philippines, please see discussion on “Business of Issuer.

Item 3 - Legal Proceedings MGI is undergoing VAT refund process covering the years 2011, 2012, and 2013 with a total amount of P112.03 million or US$2.25 million. These claims have now been elevated to the Court of Tax. Aside from the discussions above, The Group is neither a party to, nor is involved in, any litigation that affects or will affect its interests. It has neither any knowledge of any litigation, present or contemplated, against the Company.

There are no other pending legal proceedings to which the Group is a party or which any of its property is subject to.

Item 4 - Submission of Matters to a Vote of Security Holders There were no matters that were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

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PART II - OPERATIONAL AND FINANCIAL INFORMATION Item 5 - Market for Registrant’s Common Equity and Related Stockholder Matters A)

Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters 1.

Market Information Stock Market Price and Dividend on Registrant’s Common Equity (last 2 years)

1st Q u arte r

2n d Q u arte r

3rd Q u arte r

4th Q u arte r

1st Q u arte r 2017

2016

2015

2016

2015

2016

2015

2016

2015

P hp1.00 P hp3.98 P hp2.61

P hp1.00 P hp6.25 P hp5.51

P hp1.00 P hp4.40 P hp3.60

P hp1.00 P hp5.89 P hp4.00

P hp1.00 P hp4.25 P hp3.90

P hp1.00 P hp4.41 P hp3.76

P hp1.00 P hp4.25 P hp3.80

P hp1.00 P hp4.05 P hp3.03

2.686MM

2.

.807MM

5.399MM

5.399MM

12.29MM

12.29MM

1.217MM

1.217MM

15-Ju n -17

P hp1.00 P hp4.22 P hp4.00 2.686MM

P hp1.00 P hp6.18 P hp6.15 103,900

Holders As of June 15, 2017, the Company has 2,029 stockholders.

Hereunder is the list of the top 20 Stockholders (as of June 15, 2017):

STOCKHOLDERS 1 PCD NOMINEE CORPORATION 2 HOUSE OF INVESTMENTS, INC.

SHARES 372,978,638

PERCENTAGE 90.81%

21,805,861

5.31%

3 HYDEE MANAGEMENT & RESOURCE CORPORATION 4 IPEOPLE, INC.

1,880,779

0.46%

1,240,651

0.30%

5 BAGUYO, DENNIS G. 6 PCD NOMINEE CORPORATION

1,203,888

0.29%

830,376

0.20%

355,468

0.09%

327,030

0.08%

9 R.P. LAND DEVELOPMENT CORP. 10 TAN, JUANITA UY

309,078

0.08%

300,781

0.07%

11 DAVID GO SECURITIES CORP. 12 LEY, FELY

277,949

0.07%

266,600

0.06%

13 CHEN HUA BI 14 PAN MALAYAN MANAGEMENT

266,599

0.06%

266,592

0.06%

15 MENDOZA, ALBERTO &/OR JEANIE C. 16 YU, JOHN PETER C. YU &/OR JUAN G.

251,492

0.06%

180,000

0.04%

17 PHIL. ASIA EQUITY SEC. INC. U-055 18 ORIENTRADE SECURITIES, INC.

159,959

0.04%

121,500

0.03%

19 UY-TIOCO, GEORGE 20 ROQUE JR., GONZALO

106,640

0.03%

90,234

0.02%

403,220,115

98.17%

7,516,215

1.83%

410,736,330

100.00%

7 YAN, LUCIO 8 ONG PAC, SALLY C.

Subtotal: Others: Grand Total:

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Minimum Public Ownership The Company is compliant with the required Minimum Public Ownership of at least 10% of the total issued and outstanding capital stock, as mandated by Section 3, Article XVIII of the Continuing Listing Requirements of the Listing and Disclosure Rules. As of May 31, 2016, the Company’s public float was 45.09%.

3.

Dividends In accordance with the Corporation Code of the Philippines, the Company intends to declare dividends (either in cash or stock or both) in the future. The shareholders of the Company are entitled to receive a proportionate share in cash dividends that may be declared by the Board of Directors out of surplus profits derived from the Company’s operations. The same right exists with respect to a stock dividend, the declaration of which is subject to the approval of stockholders representing at least two-thirds (2/3) of the outstanding shares entitled to vote. The amount will depend on the Company’s profits and its capital expenditure and investment requirements at the relevant time.

Dividend declaration in two (2) most recent years Date of Declaration April 26, 2012 April 26, 2012 July 04, 2013

4.

Dividends per S hare Cash S tock 10% 10% 5%

Record Date

Payment Date

M ay 18, 2012 September 21, 2012 July 25, 2013

June 14, 2012 October 17, 2012 August 20, 2013

Recent Sale of Unregistered Securities PetroEnergy Resources Corporation request for confirmation of exemption transaction filed on February 18, 2015 and was approved on March 20, 2015.

The provision of Section 10.1 of the Code under which exemption is based: Section 10.1 (e) The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock.

Section 10.1 (i) Subscription for shares of the capital stock of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stock under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given in connection with the sale of disposition of such securities, and only when the purpose for soliciting, giving or taking of such subscription is to comply with the requirement of such law as to the percentage of the capital stock of a corporation which should be subscribed before it can be registered and duly incorporated, or its authorized capital increased.

Section 10.1 (l) The sale of securities to any number of qualified buyers.

PetroEnergy Resources Corporation offered 136,912,110 common shares to all existing eligible shareholders of record as of April 30, 2015 (Ex-date April 27, 2015), at a ratio of one (1) Rights share for every two (2) common shares held at an Offer Price of P4.38 per share. The Offer period started on May 11, 2015 and ended on May 15, 2015. The Stock Rights Offering is fully subscribed and fully paid-up, and has been listed at the Philippine Stock Exchange on June 9, 2015.

B) Description of Registrant`s Securities 1. Common Stock The details of the Company’s capital stock are as follows:

Authorized - 700 million shares at $0.0245 par value Issued and outstanding 2.

3.

4.

5.

6.

7.

410,736,330

$9,391,312

Debt Securities - Not Applicable Stock Options - Not Applicable Securities Subject to Redemption call – Not Applicable Warrants – Not applicable Market Information for Securities Other than Common Equity – Not Applicable Other Securities – Not Applicable 41

Item 6 - Management’s Discussion and Analysis or Plan of Operation 1. Management’s Discussion and Analysis (Amounts are in U.S. Dollar) a. Consolidated Financial Position (As of December 31, 2016 and 2015)

As of December 31 (Audited) 2016

% Change

2015

% in Total Assets

ASSETS Cash and cash equivalents

$12,914,588

$32,536,605

-60.31%

6.03%

Financial assets at fair value through profit and loss Receivables

162,445 7,860,439

156,231 3,591,873

3.98%

0.08%

118.84%

3.67%

Prepaid expenses and other current assets Property and equipment-net

6,766,450 138,870,569

6,413,693 140,724,197

5.50%

3.16%

Deferred oil exploration cost

10,134,234

15,919,839

Investment in a joint venture

26,843,396

Investment properties-net Deferred tax assets-net Other noncurrent assets TOTAl ASSETS

-1.32%

64.80% 4.73%

27,166,952

-36.34% -1.19%

12.53%

31,417

31,417

0.00%

0.01%

308,168

306,910

0.41%

0.14%

10,408,066

10,282,823

1.22%

4.86%

$214,299,772

$237,130,540

-9.63%

100.00%

LIABILITIES AND EQUITY Accounts payable and accrued expenses Current portion of loans payable Income tax payable Deposits for future stock subscriptions Loans payable - net of current portion

4,619,107

18,795,721

-75.42%

2.16%

15,982,090

16,539,074

-3.37%

7.46%

100.00%

0.02%

45,532

-

1,781,640

6,557,228

-72.83%

0.83%

99,505,183

99,171,368

0.34%

46.43%

Asset retirement obligation

1,366,511

1,094,672

24.83%

0.64%

Derivative liability Deferred tax laibilities Other noncurrent liability

1,537,586 183,148

10,855,986 1,624,496 114,425

-100.00% -5.35% 60.06%

0.00% 0.72% 0.09%

125,020,797

154,752,970

-19.21%

58.34%

65,276,897

66,335,445

-1.60%

30.46%

49.62%

11.20%

TOTAL LIABILITIES EQUITY Attributable to equity holders of the Parent Company Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY

24,002,078

16,042,125

$89,278,975

$82,377,570

8.38%

41.66%

$214,299,772

$237,130,540

-9.63%

100.00%

Total assets amounted to $214.300 million and $237.131 million as of December 31, 2016 and December 31, 2015, respectively.

Cash and cash equivalents consist of cash on hand, cash in banks and money market placements with original maturities of not more than three months. The 60.31% net decrease from US$32.537 million as of December 31, 2015 to US$12.915 million as of December 31, 2016 is mainly due to payment of progress billings for the construction of Solar Power Project and the MGPP Phase 2 and payment of current portion of loans.

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Financial assets at fair value through profit and loss (FVPL) amounted to US$0.162 million and US$0.156 million as of December 31, 2016 and 2015, respectively. The 3.98% net increase in this account is due to the positive changes in the market prices of the Company’s investments in stocks traded in the Philippine Stock Exchange (PSE).

The Receivables account mainly consists of receivables from lifting/sales of crude oil revenue and electricity sales. This account increased by 118.84% from US$3.592 as of December 31, 2015 to US$7.860 million as of December 31, 2016 due to higher outstanding receivable from electricity sales, mainly from Solar Power Project, which started its commercial operations in February 10, 2016.

Prepaid expenses and other current assets consist of advances to contractor, deferred financing costs, prepaid insurance, supplies inventory, refundable deposits, restricted cash, crude oil inventory and other prepayments. This account amounted to US$6.766 million and US$6.414 million as of December 31, 2016 and December 31, 2015, respectively. The 5.5% net increase is mainly due to advances made to contractors for the purchase of equipment for the MGPP Phase 2.

Property, plant and equipment (PPE) declined by 1.32% from US$140.724 million as of December 31, 2015 to US$138.871 million mainly due to the impairment of the Gabon oil assets as a resut of in-house valuation made for the said asset.

Deferred oil exploration cost amounted to US$10.134 million and US$15.920 million as of December 31, 2016 and 2015, respectively. The 36.34% net decrease is due to transfer of deferred costs to PPE. Investment in a joint venture refers to the remaining 40% shareholdings in PWEI. This amounted to US$27.843 million and US$27.167 million as of December 31, 2016 and December 31, 2015, respectively.

The 1.19% net decline mainly pertains to the translation adjustment from previous year’s closing of P47.06:1US$ to P49.72:US$1 as offset by the income generated by PWEI amounting to US$1.130 million.

Investment properties remained unchanged as of December 31, 2016.

Deferred tax assets (liability) (DTA/L) occurs due to timing differences in recognizing temporary deductible expenses and temporary taxable revenues such as accrued profit share, accretion expenses, accrued retirement liability, provision for probable losses, unrealized gains or losses and change in crude oil inventory.

The Group has a DTA of US$0.308 million and US$0.307million as of December 31, 2016 and 2015, respectively.

The group also recorded a US$1.538 million and US$1.624 DTL as of December 31, 2016 and 2015, respectively, relative to PetroGreen’s unrealized gain on re-measurement of investment. The bulk of the 5.35% net decline pertains to cumulative translation adjustment of this account from previous year’s closing of P47.06:1US$ to P49.72:US$1.

Other non-current assets amounted to US$10.408 million and US$10.283 million as of December 31, 2016 and December 31, 2015, respectively. This account consists of the non-current portion of advance rent, input vat carry overs, and restricted cash. The 1.22% net increase is mainly due to the additional input taxes within the period and development costs for the MGPP2.

Accounts payable and accrued expenses amounted to US$4.619 million and US$18.796 million as of December 31, 2016 and December 31, 2015, respectively. The 75.42% net decrease mainly pertains to payment of outstanding payables to contractors during the period.

Current portion of loan payable as of December 31, 2016 amounted toUS$15.982 million and $16.539 million as of December 31, 2015. The 3.37% net decrease accounts for payment of principal loans due during the period.

Income tax payable as of December 31, 2016 pertains to PetroSolar’s 5% provision for income tax under the PEZA rules.

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The deposit for future stock subscription as of December 31, 2016 amounted to $1.782 million and $6.557 million as of December 31, 2015. This pertains to total consideration received from non-controlling interests (for PetroGreen, MGI and PetroSolar) in excess of the authorized capital of entities within the Group, with the purpose of applying the same payment for future issuance of shares. The 72.83% decrease pertains to the approval of application of the increase in capitalization of PetroSolar.

The 0.34% net increase in loans payable - noncurrent is mainly due to the loan availed by MGI for the development of its MGPP2 offset by the cumulative translation adjustment from previous year’s closing of P47.06:1US$ to P49.72:US$1.

Asset Retirement Obligation amounted to US$1.367 million and US$1.095 million as of December 31, 2016 and as of December 31, 2015, respectively. The 24.83% increase in this account resulted from the amortization of the net present value of abandonment costs estimate and additional abandonment cost estimate for the Solar Power Project.

The Group’s derivative liability pertains to the payoff structure and put and call options over PetroWind shares. As of December 31, 2015 this amounted to US$10.856 million. As of December 31, 2016, the derivative liability was fully reversed (Please see Note 19 of the Audited Financial Statement).

Other non-current liability consists of the accrued retirement liability and accrued rent. The 60.06% increase pertains to additional set-up of accrued rent for PSOC. Equity attributable to equity holders of the Parent Company amounted to US$65.277 million or US$0.159 book value per share as of December 31, 2016 and US$66.335 million or book value per share of US$0.162 as of December 31, 2015. Despite of the additional income during the period amounting to US$1.772 million, this account declined because of the cumulative adjustments of the Peso value assets and liabilities from previous year’s closing of P47.06:1US$ to P49.72:US$1.

Non-controlling interest (NCI) as of December 31, 2016 and 2015 pertains to the following: 10% share of EEI-PC in PetroGreen; 25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara; 44% share of EEI-PC (direct) and 10% of 56% share (indirect) in PetroSolar.

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b. Consolidated Results of Operation (As of December 31, 2016, 2015 and 2014)

Years Ended December 31 (Audited) 2016 REVENUES Electricity sales Oil revenues

COST OF SALES Cost of electricity sales Oil production Depletion GROSS INCOME GENERAL AND ADMINISTRATIVE OTHER INCOME (CHARGES) - net Gain (loss) on derivatives Share in net income (loss) of a joint Interest income Net foreign exchange gains (losses) Net gain on fair value changes on financial assets at FVPL Gain on disposal of investment Interest expense Impairment loss Accretion expense Miscellaneous income NET INCOME BEFORE INCOME TAX PROVISION FOR INCOME TAX NET INCOME

2015

2014

% Change % in Total 2016 vs. Revenue 2015 s 2016*

28,290,322 $5,339,338 33,629,660

16,967,907 14,741,614 $6,574,675 $11,132,670 23,542,582 25,874,284

66.73% -18.79% 42.85%

61.42% 11.59% 73.02%

12,199,861 3,704,709 2,795,358 18,699,928 14,929,732 3,217,253

7,113,087 4,239,457 1,681,618 13,034,162 10,508,420 3,911,082

71.51% -12.61% 66.23% 43.47% 42.07% -17.74%

26.49% 8.04% 6.07% 40.60% 32.41% 6.99%

(734,060) (10,755,464) 1565.92% 241,481 (242,562) 367.91% 112,537 70,633 152.47% (178,876) (93,661) 122.62%

23.36% 2.45% 0.62% 0.09%

10,760,704 1,129,923 284,127 40,457 16,404 (9,076,674) (8,831,689) (156,955) 197,087 (5,636,616) 6,075,863 217,631 5,858,232

1,392 (4,934,680) (140,635) 211,638 (5,421,203) 1,176,135 (3,432,935) 4,609,070

1,772,841

2,680,207

6,064,893 5,132,328 1,405,642 12,602,863 13,271,421 3,276,903

26,128 1078.45% 21,052,299 0.00% (4,524,186) 83.94% -100.00% (50,900) 11.60% 243,237 -6.88% 5,725,524 1710% 15,720,042 416.60% 5,968,772 106.34% 9,751,270 27.10%

0.04% 0.00% -19.71% -19.17% -0.34% 0.43% -12.24% 13.19% 0.47% 12.72%

NET INCOME ATTRIBUTABLE TO: Equity holders of the Parent Company Minority interest NET INCOME Basic/Diluted Earnings Per Share (EPS)

8,489,385

-33.85%

3.85%

4,085,391

1,928,863

1,261,885

111.80%

8.87%

$5,858,232

$4,609,070

$9,751,270

27.10%

12.72%

$0.0043

$0.0076

$0.0310

Note: Differences in amounts are due to rounding off. *includes all revenue accounts ( electricity sales oil revenues, gain on derivatives, share in net income of a joint venture, interest income, net foreign exchange gain, net gain on fair value changes on FVPL, miscellaneous income) The Group generated consolidated net income attributable to equity holders of the Parent Company amounting to US$1.773 million or $0.0043 earnings per share and US$2.680 million or $0.008 earnings per share as of December 31, 2016 and 2015, respectively.

Revenues: Electricity sales refer to the electricity power generated by MGPP and PetroSolar. The 66.73% increase is mainly due to start of commercial operations of PetroSolar on February 10, 2016.

Oil revenues decreased by 18.79% due to lower crude oil price from an average of US$48.16/bbl. to an average of $40.08/bbl. and lower production barrels from 6.777 million barrels (gross) to 6.150 million barrels (gross).

45

Costs and Expenses: Costs of electricity sales pertain to the direct costs of generating electricity power including depreciation, and other costs directly attributed to producing electricity. The bulk of the 71.51% increase is mainly due to the operating maintenance cost of the Solar Power Project which started its commercial operations on February 10, 2016.

Oil production expenses (OPEX) decreased by 12.61% from $4.239 million as of December 31, 2015 to $3.705 million as of December 31, 2016 mainly because of lower royalty (Gabon) expenses brought about by the decline in average crude oil price and decline in production barrels.

The 66.23% increase in depletion is due to increased PPE subject to depletion, mainly on the allocation of the costs of two platforms over the number of well drilled during the Etame Expansion.

General and administrative expenses (G&A) decreased by 17.74% from US$3.911 million as of December 31, 2015 to US$3.217 million as of December 31, 2016 because in the 2015 G&A includes expenses for the Stock Rights Offering, and Documentary Stamp Tax for the sale of 10% stake in PGEC to EEI. Other income (charges) amounted to (US$5.637) million and (US$5.421) million as of December 31, 2016 and 2015, respectively. Below is the itemized discussion of the changes in each other income (charges) account.  Gain (loss) on derivatives: o The US$10.761 million unrealized gain in 2016 is due to the full reversal of the derivative liability (Please refer to Note 19 of the Audited Financial Statement); whereas, o the US$0.734 million unrealized loss in 2015 resulted from the additional set-up of derivative liability during the period (Please refer to Note 19 of the Audited Financial Statement);  367.91% increase in share in net income of a joint venture because the NWPP started its commercial operations in June 10, 2015, thus the 2016 income of the NWPP includes a whole year of operations whereas the 2015 includes only half year of operations;  152.47% net increase in interest income from US$0.113 million as of December 31, 2015 to US$0.284 million as of December 31, 2016 mainly due to set-up of interest receivable from Transco, relative to the outstanding receivable on the electricity sale and interest income from the outstanding funds;  122.62% change in net realized gain (loss) on forex changes from US$0.179 million loss as of December 31, 2015 to US$0.040 million unrealized gain in 2016 due to fluctuations of Peso vs. US Dollar;  1078% net increase in net gain in changes in market values of investments in stocks traded at the PSE from US$1,392 as of December 31, 2015 to US$16,404 as of December 31, 2016 is due to positive movements in market values of investments;  83.94% increase in interest expense from US$4.935 million as of December 31, 2015 to $9.077 million as of December 31, 2016 due to the interest expense for the TSPP1 and additional loan availment during the period;  US$8.831 million impairment loss recorded in 2016 relative to the Gabon Assets due to low crude oil prices (please refer to Note 10 of the Consolidated Audited Financial Statements); and  11.60% increase in accretion expense from US$0.141 million as of December 31, 2015 to US$0.157 million as of December 31, 2016 mainly due to the addition in abandonment estimate for the Renewable Energy Projects;  6.88% decrease in miscellaneous income.

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The group also recorded a US$0.218 million and US$(3.433) million provision for (benefit from) income tax as of December 31, 2016 and 2015, respectively. The US$0.218 million provision for income tax as of December 31, 2016 mainly pertains to the 5% gross income tax of PSOC; whereas,  the US$3.433 million benefit from income tax pertains to the correction of the tax rate of the initial recognition of the of the unrealized gain on re-measurement in 2014 from 30% tax rate to 10% tax rate because this pertains to future sale of shares not traded in the PSE. Non-controlling interest (NCI) as of December 31, 2016 and 2015 pertains to the following: 10% share of EEI-PC in PetroGreen; 25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara; 44% share of EEI-PC (direct) and 10% of 56% share (indirect) in to PetroSolar; c. Consolidated Financial Position (As of December 31, 2015 and 2014) Total assets amounted to $237.131 million and $142.048 million as of December 31, 2015 and December 31, 2014, respectively.

Cash and cash equivalents consist of cash on hand, cash in banks and money market placements with original maturities of not more than three months. The net increase from US$2.818 million as of December 31, 2014 to US$32.537 million as of December 31, 2015 is mainly due to the $52.91 million loan drawdown to finance the Solar Power Project.

Short-term investments (STI) consist of money market placements with maturities of more than three months but less than one year. There are no STIs as of December 31, 2015 as compared to $0.186 million as of December 31, 2014.

Financial assets at fair value through profit and loss (FVPL) amounted to US$0.156million and US$0.163 million as of December 31, 2015 and 2014, respectively. The 4.18% net decrease in this account is due to the negative changes in the market prices of the Company’s investments in stocks traded in the Philippine Stock Exchange (PSE).

The Receivables account amounted to $3.592 million and $3.572 million as of December 31, 2015 and December 31, 2014, respectively. The 0.57% net increase is mainly due to advances granted to an affiliate, PWEI. Crude oil inventory pertains to PERC’s share in the Etame Marine Permit (Gabon) ending inventory. This amounted to US$0.097 million and US$0.419 million at the end of December 31, 2015 and 2014, respectively.

The 76.98% decrease is mainly due to lower crude oil price from $56.74/barrel as of December 31, 2014 to $33.56/barrel as of December 31, 2015; lower barrels left unsold from 344k barrels (gross) to 138K barrels (gross).

Prepaid expenses and other current assets consist of advances to contractor, prepaid insurance, supplies inventory, refundable deposits, restricted cash and other prepayments. This account amounted to US$6.317 million and US$2.688 million as of December 31, 2015 and 2014, respectively. The bulk of the increase is due to the following:  Set-up of MGI and PetroSolar’s Debt Service Payment Account (DSPA);  Unused portion of proceeds from Stock Rights Offering held under escrow; and  Down payment to its contractor for the Solar Power Project.

Property, plant and equipment (PPE) is up by 76.38% from US$79.784 million as of December 31, 2014 to US$140.724 million as of December 31, 2015 mainly due to the development of the Solar Power Project and transfer of completed Etame Wells from deferred exploration costs to PPE-wells.

Deferred oil exploration cost amounted to US$15.920 million and US$19.113 million as of December 31, 2015 and 2014, respectively. The 16.70% net decrease is due to transfer of costs of completed wells (from Etame Expansion Project in Gabon, West Africa) from deferred costs to PPE. 47

Investment in a joint venture refers to the remaining 40% shareholdings in PWEI, the company that developed the NWPP. In February 14, 2014, PetroGreen sold 50% of its 80% share holdings to CapAsia. This account amounted to $27.167 million as of December 31, 2015 and $27.631 million as of December 31, 2014.

The 1.68% net decrease accounts for translation adjustment from Peso to USD. Investment properties remained unchanged as of December 31, 2015.

Deferred tax assets (liability) (DTA/L) occurs due to timing differences in recognizing temporary deductible expenses and temporary taxable revenues such as accrued profit share, accretion expenses, accrued retirement liability, provision for probable losses, unrealized gains or losses and change in crude oil inventory.

The Group has a DTA of US$0.307million and US$0.202 as of December 31, 2015 and 2014, respectively. The bulk of the 51.91% increase is relative to the movements of the accretion expense and crude oil inventory.

The group also recorded a $1.624 million and $5.128 million DTL as of December 31, 2015 and 2014, respectively, relative to PetroGreen’s unrealized gain on re-measurement of investment. As of December 31, 2015, the initial recognition of 30% tax rate for the unrealized gain on re-measurement in 2014 was corrected to 10% tax rate, because this pertains to future sale of shares not traded in the PSE. The change in tax rate decreased the DTL of the group.

Other non-current assets amounted to US$10.283 million and $5.440 million as of December 31, 2015 and December 31, 2014, respectively. This account consists of the non-current portion of advance rent, input vat carry overs, and restricted cash. The 89.01% increase is mainly due to the additional input taxes within the period and development costs for the Solar Power Project.

Accounts payable and accrued expenses amounted to US$18.795 million and US$5.142 million as of December 31, 2015 and 2014, respectively. The bulk of the 265.54% increase represents progress billings from suppliers/ contractors for the Solar Power Project.

Majority of the current portion of loans payable as of December 31, 2015 and December 31, 2014 refers to loans payable of maturity not more than one (1) year; and the reclassification of non-current loans payable that are due within 1 year to current portion.

The Group recorded a nil and US$477 income tax payable as of December 31, 2015 and 2014, respectively.

The nil/minimal taxes payable are:  For the regular income tax regime, PERC and PGEC, they are subject to the Minimum Corporate Income tax (MCIT) due to low taxable income; and  For MGI, it is subject to the Special Tax Rate under BOI, with incentive of 7-year income tax holiday period.

The bulk of the 120.53% increase in loans payable – noncurrent pertains to the loan facility availed by PetroSolar from PNB and DBP to finance the construction of the 50 MW Solar Power Project.

Asset Retirement Obligation amounted to US$1.095 million and US$0.609 million as of December 31, 2015 and December 31, 2014, respectively. The 79.88% increase in this account resulted from the additional abandonment costs estimate for the Etame Expansion.

The Group’s derivative liability pertains to the payoff structure and put and call options over PetroWind shares. The 1.67% increase pertains to the additional set-up of derivative liability during the perod.

Accrued retirement liability amounted to US$0.066 million and US$0.069 million as of December 31, 2015 and 2014, respectively. The 4.84% decrease is due to additional funds deposited to the retirement fund.

Equity attributable to equity holders of the Parent Company amounted to US$66.335 million or book value per share of US$0.162 as of December 31, 2015 and US$50.093 million or US$0.183book value per share as of December 31, 2014.

Non-controlling interest (NCI) as of December 31, 2015 pertains to the following: 10% share of EEI-PC in PetroGreen; 25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara; 44% share of EEI-PC (direct) and 10% of 56% share (indirect) in PetroSolar; 48

While as of December 31, 2014, this pertains to the 25% share of Trans-Asia and the 10% share of PNOC-RC in Maibarara.

d. Results of Operations (For the years ended December 31, 2015 and 2014) The Group generated consolidated net income (loss) attributable to equity holders of the Parent Company amounting to US$2.680 million or $0.008 earnings per share and US$8.489 million or US$0.031 earnings per share as of December 31, 2015 and 2014, respectively.

Revenues: Oil revenues decreased by 40.94% mainly due to lower crude oil price from an average of $95.12/bbl to an average of $48.16/bbl.

Electricity sales refers to the electricity power generated by Maibarara Geothermal Power Plant which started its commercial operations on February 8, 2014. Higher electricity sales is mainly due to full year operations period for 2015 as compared to 2014.

Costs and Expenses: Oil production expenses (OPEX) decreased by 17.40% from $5.132 million as of December 31, 2014 to $4.239 million as of December 31, 2015 because of lower royalty (Gabon) expenses brought about by the decline in average crude oil price.

The 19.63% increase in depletion is due to reclassification of the costs of completed wells as of December 31, 2015 from deferred oil exploration costs to PPE-wells subject to depletion and higher barrels produced of 6.777 million barrels in 2015 compared to 5.803 million in 2014.

Costs of electricity sales pertain to the direct costs of generating electricity power which includes operating and maintenance costs (O&M) of power plant and fluid collection and reinjection system (FCRS), depreciation, and other costs directly attributed to producing electricity. The 17.28% increase is mainly due to full operations in 2015 as compared to 2014, which started only in February 2014. Also, there are higher expenses like insurances, taxes and personnel costs in pursuance of the operations.

General and administrative expenses (G&A) increased by 19.35% from US$3.277 million as of December 31, 2014 to US$3.911 million as of December 31, 2015 due to the additional administrative and research costs for the construction of Solar Power Project.

Other income (charges) amounted to (US$4.687) million and (US$4.571) as of December 31, 2015 and 2014, respectively. Below is the itemized discussion of the changes in each other income (charges) account.  59.33% increase in interest income from US$0.071 million as of December 31, 2014 to US$0.113 million as of December 31, 2015 is due to interest income from loan to PWEI;  94.67% decline in net unrealized gain in changes in market values of investments in stocks traded at the PSE from US$0.026 million as of December 31, 2014 to US$1,392 as of December 31, 2015 is due to decline in market value movements of investments;  176.3% increase in accretion expense from US$0.051 million as of December 31, 2014 to US$0.141 million as of December 31, 2015 is mainly due to the addition in abandonment estimate for the Etame Expansion.  90.98% change in net realized loss on forex changes from US$0.094 million loss as of December 31, 2014 to US$0.179 million loss for the same period in 2015 is due to fluctuations of Peso vs. US Dollar;  share in net gain / (loss) of an associate, PWEI amounted to $0.241 million gain as of December 31, 2015 and US$0.243 million loss as of December 31, 2014. The turnaround accounts for the income from operations of PWEI.

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 Interest expense amounted to US$4.935 million as of December 31, 2015 and US$4.534 million as of December 31, 2014. The 9.07% increase is due to: o

o

prior to the commercial operation of MGI, interest expenses are capitalized until it’s commercial operations in February 2014, afterwards, the interest expense is directly charged as expense under the profit and loss statement; and interest from the various short-term loans availed by the group during the period.

 12.99% decrease in miscellaneous income from US$0.243 million to US$0.212 million is due to the sale of old vehicle in 2014 which resulted to a gain.

Gains on sale of investment in a subsidiary as of December 31, 2014 resulted from the sale of the 40% stake in PWEI on February 2014 to CapAsia, which resulted to loss of Control. This transaction in 2014 recognized a US$21.052 million gain on disposal of investment. This transaction also resulted in to recognition of the (US$10.755) million loss on derivatives resulting from the put and call options (Please refer to Note 19 of the Consolidated Financial Statements). The movement for 2015 amounting to US$(0.734) million accounts for the additional set-up of derivative liability.

The group also recorded a US$(3.433) million and $5.969 million provision for income tax as of December 31, 2015 and 2014, respectively. Bulk of the provision pertains to PetroGreen’s unrealized gain on re-measurement of investment. As of December 31, 2015, the initial recognition of 30% tax rate for the unrealized gain on remeasurement in 2014 was corrected to 10% tax rate, because this pertains to future sale of shares not traded in the PSE. The change in tax rate caused the negative provision for income tax as of December 31, 2015.

Non-controlling interest (NCI) as of December 31, 2015 pertains to the following: 10% share of EEI-PC in PetroGreen; 25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara; 44% share of EEI-PC (direct) and 10% of 56% share (indirect) in to PetroSolar; While as of December 31, 2014, this pertains to the 25% share of Trans-Asia and the 10% share of PNOC-RC in Maibarara.

Key Performance Indicators: The following liquidity and profitability ratios indicate acceptable levels of financial condition and performance of the company:

Current ratio Debt-to-equity ratio Asset-to-equity ratio Operating profit margin Asset turnover

2016

2015

2014

1.24:1 1.4:1 2.4:1 44.39% 21.49%

1.02:1 1.88:1 2.88:1 44.64% 10.17%

0.45:1 1.29:1 2.29:1 51.29% 33.28%

Formula Total Current Assets/Total Current Liabilities Liabilities/Total Stockholders’ Equity Total Assets/ Total Stockholders' Equity Operating profit/Operating Revenue Total Revenue/Total Assets

The increase in the group’s current ratio as of December 31, 2016 compared to 2015 is due to decline in accounts payable account.

There is an decrease in the group’s debt-to-equity ratio as of December 31, 2016 as compared to 2015 mainly due to higher equity brought about by additional income during the period and lower liabilities due to loan repayments.

The asset-to-equity ratio indicates the group’s leverage. This declined due to higher equity.

There is a slight decline in operating profit margin as of December 31, 2016 compared to 2015, mainly because of lower crude oil revenues brought about by decline in crude prices. This indicates the yardstick of the group’s operating efficiency.

The increase in asset turn-over is due to the operations of the new project, Tarlac Power Project, of which operations has started in the 1st quarter of 2016.

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For additional KPIs, please see attached “Schedule of Financial Soundness Indicators”

2. Plan of Operations for the next 12 months A. Oil Exploration Gabon, West Africa The operator will continue to produce oil from the existing wells. The consortium is firming up the drilling and facilities program for DGH approval.

Philippine Service Contracts SC 6A - Octon Operator Philodrill will continue with the DOE-approved work program of G&G works to define new leads to be further de-risked.

SC 14C2 - West Linapacan Operator Philodrill will commence with the acquisition of the legacy 3D dataset for further reprocessing, and conduct Quantitative Interpretation over said volume, to further define leads for possible development.

SC 51 - East Visayan Basin The consortium is awaiting DOE’s formal approval of the revised Work Program. Once approved, Trans-Asia will commence with the conduct of the pore pressure study and gravity survey.

SC 75 - Offshore NW Palawan The service contract is currently under Force Majeure. Once lifted, the Consortium will proceed to Subphase 2, with the conduct of a ~1,000 sq.km 3D seismic survey over the identified leads in SC 75.

B. Renewable Energy Maibarara Geothermal Power Project Production will continue. Construction for the expansion (Maibarara-2) activities will be carried on this year (i.e. civil works, plant construction, commissioning activities, etc; planned start of commercial operations is end of 3Q 2017).

Nabas Wind Power Project The plant will be in continuous operation from the 18 WTGs comprising the project's Phase 1.

Tarlac Solar Power Project The plant will continue to supply electricity to the grid. Preparations for Tarlac Phase-2 are ongoing, including optimization of project costs, offtake bid preparations, and continuation of securing permits. PetroSolar already submitted an application for Declaration of Commerciality for the TSPP2 with the DOE. Puerto Princesa Solar Power Project PetroGreen will continue with pre-development works for the PPSPP, such as technical feasibility studies, optimization of project costs, offtake bid preparations, and continuation of securing permits. PetroGreen aims to construct and develop the PPSPP by 1st Quarter of 2018.

Material Commitments MGI is currently developing the 12 MW Expansion Project (Phase 2) of the Maibarara Geothermal Power Plant.

This will be funded through 70% debt and 30% equity.

Discussion of Indicators of the Company’s Level of Performance Productivity Program For oil revenue, the operator of said project, VAALCO Gabon (Etame), Inc., and the members of the Consortium have defined some wells to be drilled to increase production. VAALCO has the necessary skills to manage the resources and complete the work on time and within budget.

For the electricity sales, expansion of the Maibarara Geothermal Power Project will increase the power generation from 20 MW to 32 MW.

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Receivable Management The group’s outstanding receivables are mainly from PHINMA and TransCo (for the sale of electricity) and from sale of crude oil in Etame Gabon, through the consortium operator. Payment is received every 30-45 days following each sale.

For the sale of crude oil, for the fourteen (14) years since oil production inception, there was no event that the buyer failed to remit the proceeds of the sale. However, the group is willing to look for another buyer should there be some problem that may happen in the future.

Liquidity Management Management of liquidity requires a flow and stock perspective. Constraint such as political environment, taxation, foreign exchange, interest rates and other environmental factors can impose significant restrictions on firms in management of their financial liquidity.

The Group considers the above factors and pays special attention to its cash flow management. The Company identifies all its cash requirements for a certain period and invests unrestricted funds to money market placements to maximize interest earnings.

Inventory Management The only inventory is the crude oil produced in Gabon. The buyer lifts certain volume and pays the same in 30 days. The operator sees to it that crude oil inventory does not reach 800,000 barrels at any one time to avoid overflow and to generate revenues to cover production costs.

Cost Reduction Efforts In order to reduce costs, the Group employs a total of one thirty eight (138) employees with multi-task assignments.

The Company’s general and administrative expense is equivalent to 6.99% of the total revenue.

Rate of Return of Each Stockholder The Company has no existing dividend policy. However, the Company intends to declare dividends in the future in accordance with the Corporation Code of the Philippines. Please see Part II, Item 5, 3. Dividends for the Dividend declared for two (2) most recent years.

Item 7 - Financial Statements The 2016 Consolidated Audited Financial Statements (AFS) of the Company are incorporated herein by reference. The schedules listed in the accompanying index to Supplementary Schedules are filed as part of this Report.

Item 8 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosures -none-

Corporate Governance The Board of Directors including its officers attended Corporate Governance seminars in compliance with the requirements of the Securities and Exchange Commission. In addition, the total corporate organization received copies of the Manual on Corporate Governance (Manual) duly approved by the Board of Directors.

The Company’s platform of corporate governance is anchored on its Manual. The Manual has been updated to reflect the requirements stated in the Code of Corporate Governance for Publicly-Listed Companies (SEC Memorandum Circular No. 19, Series of 2016). The Manual institutionalizes the principles of good corporate governance in the entire organization. It also lays down the Company’s compliance system and identifies the responsibilities of the Board and Management in relation to good corporate governance.

The Company believes that compliance with the principles of good corporate governance begins with the Board of Directors. It is the Board’s duty and responsibility to foster the long-term success of the Company and secure its sustained competitiveness and profitability in a manner consistent with its corporate objectives and the longterm best interest of its shareholders and other stakeholders.

52

The Corporation’s Board of Directors is composed of individuals of proven competence, integrity, and probity.

These individuals determine the Company’s purposes, vision and mission, and strategies to carry out its objectives, ensure compliance with all relevant laws, regulations and codes of best business practices, adopt a system of internal checks and balances, and install a process of selection to ensure a mix of competent directors and officers.

Three (3) Independent Directors (namely, Mr. Basil L. Ong, Mr. Cesar A. Buenaventura and Mr. Eliseo B. Santiago) sit on the Board. The Company adopts the definition of Independence in the Securities Regulation Code and the CG Code for PLCs, and considers as an independent director a person who is independent of Management and the controlling shareholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in the Company.

The Board is currently supported in its corporate governance functions by four (4) committees: the Compensation and Remuneration Committee, the Nomination Committee, the Audit Committee, and the Corporate Governance and Risk Management Committee. The Compensation and Remuneration Committee is tasked to establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of corporate officers and directors, and provide oversight over remuneration of senior management and other key personnel ensuring that compensation is consistent with the Company’s culture, strategy, and control environment. The Nomination Committee evaluates all candidates nominated to the Board in accordance with the Manual. The Audit Committee reviews and approves the Company’s financial reports, performs oversight financial management functions, and evaluates and approves internal and external audit plans. The Corporate Governance and Risk Management Committee ensures observance and compliance with good corporate governance practices and shall be responsible for the development and oversight of the Corporation’s risk management program.

Below are the Committees and their corresponding members: Nomination Committee Chairman Members

-

Ms. Helen Y. Dee Ms. Yvonne S. Yuchengco Mr. Cesar A. Buenaventura - Independent Director

Compensation and Remuneration Committee Chairperson Ms. Helen Y. Dee Members Ms. Milagros V. Reyes Mr. Cesar A. Buenaventura - Independent Director Audit Committee Chairman Members

-

Mr. Cesar A. Buenaventura - Independent Director Mr. Basil L. Ong – Independent Director Ms. Helen Y. Dee

Corporate Governance and Risk Management Committee Chairman Mr. Basil L. Ong – Independent Director Members Mr. Cesar A. Buenaventura - Independent Director Mr. Eliseo B. Santiago – Independent Director Based on the recommendations under the CG Code for PLCs, as adopted in the Manual, the Company shall recognize its Board Committees and shall establish the following: 

Audit Committee – which has the oversight capability over the Company’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations. The Audit Committee shall likewise review all material related party transactions and would thus exercise the functions of a Related Party Transaction Committee.



Corporate Governance Committee – which shall be tasked to assist the Board in the performance of its corporate governance responsibilities, including the functions that were formerly assigned to the Nomination Committee and the Compensation and Remuneration Committee.

53



Board Risk Oversight Committee – which shall have the oversight function over the Company’s Enterprise Risk Management system, enabling the Board and Management to be in confident position to make well-performed decisions, having taken into consideration risks to significant business activities, plans, and opportunities.

As part of corporate measures to ensure compliance with the principles and policies embodied in the Manual, the Board of Directors designated Atty. Samuel V. Torres, as the Company’s Compliance Officer (concurrent Corporate Secretary). Atty. Torres is responsible for, among matters, determining and measuring compliance with the Manual; appearing before the Philippine SEC upon summons on matters relating to the Manual; identifying, monitoring, and controlling compliance with corporate governance matters; and recommending to the Board of Directors the review of the Manual. Atty. Torres works closely with the Board of Directors, top management, and board committees to evaluate and monitor compliance with the Manual. Specifically, he determines the level of compliance and accordingly recommends the adoption of measures to improve such compliance. Likewise, the various board committees perform oversight duties and functions to ensure proper compliance with the Manual and other corporate policies. The Company also submits governance reports required by the Philippine SEC and the PSE to determine compliance with their rules and regulations, the Manual, and the Code of Corporate Governance. Pursuant to the CG Code for PLCs, the positions of the Corporate Secretary and Compliance Officer will no longer be performed by the same person.

In line with the Company’s aspirations for growth and development, the Company continues to work towards enhancing its adherence to the principles and best practices of good corporate governance.

There was no deviation from the Company’s Old Manual of Corporate. The Company will continue to exert efforts to ensure compliance with the Manual and the CG Code for PLCs.

54

Pcrfinslgy

7/F JlUl Blttdhg, ADB Avenu., O.ljgas Ce.ler P6ig City 1600. M.tro M.ntt , Phitippleg rd:P34a37-2e17 Fa!: (632) 631J066

PETROEIERGY RESOURCES CORPOiiATION

E-m.ll p.to_.n€Ey@D€lr!€rEl€v.@d,ph

STATf, MENT OF MANAGf, MENT'S RESPONSIBILITY FOR FINANCIAL STATf, MENTS

February 23, 20 I 7 S€curiti€s and Exchange Commission PICC, Roxas Boulevard, Pasay City

The mamgement of PetroEneryy R€sources Corpomtion is responsible for the prepa.ation and fair presenlation ofthe consolidaled financial statements includins the schedules attached th€rein, for th€ yea|s end€d D€&mber 31, 2016 and 2015, in accordanc€ with the prcscribed financial reporring fi€mework indicated therein, and for such intemal conhol as managem€rit det€mines is nec€ssary to enable the prepamtion of finarcial slatements rhar are fiee from malerial misstat€ment, whelher due to filud or enor.

In preparing the frnancial sratemenrs, management is r€sponsible for assBsing the Company's ability 10 continue as a going conc€m, disclosing, d applicable matters relat€d to going concem and using the going ooncem basis ofac.ounling unless nanagement either intends to Iiquidale lhe Company or 10 c€as€ op€rations, or has not realistic altemarive but to

The Bodd ofDirectors is responsible for overs€eing th€ Cornpany's financial reponing process.

The Board of Dir€.io6 reviews and approves the financial statem€nts including the schedul€s atbched therein, and submits the same to th€ stockholders or nemb€rs.

& Co., the independent auditor appoinl€d by th€ stockhold€rs, has audit€d rhc fina'cial ofthe company jn accordance wirh Philippine Slnndards on Auditin& and in jts repod ro rhe stockholders or

Sycip, Gones, Velayo statements

membe.s, has express€d iis opinion on the faimess ofpresentation upon completion ofsuch audn.

SUBSCRIBED AND SWORN to me before this April 10, 2017 in Pasig City. Affianrs exhibited to me their Ta\ Identification Number (TIN) indicated below €ach nam€.

NAMES

TIN

Milag.os V. Reyes

\00"732-775

Carlora R.. Vi|ay

100-732-809

No. ?-t9 : rug"No. T6 , sookNo. / ; Doc.

l'

COVER SHEET AUD|rED FIXANCIAI STATCMEN'S

E T R

I

N E R

N

'Rlic|'^L

c B s

N

oFFIcElM

R E s

v

E

D

R

E s

/h,e4y/.'/'dlfu J

F

fu T

R

I

3

0

o

R

T

) D B

B P

3

v

Fro-d4@tsre0r€{.

Dr

tu&bdde@r!/!!brmrdhto@i6

Onts celrer, fudedee&!bd?ndeP@

7rh Fbor, JMT Builditrg, ADB

(j'ffifuh'11']#&Ffu

Av.nu.,

Pais city

fu4r&b69.d*'h66'h4d!b@fulMd e@ditrh@@dfu

iln[il]tmmuil

INDI Pf NDENI AUDTTOR'S REPORT

Die B6d of Dn€toa sd SloclholdeB PetoEnsgr' Resoues cdlont@ 7lh Floor, JMI Buildin8, ADB Alenuc,

wcisve

dibd rhe consolid&d

firuci,l sbrment

of

PtuEndgt RcsouE6 ColpoEtion sd i6

subcidiarics (rhe cronp) ich conFise th. cosolid.lod sbbent offintucial posilid 6 al Decmber 3 I, 2015 fld 2015, dd lho a@lidftd shhenb of contrchesive iname, comoli&red sbtenena of ohdges in equit dd €nsoli&Ld slo&mentr of c'sh flo*s for each oflhe the yem in lhe Dcriod ended De€nber 31, 2016, dd not6 ro the aMlidiled fiMdal sbremenb. including

I

summry of siSnificdt &munting policis.

In

coMlidted period

tuhenL pr.Ml fanlt in dl tuisirl 6 al D*nber I l. 2015 md 2015, $d its dd its oonsoli{tded c6h flo$ for eoh olthe LllEe t€m in rhe

the r€hpmying coMlidaLd fimcial rhe con$lidaled finmcial posirion ofr& GrcuD

ou opi.ioq

ffirb,

fiwirl psfm*

sded Deembd

31, 20 | 6 in

aadm€

with

lhiliptin. Fine.hl

Reponins

Sb&tds

we mnducted our aldits in loord@e *ith PhiliDDinc St ndrtds on Andniq (PS{s) Olr Bldsibirirtes uder rhe sbnd.ids N lunhd dFcribed in the -.l,ard t s R.spNibnftie: lN tl|. ,{ulit af the Co$otidded Fiwncial,tde'.,rs $ction ol ou toport, We m indep.ndst ottc Gnup in accodoca Nilh the Cdde ofErhics ld PDlesioal Accounba in tb. Philjppines (Code of Elhict toserher *ilh th. clhical EquiEmmb rh'r fle Fldmt 10 our udil ofrhe coaolidared finocid siahentr i the Philippines, md ur bNe turlled ou orhs ethi€l sponsibilili$ in ecudscewithrhse ie{uiEmdls udtlECoi.ofEL\ics. We beli.v.lhal lte ludit widene *e haw oblained is su6cienl od app@piat rd pbvide r bsis for ou opinton.

Nd

l0 ofrhe coMlidanii Jinmill sftnenb, *hich discuses th€ snsp.nsion in lh. West Linlpam Oil6eld. Among lh. other op€mrioc ofrh. Ctoup, prdudion adivilies in ihe wesl Limpoo Oilneld aises dRdainlies 6 io tle the susDosiod oithe p(lit bilig of lhe ptulem opddions in rhe eid oilfield. Itie profltabjli9 of p.ttoleum opsatoN relaEi to the sid oilfi€ld is dc!.tulert upon di$overy ofoil in comdoiol qwlftfu thrl woDld Esult fsh the srcce$irl Ed{eloDmmr &ti!iti* thdon. Ou opinion is nor qudilied in resp€t of

w. d6r

aneniio' b

ofthc Drdudim adilitie

ililtililmIlilul

-7-

Key audn natten m lhs. mn N thof, in our pof$sioal judgnent tuft ofbosl signin.mce in our audit olilc consolidrbd fimdal shbnenb of the c!ftnt priod. Ibero naft6 seE addressd in dE conbxr of ou audit ofrhe cdnolidakn fid&cid slalemdls 6 a wholq rd in foming ou Fd e&h matht b.lo\ opinion tl€Mn, dd w. do no1 proride . seprate opinion on drese our desoiotion othow our andn addK!.d l)le nite. is @vid.d in lhat conlql

tuns.

dsribed in the,r&tir,.'s Xsrp"tuibnniet lor the ,ardn o/&.

Finaeial Stden?nb srion of olr retoG inoluding i relation ro th*e ntd*.

Cohsalidat?d pcrfom$e Aedingly, ou audit includ.d the ofpDcedEs d6i8led ro espond b olt 6se$nert of rhe risks of mdial DistuDenr of rhe comolidrred frdcid slocmdls. The 6uh5 ofou ndil prcedu6, including the prccedfts pdfomed to oddrcs tie m,teB below, p@vide rhe bais foi ou audit opinion on the Nconpmyirg @nsolid.led finmcial shrden6.

We hive fiiJnlled the Esponsibililies

vat"dio"

oJptu

ud

caa

oli.rc

laludion of Pdocrem Ener8/ Cotpontont (a subsidhry of peboEmlgy) ddivatv. liobiltry Flrted b lh. pur sd call options on tne shm pmhde 4sm.n1 micEd ilto virh C,pAsh ASEAN wind Holdinss Coopenriefu.A. oler lh. inv€te Compmy, PtuWind Endg/, lnc. (rekwtnd) is hded on ctuin dsumplioN sd enimares. nies imlude thc probabilily ofo liquidiry evd thrt wiu lminore the Dur Dd call options, rh. omplbliar ofstike price ar exeris. dtrc, th. tuiurc Derfo'fuce of lerowird, md rhe rjst ldjured dkaDt ne. we focu.d o tiis @ bmuse ofthe nsagmmfs judgDent invohed in rhe laluidd. T1| .fied on rhe 2016 m'sdlidakn ns incomc of rhe Fnaument of thc dedvotive liabilig moud ro $10.76 niuion. See Note l9 of rhe €nsolidaled nmoirl sardenls.

Tho

L\e valurtior nodel u*d by referedcing 10 conmon valution rodeb We Ficwci lhe *ey inpnb used in the lab.lian seh 6 lhc pobabiliry ot m *en! tha! aiu trige.r tne pnt or 6u, nre, nakd bda tud uquoi.d mskel

by Efemdng ro ntuk con@tual c6h llors, ris* of the dabonMluatiddate In addilion, {c involvci ou in&nul sp€cialisl in the nerhodolqy dd lhc ssuptions nsed.

W. sse$ed

pri6

fr*

d

sid

l

'Ihc estimles ot oil e6 aepes rcquiE siglificdrjudend dd ue of Nmptions bt .he be6!s. mmlgeDenr includins inpu6 froa int mal We focus€d on this cs.iml.s havc a mlaid imp,cl on ihe consolidared fndcial slot mdls, 6 theso @ urilized in h$ing impaimenr, mlcularins d€pleialio4 derletion dd moniadoq md estnnating d€nni$ioing prcvisions.

.4ins.

ftt

lhe

Dnfrinty iNolved in e$ina1i4 ENe qwtiries b€m$ of lle cdplex anbacrdl sd3lmcnll d.ldli4 the Group's sh@ offfieres in Gabd dd othd l@al seryice sntacL oler *hici tl'e Compmy ha peticiparing in@ss. Illis DnMin!, ako depends on lhe mount of Eliable sEologic dd dginerhg dab avdhble al lh€ rime ofthe edintle dd llc inrrprebtid ofthesc drll by lhc nilageDent Se Nob l0 oflhc consolid.l€d fimdal tunda. 'nrere is m innae'r

ltilililtItt$mtl

rhe mmslnenlt *linotion pFGs, including the asumplios used i' refedce !o lhe dsumpriotu oflhid parq esdnlis md rstd rhe relddt conrols We pflfom.d m dalysn otfie yee Esnes cdDed to lh. prior ys sd inquiftd of uy ch$e6 i' tbe chbges in lhc uderlyin8 ssunprio.s u*d. We dalu!&d dE amp€enc., spobiljlies sd objsiiviry ofrhe Wc engineN en98ed by rh. Goup to perfom d iideD€nd.nt Gsesmqt of ib oil reviered lh€ spoidi*t rad dd oblain d m ud.Ebdiry ofrhe natw, s.ote sd objedives of chdg$ in lhe Eserye his wo.k od bajl of die Blimo&s includins

W. Eviewed

.uol

ftsfle

d'

Etitulo,

of

M ..ti'w^t

oblizdtuB

h6 prcvisions for cl6e dom, restoraton ud envimmental obligarions on ii5 sol& po*er pldt in T6lac, geothemal po*s plant it Bolog6 sd iimi in oil fields in G$or The calcul.tion of rhese plovisions FqDt* rhe 6c of nmagmenrjudgndl in esrinating lururt @sts dven the nature of@h si&, rhe opsarins actililies donc, md dE facifties coatucl.4 oong other The GbDp

Ihs

!o ssme q rc@nable 6te €lculatim ftquire rhe considemtioB. 'rmagenmt pEsenr ulue al Ep.ni4 d.1e rh* fuore ssb to

10

dis@unl

ftviess dr closeim, restorim md envircnmmral obligations on o unu'l b6is ne Coun s6 m eftmal tshni€l sFcialisl to 6ss ib shd in abmdonFenr @s in Gnbon oil noUs, md m intul bchni@l Broup lo estimre rhe furure rcsldalio' c6b of ib sole od Beothmd porer plsls sibr Berue dfrhejldgnenl ud snbjecrivi9 involv.d it dF Btinatio. pie.$, wc corsjdered rhis ro be a kel audit nonr. As ofDeMbct 31, 2016, provisions Elald 10 Net dnenenloblieltimstobl€d $1.3? million. seNob l3todie snsolidaled finocial $rd.nll The OouD

W. rcvie*ed

the tlllmsEmenf s

pllEs

in alcularins rhe piovisions for

ser EtiEnenl

obliealion,

andtned$eEldtutconltols imludinschmses inrhe saidprorisios in2016 W.Evieueddd discws.d wilh the ndasme Flevdl dcumenrs od rstd rhe doutts ofthe 6sDed Hloiarion and Ehabilibtio. by comparlnB these b rhe repon offie dhnicol specialisr. W. reviNed the lnft ondihalesused inalcnldingrhe pbvision. Wc 6r*qi the conpelen€, apabilitis dd obj*rivig of the lfuasemcnl's irteDal md *emal r*hnicol speolist rtilized ro prcduce lh6e Val@ion ol invnw"t in Goboi,

fie

GrcuD

Pd

Alrica

$d

tv?n

Linap@

hs irvelrrent in Gaboa We$ Afticodd wesl Li'rpacm inchdcd in wells,

phdm

plat ad equipn tu snian e bsd fd iepaimdl and oder frcililiff' accour 0nds Ppp vhm therc .ie indicoljons tirt tne crryin8 values oftle inv6hent nay eica.d rovemble tty,

aeomt ofthe d.clinc ir oil pries in 2016. which lMogomsr ansidsed d inprimenl iddi€ld, lhc mmag€menr perfomed m inFaimdl 16l D4 rc..rdingly, @ogni4d o inpiidmr lo$ mounring to $3.33 niuim. nE de&mimtion ofrhe recovdble moub oflhe 43.* b.ing tsd for inpaiment r.quies e*imrim involing lh. w of intdal asuiptions such 5 tutue pldduclion 14eh ud msb, md eftbd sumplions sch a oil pflB dd disout 6b Bsus. of $e signincmtjudsndr iNolv.d in lh. esliDdion ps*, we consideEd rhis ro be a koy udn roftr. s€ Not l0 0f dle @nsolide! ntucirl stllrnents On

lililtrm|llmm[l

w.obtainedtnemsagmencsdse$m-tof itsiNeslr!'ens HMbbilityrhroughthetdisonnred c6h now psledim. In ftldiion, we tesbd dE Asmprim lsed lo complte vdue iluse of eich invesbent such d funire 6i io* poj€tion, cmodiy trices, disur nrs, dd exchdge mb our poo.du6 ako include snladng lhe osupiions usen b those povd.d by rhid Frt estimdes. We also iBpecd lhc serice onhcb rd @lddl joinl opedions 4redds of @h explohrion pojels lo deGdi.e lnd the psiod ovd viioh de Ghup hN lh. riShl 10 exploE in the speofc ma has nd expi.ed dd $a(he Grcup na rishts dd obligdions Dds rhe ontr&b thDugh pdiciparing interesL We obainei the lat6r nMgm.nr discl6Es rest.ding lhc slotus oftnen senicc contrb md asesed the rd.qu.cy lo suppon lhe ffi6snen1 olnsogpmor restding .h. sovombility of these inv6b.nts. we dso involved ou incmd sp€cialhr bm to revis lh. calcularidn oflhe Ecoverable mounb ofthe invdlll.nls for pu.pGff of impaiment testing-

Mdaldent is rsDonsible fd rh. otnt inf@arion Die olhd infonation mnpiis.s tle infmrion includan in $. SEC Fom 2OlS (Delinitivc lifomalion Sbhctt) SEC Fod l7_A md ADual R.pd for tl'e ys etuled D.Mbs I I, 2016, but dos no1 include the @6olid.Ld fi'mci'l slstnenb Dd or audilor's Fpofr thedn. ]t SEC IoD 2GIS (Defmilive rnforurion Sbemdt, Fom 17-A md An'ual Repon for rb. yee odtd Decemb€t 31, 2016 ee exte.ie! b bc rode waihble lo N afte rhe dale ofihis audibr's repd SEC

Ou opinion or lh. consoli{t nol cxpres my

fod

of

r€d

flldid

sMr@

slolemenb does nor

avd

lhe

oths infomalion md we *iU

anclGidn .h4on.

ou tDdib ofthe eBolid{ed flMci.l sbrenena. olr rcsposibilit is ro rcad the other infolmtion iddlificd above vhen it b*ones ovdlable dd, in doing so, consider vh.lher the olhd hfmriio is meiauy inconsislenr vith rhe @nsolidlted finmcial sEtsdls or ou knowl€dse ohained in rh. .udils, or orhegie app.s 10 b€ marerially missLl€d Ir

onnolion

R.sDo.sibililig

rh

or

Mr.ag.n.nl rhd Thk Ch"rg.d rirL Governone

for th. Consolid.ted

Muagemenr is Hp6iblr foi lne pEp€Etion rd faii prcsentation ofrhe consolid.led fmcial shrflients in aeodmce wirh PIRss. md fd suoi iDtedal contol d mmlenert ddmind is nece*sary to dable rh€ prermlion ofconsoli&red fDmcitl sMentr dlar de fiee fton material

mislabmsr. *herhd

dDc 1o

t

ud or

*or.

E.paiine lh. coNlidared fitucial slalem.nt, mm'gdent is rdpocible for as6sing tlF cronp\ ability ro contin!. d a goiry 6n(a di$lsing, $ applicable, nand relaled b song con;n dd 6inc the going @'cen bads olMnnring unle$ mma8ensrt eider intcn& io liquidate the GrcuD or to e6e oD.'atios, d h6 no Ealiiic albidi!. bul lo do s In

TlGe chrged lh Bovdsoe

e

ftsponsibl.lot ovffiinA

the

Gblph lbocial Fponhg pme$

lltiltl|t||fiilI|[[

,{udilor'rRspouibitit'e!rorrh.Auditof rheCotrblt.redrim.ci Srrro.trb our obislivd ee lo obbin Eenable a$dde aboul Nhelier the mnsolidared 6nddd slaldeds 6 a whole ft 6e fron aacrial nisloLnen! vherher due io liaud d e]ff, dd lo isue m rudtoas EDd.halinclud.souopinion. Re6onable dsurace is a hie! lael of dsumcq bur is not I gudotc thol u audir conducred in Mddde lh PsAs will alM,s debct a mlsid miss&lemert wien it exisb. MissEhdt 6 4isc frcm liaud or etur dd e mnsideFd nabrial ii individlally or in the 4lrcgole, lhey could lffiombly be *peLd to itthene dE 4monic &4isids ofusm Lk n or dE h6is ofrhse co@lid.ted nmoiol slo&menb.

Ar pd of m oudit in aaordmce with PSAS, se .xdisc pofssional JDdgDenl Md mainbin Diofe$ioMl s*eprickn rhnughour lhe audii. We lho

nisslaLsml oflhe coNolidatd nmn.iol si3bmenb. vh.lhs dne to lBud or ed, &si8n dd t€rlom Ndit pbc.dwe ietoNive b rhGe risk, dd obhin audit eliden* lhat is snfricient md rppbpirE lo pryide a basis for ou .pinion The risl ofnot d.letire a mabrisl missbrdml Fsulring fron ts ud is hiShd lhr for orc rsulting fton ercr, 6 fraud nay involv. slluior forlery. inb.iontl omissioN. nisFpreMblio6, q the overide of incml @rtuj.

Iden.iry

ed ss.$ rie isks

d udstording

of mersial

dbol

reldml10 rhe audir pre.nws thal @ in lh. cifmstoces, tul nol for the purtose or expre$tng 'pprcpnit opinion on rhe efredivrnds otlhe GEup\ intbll mtfol Obbin

ot inbrnsl

u

Evilu.le lhe lppbpriaroe$ oa&couling policies tr*d md $e ffinrblde$ of s.ourins estinatB md rela!€d disolosw Dade by nmeFmol. apFopri.t ne of llbagFmmf s e of tie gping cmo basis of lmutng md. bsed on th. audil {idm€ ohbinc4 shelhs r nat.ial unetbinly exisb relaled lo evdrl or cuditioB rhar niy cdt si8nific$l dotrbt on rhe Grcur's ability ro cmtnu. a a go'ng aned If se conclude .hal a n.terid uetuinB exists, wo e Equired b dra* atlention in du Ndibfs ftodt 10 lhe rclatd disclosr* id tht coMlidarei fi.mcial sloLment or, if such disolsu€ m iradequsre, to modiry our opinion. Ou conclDsiod e b6od on the audn *n dce obbin€d up to the d.te olou luditoas repon. Howe!4, tunG evmb or conditions ncy caw the Group lo Conolude on dre

ce6e ro contnue

d

a goBa

concen,

sdc.w dd @ntenr ofrhe cosolida&d ,ilmchl sbEmdts, the dislosres, dd rh.lhr de coNolidrred fimnchl tusenb replg.tt the

Eral0a@ th. ovs&ll pesenhrioq

inchding lnderlying

bm&rioN md evdb

in a

lllsmd

rhar

&hiw6

fair presmulion.

apprcpd& rudil .vid.nce rega'ding rhe fhscial inforuri@ oflhc enritid m bBinss aclivities villin tte C@uD ro expigs d otition on rhe cNlidal.d ,i'mciil shrdents. We @ FsFnsible fd rhe di@don, supmision ed Fntnoce ofthe ludit we rdoir sol.ly HpoBible foi ou tudit opinior.

Obrain sufiioienr

|M||lrfl[|mllfi[l

W. commuisare *idr rhce cheged lh goremde Egdding, mdg olhs mftq the plm.d scop.rd timingofth. Ndi$dsiSnificmraud nndings, includingmystnificdtdelioienciff iD i dd cmrol tnat we iddt,i duing our audil.

govtuc.

relevmt rh o slo&mot rhat *e have @mrli.d we rlso povide lhos. choeFd with 'nh Eldidshipd ed md 10 vith th.m all almunicale elhisl EquiEmenb regarding ind.p.nddo.! ild whee atplioable. orher maftd rhit nay idombly be thoulhr rd bd on ou indep€ndence,

Fioh th. natteE oomDunicrred rirh thos chdged *irh sovemmce, vc deremine th* ntttem thar sere ofnsr signifid€ ir $. au'lit ofrhe consolid.ied finoncial sbrsena of$e curcm period ad lhdfd. $e key audn ndets. W. deqibe ltese mne6 in oui tuditors rcpofr unl6s laa or ftgulalion pEludd public disclosu. about tie Dsds or who, in cxttnely rm circmsbcB, we debnine rhat . nrttr should nol te onnunicii.d it ou! Fpd b€c.us. th. ldv.Ne @sequdc6 of doing e rould @'rbly b. .xp..t d lo oulweiSh rhe public intul b€nefis of s@h

e

Thc

engsgflmr

sYcP

pder

on

cotRts vELAYo

/rl, t

&. audil Fsuhing

in rhis

indeFndot 4diror's FDoit

is .r.hn T. ViUa.

& co.

ttaa

AdFdibtion No. 0733-AR 2 (Gbup A) May l, 2015, valid util April 10, 2013 Tu ldenrificdion No. 901-61 7'005 BIR AccEdibrion No. 03-001993-76-2015, Febrary 27. 2015, volid util Febrxary 26, 2013 PTR No. 5903775, Jsuary l. 2017, Mokti Cny SEC

tmilruililil||I

PFTROTNERGV RTSOURCES CORPOR,ATIO\ AI\D SI. ESIOTARIES CONSOLIDATED STATEMENTS OF FTNANCIAL POSITTON

t0t5 ASSETS

dd ca$ equivalenb iNol6 6 ud 27) Fimcid 6setr ot fan vdE tnou8n profit or lo$

!2,914,533

cnsh

R*ivablcs (l.lore PEoaid

exms

5, 3 and 27)

md othft cutrnt arei,

ed 10) 5 dd I l)

Pdpdg, pldr sd .quipnent

(Notes 5

Deleren

(N@s

o

lnvehdr Irvstn€nl

$l:,516,605

exploation

€st

id .join. vent!€ (No&s 2 md p@penies (Nor6 5 13)

rd

l2) 31,417

Derfled d 66eb - het O]ob s sd 2l ) Orh.r nonlutrdr ets aNoE 14

r0JEr,8:l $117.,t0,540

I,IABILITIES AI{D EQUTY Accomb palabl€ ,rld a€rued exp€ns* O.lob l5 dd 27) curdt ponion of loss payrbL (Nol6 l6 sd 27) Inoone d psydle (Nd 2l ) Depcia fd fritu sdk subsqiDrids (Nole l7)

lrss Ase.

payable - ner of

e.nmr

crmt

pofrion o,lob I6

dblig.lion (Nols

5

Derivotive liabiliy (Note 19)

Defeftd

b

liabilftiB

(Nd

dd l3)

dd

$t3,795,72t

6,557,224 4r,392 021

2, r0,355,936

21)

Tohl Noncuftnt Lilbilidg

|lt[lfltxlrumlI

2016

tol5

Andbul$le b equity hol&6 of lh. Pabt CompMy capiill slox (Noro 20) Addirio.il paid-in ciDibl (Noc 20) Approprided (Nore 20)

Rensucrents of nel eorucn Edment liabilily Cmularive tuda.ion idjBhdr Equiq

Gfle

0,rore 20)

Non6'tolling i.is$a (Nole 30) ToL tqur) TOTAI LIAIIIITITS AND EQUITY

1,t49,555

o7,136)

(16.227J

(2,543,323)

1,359,1?3

24Jn2,014

3e;?3,9-5

32,t77.570 $237,130,540

fiiltil1]Luil]l

PETROENERGYRESOURCESCORPORATIONAND SUBSIDIARIES CONSOLIDATf,D STATEMENTS OF COMPRtrHINSIVT INCOMD

cc. ot.rrdhiiy d6 0{or

2t

ExPf,NSE (Nor a) cIliRL !M ^pMNrtrsTrvE oDn rNcoM.l.eRGB) - d

6q

(b$)

sh@ io

d

Nd roEiF

crtr

dn

dslvs

cNoE

D)

b@ru oos) ot,joEr

r,qr,032

3Jt6eB

Mft or& n)

qdos! gds (bs6)

tuugh Pft.d d bs (xor 7) oD

rJ17Js

disd o.brctur

(Ndc

6re

tr)

rRov6roN roR (BBEnr rRoM) Ncom

Nor2p

rd

trxd!

(3,132,qn

5.q3.72

OEER COMPiEts'NSIVT INCOME O-oSS) t4 b b' 4ctatj.d b NaIt or t6' h tubqwd 4'ie Mrdllr b dhd'!rchshid djussr- ddd

b

Nt b tr rct@ifed h Fojt

t tw

rrrr,0q, ^NruBUAB!E

M

EOUITY

IIOLDM

OT

(r.rt)4ro

B' 10

@t

thil[[|I[ilm|l

F4uiryhd&BdePao'coope' \oiq^h I ir r|!$Nd 10)

l,msjcl

s5'!$.:31'1.609.0'0'

nllruilNililil[l

:

3

!'i

i !

F

!

-!

:

I

!.!

-

E

t

d s

E Ez

4

€ .5

i

!-

IE !

a

;! : i :

E

:!g€ ,5

I i

! :

d ZE

ii3

i

'g

3 a

I

j{ j t 3

:

t

,

e E

3

c

i:L,s

i;:.-l

d o

5 4

:

I F.

+;l

I

ts

qlE :,

I

g:l

I

a! .t

F

9E

zt

-H

j

Ei

Ui ! rlt

ii

a

1

3

'E !E

I

z

,

{

a

I

!.

!!

F

;? I

{

!94 is E3a

!.

i: ! a

6!:

T

t I

:r; !Fe :

r = I

s

a

e

-i

:

E

E" E

I g

'i

n

::q

I

lil itii !:!l

::1

:ii

! a T

g $

a

I t!

E!

M-;

I

!, ,! €t t3 .!! i

EI3

E$

Eti 3it '|EZ

t

l ! j

PETROENERGY RESOURCES CORPORATIONAND SUDSIDIARIDS CONSOLIDATED 5TATEMEYTS OF CASH FLOWS

CAStr fl,OWS

OPEUTING

'TOM

^CTIITTIf,S

Itudn .xFEr (Not 16) Inrridd! ls! d cabdi Ed (Not 10) Depletid, d.re.i'iio,nd mdizatioD

dr34,63:

a6did .rla$

0{de rt) wncott of'Lr.n.d .xplmrion cosb on dbp{.,r of invaft.ni Orot 12) Los (srin) od d.nvative (Not le) she in n. ro$ (in.oi.) or, joint v.nM Orote

cain

Nd @.iri'.d fwisi dcb'ngc los Gaii') Nd siir d rin hh. chdg* on rmial s* hir slu. deu€n pnfir r los (Not 7) cain on ele of.qlipn.d ilot 2l)

12)

ar

(1,8r)

Divjdmdinon. (xor 7) opmriry incom. 6efor N*iis opibt chrs6

aeomE @FbL sd rcqu.d

d@rs

0

Ndc.shomudedbyoFnbsdivitjB

o,?01)

(2,0re)

r,4661!L

)n9?,t5.)

!J0!,061 2r.49r,129

16,451.592

C^SH 8I-oWS TROM INVESTINC ACTIVITIES

Proc..js6'onsaleofFop.nyedlqDpm.hl AcquisirioB orprcpsry, pld .nd addirimd deLred oil elrldion

,."]

.quipr.d (Not

.6 CNo@ l) D.c& (incl%t io orb{ nucenr !s Addjriod,l invBftmt in ajoid mtu (Nd. 12) N.r c,sh

iniw

trom

1

10)

ca,8ee.?2t 00,041,65rJ (5,6t6.616) (?,715,161)

(630,33t

(5.303,110)

deomlid:riu ofi lublidioy

tilililmNIil|lil

2-

C^SH FI-OWS TROM FIN^NCINC ACTIVITIES hos-tu debr (NoF 16)

Pm.€.ds fion availnent or

-

contullins inrsess (NoF 20) Pm.€.is r,on nsuuc. ordoc*s (xoe 20)

addirimr €pid aon nomnEollins D,no.o3r pro

$55t1r,ry7

illd

o.rde r0)

(s5zrtr)

t76.?I,632 4,669,613

13,44s,629

r3r,0r0

(20,000,t9

(ej377,6,r.) O,06r.tr) Cs)

OoE:0,

EQrrrvaLENrs

(: r0or59

3r?{d3 0,04e,?e,

NET INCREASE (DECRE^SE) IN CASII

(?r3,0r2)

IND

C^SHEQUIV^LENTS C^SII AND CASH EAUIVALENTS AT 8ECINNING

II\D

CASII AND C^SH f,OTTW^LENTS

YEAR(N"E

6)

^T

OT

$1r,rt4$

ilLill|iltillimill

PETROENERGY RESOURCDS COR?ORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCTAL STATIMENTS

L

corponl. I.rom,rio.

PetroEne.S/ Resources Co4ddid ('P!RC". "PtuEne.s/ ' or tbe "Gdup '). fomdly Petoreh Consulunr5, Inc ! s6 orgoiad o Set'tenb€r 29, 1994 io pEvidc sp@idia!

tehni€l wices

ro

ib pdnr ampany. PetuIields Colponrion, fld

ro

mnpdi* exploins

for oil in the Philippind

'ft.

icgislc€d offc. dd principrl place of bNine$ oflh. Ptrdi CmpMy is 7/F IMT Building, ADB Alenue, Ont6 Cflrs, P6is Cit. s nmc 16 fmally chmgod irto Rsllre CoDomtion", Nitn dE chsge in ib prinary purpose litrn Endsing rechnisl sedi6 to oil "elroEnere/ expldaljon and d.velopm-r dd 6inin3 stivities.

h

1997, the Group

sinultusN

6

lme 25, 1999, rhe Dep.tuenr oflnery (DOl) aurho.izd the sumption by lb. GrcuD ofPhilippine oil *plorltion @nt&ls. $e Minislry ofEn€By ofGrbon, wsr A6i* hrd also ben duly norified ofde bosfer b PERC ofPtufields Prcdudid Shaing Cmhcl covsins the Etme discovcry block in lhe Addtic shcll Or N{ay 23, 2001, rhe Secuttics lnd Exchsee CommGsjon (SEC) lpporcd rhe Goup\ applicdion fd a d€rctre in aurho.izd Capibl 6on One Billion ( 1,0n0,000,000) smmon shN at a ttr $lu. of Ono Ps (?l.00) ter she to Thr* HDdEd Tniny Million d rpa 00)po LI10.000,000)

"hrs

"hr

',lueofonePe\o(?

On July 23, 2004, rhe Philippine Inlrodudion oflhe entire issucd

Stck E\chmse, rnc. (PSE) apprc!.d lh. Lisri$ by way of FDiid ofdc GrcnD

on Algusl 4, 2004, ihe sEc hs@d !o lh. coup thc erlilicste oIIEmil lo olls sediries for sde. Tlis cdtines $ar rhe sh,H olrhe C@D hrve b€en Ednftd dd licen*d for Lining

by Way oflnlroderion dd by thd be $ld oi ofiered for s.le ir the thilippins.

On aususr I

l.

2004. dre Gbup's

rhfts

**

listd

11

lh.

PSE.

Bdrd ofDir*ron (BOD) appoved the mmdn.nt oftho adiclG ot inoQoralion of?ERC !o includ. lhc bNine$ oi !.nsating pows iioD @nEnrion'l solllq such 6 c@1, fosil fiel, mtud Es, nud* rd otls hdirional $urc6 ofpoqa, ud nlm Hewabl€ snch 6. but not limicd rq bioms, hydro, solar, wind, e*lhetml, ocm ddsloholhdrenemble surc6 ofpo*ei Tne mfldm.nr ws qprored by the Philippine Secuiries md Exchmge Commision (SIC) on Sepbbs 21, 2009 On Jnly 22, 2009, the

su6

on Februry 23, 2010, rhe BOD Apprcved r l: I

Sbl

Righb Of.ring (SRO). Under rhe

SRO, rhe sh'e {se ofiftd at P5.00 pr sbe, giving a net pl@is of P631.436 million, ehich Na Ned ior th. 20Mw Phe I ofihe Mdh'ffi p.wer hoj*l OrcPP). Th. sRo

ffi

udetulen duins

rh€ period

Jue

23. 2010 rd

luly

5, 2010.

OnDeceDb€r5,2014rheBODapprcveda2,ISRO. Ihe SRO vs rdort l.n duing rhe psiod Mry I I b 15. 2015. The psceeds oflh. sRo mounled lo F599.6?5 niuid and uiu b. us.d b pdidly finuG the dprsion, conshdion md d*elopmar oftdeuble endg/

u[llfiflmflmil

prcjecis, such

Ehe Prcjcr

6 in

th. MCPP iPhs. 2) ed solai P.wer Proje! c$otr, west Alric4

s w.ll 6

lh. *pssion offie

r

incEse in Aurhodzed On June 01, 2015, SEC app@!e'i lhc Goup\ ,gplicdion for Capihl fton Three HddFn Thirty Million 030.000,000) shde at pa value of One Peso (ll.00) 10 S.!en Hutulrcd Million (700,000.000) sh@s ol pr vdue ofone Peso.

h oder b insul& PehEnergr''r

core oil busines

frcn iL renN$L .ndgj/ vdtures,

P€toEncleJ/, rilh lhe appDul otthe Boord on February 21, 20r 0, cEabd a wholly oMed subsidbry c'lled PeboGEn EneB/ CorpoBrion (PtuGred). PtuGen shall cdry{ul

rd.wabl. cnr8y poj@ll ofPeaoEnsgy. flE Peto6ro on Mmh 3l , 2010. the

SEC appovcd tbe

inelpordion of

vniF

on May 19, 2010, P.toclw signed ! Joirl AgRDenr (JvA) *iih TmlAsia oil Energ)/ Dewlopnent Colponrion (.TmlAJii), no* PHINMA End8y Corponlion od PNoc Rde*lbls corpoFrion ("tNoc-Rc") (.oll@livoly ihe Jv Peln6 ), wh.Eby me rd d*elop W Pdcn aere! lo pool dEir resoues logelher ed enb inb rjoii md opede the Mribffi G{t}emil Field L\hugh rh. fm.lion of a joinl venl'ft nmed l4aib6@ G.o.hdmal, Inc. (MCl. On Augu$ I l, 2010, dE SEC apprcved tne incorponlion ofMGI, whN p'incipal bBirss is ro d$elop ud opsar. georhsnal ied nclb and D.rd plrnb Pu66t b the wA, P.tocen holds a 65% inteE$ in MGI, shile Ta asii md PNOC-RC hoid 25qlo sd l0%, Bp{iively. OD Jau&} 5, 201 1. rh€ DOE appbved lh. of rhe Miibatua GREsc fton PeroEndg/ 10 MGL

rd

vtu

tuld lr

Jmuarr 2013, duough a SpEial Meding of.h. Board ofDiEclon, Petocen cErred a slbsidir/, P.dowind EnereJ, lnc. (Pelrawind) rhat will uderbl<e rhe Nibd wind Povs Poj@r CNWPP). Ptulvind *6 incolponed or Meh 6, 201I *hdin Petsocen innia[y held l00o/o inrered Oi tuly 15,2011, EEI Po*er Coaorrrion (EEIPC) subsnibed toa20% equit she in Pctowind. EEI}C fonally b€.me a sbcknoBer oftettowiDd upon rhe SlC s approlal of PtuWhd s increGo ir ulhorizd mpibl dek on AugBi 23, 2013.

En-rively a ofDem6er 3 I, 2013, Peboclen held 30% equiy shN in Petowind.

P.ffi'tr

md CapAsh Asm Wind Holdi4s Coop.iaii.f U,A. o]r Nowmbd 21, 201l, (CapAsia) enbEn inb a Shre PEchae Agendl (SPA) {hioh sets oul the p,ni6 nutul agesdr $ 10 llle saL of2,l75,00! shes in Perowind held by PtuGen, which is equilolent to 4Csli ollne rohl issEd md ouMding shes of terowind The pmh6e for rhe sale of slfts, & set our in S*rion I of tie sPA, shdl b€ $5,13?,0?9 upfiont payndl md o prmim oI S2,600,000 wnich *ill h€ paid on a stagBcrcd bais.

d€

Simulhausly on Novehbd 21. 201l, P.tocrcen, CapAsia md E€IPC enrer€d inb a Sheholdea Agsmdl (SHA) lhat *ill govo tneir relationship a shehold.n md slale dren rcsF.tive rieht ed obligdioro in rclalion ro Pelrowind. Funhs, th. Slr-a 6nra'6 Eovisio.s ftgddi4 vo.i4 nquiftnens for Elevut dilnies rftir Equire a higher d.8r.o of rptoval lhd thot wder disling corpo* laws. P€ftGerL CapAsi! md EEI?C ag* rhat rheir eguiry {Mmhip di6 in Petowind e ai 40%, 40p, sd 2trl., Hp€tilely.

Althouch lhc sPA md dE SttA were ex*ftd on Novmber 21, 201I, thde did Dor Esun io PtuGreent los of contul ova Paowind in 2013. Tne lN of contul did not h!@n util Feb0ary 14,2014, tn.Cldin8 Dote.

oli Fehrary 14. 2014, rhe Closirg Dai., uE Daynelt h6 hen Eived 6om el. oflhe shds d .x@uted in tie M ofAsismat coveing lh. lrNfd ofsh@s nom Pebdclg

ntil!ililmru[l

,3 b capAsia md all rhe bnditions pEedenr have bm sdisficrorily compleled. As suoh, PeLocrg losl ill mnlrol ov.r PtuWind shile CipAsh *a givd tull vorins tud €nonic ;shb a r 4P. shmholde. Th. r-srolio made retowi.d ajoint vdtlE betseh P.hcrs, CapAsii sd IEIPC by tue ofd\. SHA signed bfieen the rhEe pani6 Sovcning the

nm.r olmagiiS l.hwind.

AsolDecenber31,2014. MGI

Pdocren,

Nhioh is

eholt

isefi6t

oqd

ely a subsidiay ofPetuEnerB/ thbug!

by PcloEners/. PeLrccreen olned najonq ofth.

On Jme 09,2015. EEIPC rcquned l0o/o Pelrcl3dlC/ wi.h 90% 3he in

ofPdoEne$rt shm

lehcls.

in

lotine

PetocEeq leaving

Men 19, 2015, PtuGEen *6 3w,rded by rhe DOE with de Solr Ener$/ Se*ice Contet (SESC) No. 2015-031 l5 giling n de right dd obligarid b .rplore, d*el@ dd uriliz rhe sold eHS/ rsnrce within rhe smice ertlci @c l@rci in Tsl@ Cjly, By vinue of rhe Telac SESC. lebocMn c(rlmencd tne p.en*ebpmst &1iviti6 fd rh. 50 Mw Islac sols Power Plljed (TSPP) 10 be consruoled widin a 55 t*@ rroperry in Ceral Technoparlq Ss Miguel, Te|r Ciq. On

On Jue I7, 2015j P.tosole Colpordion ( P.tosol'") w6 in@Adden. PetoCE€n 56% shehdldings in Petosola, vhile EEDC olm rhe Emainins 44%.

On

h6

Ime I9, 2015, by vitue of rhe Deed of Asisrmsr md Asmption, PftGI€n its inleEsl in lh. S€SC 10 Pelrosolr. ne ssi8Ment ss opprored by L\e DOE

toNlenld

on Seprember 15,2015.

Tne DOE the TSIP

confimei tlc commsciality ofrhe TSPP on Sepbmbfl 24, 2015. Codhcrion of olmencen by lhe third qu&r of20l 5 wi.h 6gd snpletion of Jmuory 2016

ofD@nber 31, 2016, MGI md Peliosolr e elT*liv.ly indiiet subsidieid of PetoEnsgl lh@ugn PetlocRn, whicn is 90% omd by PtuEner$/. PtuGrem dned mjdity dfrhe voting po*d ofMGI md lefosolar. P.hoEnsgr, P.L{G'6, McI od Perosold r. ell*tiv.ly rcfeftd lo 6 lhc crcur.

As

IlE Groupt lou

(4)

slir d.rs/

buindses

e pololM,

rind, seodmcl .!d sol,r.

P€lrolem pDdu.lion is on-goi.s in de Eioe (Cdon) @ncsion, shile rhe orher Fftoleun con€sioG in the Philippines (No-rh*en hh*d, O{fshoE Mindob, Eatd Vhayd) m $ill in the advuc.d explohlion dagd d prcrr.v.lopnent st ges.

The geothmal rrcjeob @ lhc 20-Mw

Tom6,

Brhg6 ud

Th. qind

dss]

Moibm omlhmal

Pow6

Pojd

ils ,2Mw *pssion dar is dpsr€d to be complered by L\e

projecl is .he 36-me3rsl1r (Mw) NWPP

i, Nab6, Aklm,

i. lodh

(MCPP)

wh*

sto.

Petowind

1miltilntx||]ilt

The solar poN& piojecl is the 50Mw Tslao

sol[ Po*e

lldt

(TSPP) in Telac

c. Ap!Ia!4!!!esEelid!e4!u!!qdq44q!!

Ih. .Mmpanying consolidrr.d fi'mcial tumsb *eF by dr BOD on February 23, 2017.

lhe acconpdying ensolidaleii finsoi'l sbtmenb b,ve

appioved

CE, Tel&.

dd aurhodad for

issue

been prepded uddd lhc histoncoi

esl

coNention meihod, *ept for ftucial asets si.d 0t fon vahe rhmugh prfir o. los (IWL) fld de. ative liatility lhat have b6 msura d net E lizable vil@. Figld e pr€ented in UniL! s&tes (Us) Dollo ($) the lmnr conpdy s ninclionrl cllHct. All mounb re ounden b lhe n*ei dollar ml* o.hwh. indi.oled. sbtemenl ofcomplimce The accoDpoying mnsolidded fmcid saem.nls have been pEp'ren in mnplidce with Philippin Financial Reporting sbdr& (PFRS).

Basis of

CoMli&lion

'ne oonsolid?bd tnmcial shtmena snpiise rb. linmcial sbremenb ofrhe Crcup 6 at Decemb€r31,2016dd20l5. nE inocial stabmenb ofthe subsidiais @ p€pmd fot lhe sme r.!.ding yed 6 de Groupj Ning ddisrdi aMuline policis,

e i\e Goupt sub3idieiB wirh ib Decemter31, 2015. 2015 &d2014: Belo*

Espst

e

perenbg. orne6hip 6 or

2016 2015 90yo) 90%) Percenbge she of PtuGjg ir its subsidtes: 63'% 65% MCI 56% *vo (NRDC) r00% )0Ol NNa Road Developtn nl Colpmlron

2014 t0t]l/o 65% lot]//o

PERch ultitnah sh@ in MGI md 'As a rsuft ofrbe sale of l0% sbke ir PGEC, oo'solidared Etoined @ing! md income is redrced by 10v! 6 ol od for rhe )€m dded DeFmber 31, 2016 ad 2015.

lehsol&h

Penocrm h6 oonlrol oler Pebosolr, sinca Peltocen is lsgely iNolved in rhe key decisiots conoeming dre lindcill ad opdling polioies, aotirilis md p.o sion of tcbtologtoai suppon dd bchnic.l know-hoq to Petosold.

flililuill|liltmI

,5, Subsidisies o€ coNolidrtd whm contll is tufe'ed b l]l. Gionp dd c.N. b b. cmolida&d whm mnbd is bmfsrn out of tbe Gioup. Sp*insuy,lhc Grcup conlrols ssubsidiory if ud

i) b)

c)

Po*er oler.he inBE (i... .xisring deha filt givc il the ourelt !bi1i9 ro difot the adivitie ofrhe iNesbe) E:pdure, o. ight, b leiable rellm fm ill iNolvenot wth rhe invd€, md Ihe abiliq b 6e jl5 power ove rhe invesbe ro afie.. its rdms

When rhe GoDp hs consideB all rclcvor

l*

thm a

f&ls ud

n.jodq

Fl*et

ol the lotjrg or sinile right ofm invsr*, the G@up in wherher il ha povd over m invslee,

dtmsbd

assi4

mntrctul mmsment *irh the .thd !@ holdm oflh. invel* ftm olhs contlotul mgemdt voting righb sd pdmrial voling dglts c) Tbe Group s

a) b)

The

Rthrs disina

The Gioup thar

lhef

no1 it ootrr.ols m invEre iffad dd ohoees to @e or Dore oftne dree elenent of 6ntol.

rc-6scs.s vhether tr

e

dEMsbces indic&

'ne consolidaled linochl sftDenb ffi pEpeed Bing mif6m &counting polici.s for likc tssadiom ad othe. evenb in simile circunshG. All inlocDup balo6 md tustions, in&rcroup pofits dd cxpdses od gains md lGses ft elinidre! dding sMli&tion. All irt'Croup balmces, tustions, in6ne md qp€nsd dd pofil dd lNos m eliDinabd in Conp&yk equiq. The pdion Nonantduing inreresb e pasmLd sotm&ly frcn lne prsenl.d sp@rdy in rhe proft or los md nd Neb in subsididi* nor $holly oMcd 'mnr e of coNolida&d sbrendr of ohprehdsivo incone, oonsolidabd shhent ofampEhedile ircome od m'solidatn sdmsr of chdges in equiry, &d within .quny in tl'e @nsoli{tared

n&ne

offindcial pdiljm.

lo$es wirhin r

subsidiary

m sbibued b

idffil

.he

nonconlrolli4 in&Bls den ifdar Esulb

i'

a

vithoul 1o$ of emtol, is lcod.n for d m eqlity tra&tion, 6 tatMtios wid tie omm in then capeiq a oh6. Fot puch66 ftom non-mtulling intssb, the ditrmce ba.d dy cdsjderaiion pdd md rhe Elevot shre acquired ofrhe carrying value ofn r ssols ofthe subsididT is rsorden in equiry. Gains oi lsses on dispssls 10 non-oonlrolling idffib m als. reoded in equiq.

A chmge in rhe .r*D6hip

If rhe Ghup lose contol ovd

D€Boerias

mout

the

of a subsidi!ry,

a subsidiary,

it:

6er5 (includins sed{ill) dd lhbiliii.s ofthe tubsidiory, tne canfing inldl md ih. omulaiive tushrion difftn6 esrded in

of my nonantulling

Oe fiir value of ny invetuent '@ived, r*ioed dd dy suplN o donoit ir the consolidared shhenl df €hpiehNile itmne, Roldsifie lh€ p€Fnfs slsE ofmmponda prdiously @ogniz.d in OCI lo rhe coGolidahn sbtnflr ofconpi.hdtue hmne or Ebined ffings, as appropdaE.

Rsenizs

the fair value of the

€adedion

tllmiltmilmil

Thn polcy n in @od{kne wirh PFRS

L

10,

CaEoliAd?d

Fiwid Sdem,l'

Cnrrsd ir Accoutrriq Policig policie adoFen dc consiscnl uitn lhce of d. previoN c.lddr yee, .xcepl thd rhe Grcup h6 ldoden the followins ne* aqmrin! ponoucemmb shing Isurryl,20l6. AdoDtion oflhese lromuncondts did nol hrv. dy si8nilicmi inpict d rhe ialci.

GFUp\ finsoial position or perfomsce nnl6s oln@ise The &counring

i rd PIIts 10, PFITS 12.ad P AS 24,Inedt

r Am.db.nr!

E"tina: ,lppbb,t the CoNlrldlion Ewptkn . An..dD.rt ro PFRS 1r, r4donth's lor A.q'isttiN of rtuzttt i" roi!'t OrtuiN . PFRS 11, R4tldor! D.lordl ActuM . An.dnerr3 ro ?as l,riEld@Inrrirts . Ab.ndm€ ero PAS 16 r.d PAS33,aui;li.di.'otA.tettablM.lhod'of D?pt .idion ud Inodrzdi., . An.hdn.Ilr 1o PAs 16 .d PAs 41,,kticulttrc: Bwu Plartx . Ane.dDenr! b PAS 27, tgity Mdhod in Seputu Fiw.*'l SMa . Amurf Imp.ov.netrr b PFRS!20I? - 7014 C!.lc . Ab..dn.bl1o PFRS 5, Crea4 in Mdrodt oI Ditpotdl . mendn.nt to PFRS 7,,td'i.i'" Cr,tutt . Am.nlae b PrRs 7,,,1?/.rrlit! ofth.An nba2"atu PFRS 7to con Ldt d I4tuin Firon rnstuMt An.ndD.trlroPASl9,rtr.od Ie: M@*a Isu ', whn n$.Ituin Anqdneli ro PAS 3{, rn r,ru. of l{tuion'Ek ^4|ordl Fi,Mcial

Rqd'

Sltdlrft, Ini.rpretdlor .nd Ao.dn€hll ElIe.t|l. Sub.{Cuent to D...nb.r31.2016 fie G6up vill adop. .he iland.ds ed intapr.larim cnmcraicd b.lar qhd l]ls b@De *psr rhe adoption ofthese new, cf@tive Exo.pl s ofieviso indrcated il'e Grcup d6 'ot r*ised md mended shdards dd tuw thilippine In@rFrcbtion 10 hav. a sierifioi impool ot Na

Acoutrtitrg

ioPFp..s t\ au|i.arw oftt s.ope of th. st'nlad (P'n ot,4rtt4!

I''prorM b PFRss 2014 - 2015 (yd.)

'I1E mendnda old0 that tne dislosm Equimenb in PFRS 12, oths ihd rhose rehling !o summdizd fmcial infodrtion, apply lo m .nntyt interest in o subsididf, ljoinl lene or s ssociaL (or ! poI1ion of ils inteE t in ajoinl ve!tuE or m sseie) dar is clBsified (o included in a disposal gbup that is cldsifien) a held for sale.

Arqdnent

'Ille mddnents do nol hflc sy impd on th€ Crup's nmdal pGition md resula 6f op€htion TheGbup U include the nquiFd disclGurcs in ils 2017 ensolid.tcd firoci.l

rmmtmm!ilr

Anordd.rt!

ro PAs 7. s&r.n..r of c..h Flo*. Db.lduts Iniri.dv. 'ne mendinenb to PAs 7 r€qDiE m enr y to provide disclsuEs thd e,abl. 6e6 offine.ial sen.nts lo .valuL chugs in liobili.ies disinA from linmcing aclivilies, idclDdine bolh ohmg6 sisirg Fom c6h nows ud non{ssh chflgE Guch s foreign excl'm8e gains or l6set.

On inilial rppliotion of Llie dmdndb, enrities de no. Equned b O.vide cdpdative inrmalid forpraciins periods E topplicolion oithe modmots is pemiftn.

ADDIi€lion ofdendnenb qiu

Am.ndd.trb b PAS

12,

6uh

in additiond disolosuB in the 2017 consolidoted

1r&fr. TM, R.cqntioh

oJ

D.lMd

Tu

Asald

fDmcial

VrEaIh..l

dddmenb clfiry ftat d mrit n..ds ro cdsi&r whethr la{ laa rcsticts lhc so!rc.s of b\obl. pDt s agFiNl Nhici it may nake deduclions on rh. sssl oftkr deducrible rmpor'ry difieEne FunnmoE, rhe mddnda sovide gliddce d hoa d en.ily shoDld ddmine tutuE Lxoblc pofils rd *ploir lh. cjrcumslllG jn vhich l,rable prclil Dry i.clnde il'e The

Foolery of sore

ff.

asd

for moE thm then errying

mour.

apply the mendrnents rcrsp@lilely. uosevs, on initial applicdion of chDle in rhe openinE equ,ty ofrhe edlie$ cdpft.iw period nay be rseni&d in opdins .etored emincs ior iD anoths @Dponenr ofequ,9, 6 rppopride). withour sllsariry 1be cnmse besen openins Ebinen mings ad oth{ amponst ofequiry.

Enliris applying ots relici mB1 dGolse ilat iact. lsly lppliation otlte mendmdrl n

Entities rhe

required

mendnmt.

Th*

10

rhe

mendme'b ue nd *peded

Aneldn.nll

to PFRS 2,

ro have

ay inplcr

on tne

Goup

,t aE rrt d PryMaa cl6t{Eolion

66EIIPWI TMdN

ond

M6w^.nt ofsnu&

mddnenls to PFRS 2 add6 tl'Fe nain e6: the ellesb ofvesting condirioN on the of r c.sh{edled 3h&-b6red Di}ddr l@ridi the cldsilicalid of . sh@bded paymdl lrtusolion rh n l $ldcndt fc.t]E ior anhholding d obligrtionsi od th. ,cmuring {heE a nodification ro rhe rems rd conditim of a shft-ba$d piynen. Ltu&.ion chdgls its cldsincaftn Aon cah setLd lo equily s.nhd.

Tne

n*rendt

On adoprion, entilie m requiFd b dpply n\€ mmd'rdts wirhoul relaling prior p.riods, bul rehospetive applislion ir prmin d if el.ct d fd aU thr.. Mendnenls rnd iiotner cnteria ue mer Erly +pliatior of dr mm.indt is pemiftd.

Th. Croup is ss.$iru

PFPS

lI

totenli.l offol ollhc mcndsenrs

o

i6

a@liddd fimcid

L, Rt arclron cont@ ,ith cwlMt l5 esblishes a ner live*tp nodel thar *ill

apply b Benue &isine toh Mhdl sith cuslomd. Und.r PFRS I5, r.venu h tecd4d ar d mounl thd Fl eels lhe oonsidflrrion to which m enrit exped b be enritl€d in exchas! for tufring geds or s.nie 10 . clslomd.

The principle in PIRS I5 pbvide a more slructored rypooh !o meu.irg dd Eogniz'ng PFRS

nill[tililftrl

fie

nes Evenle silr&rd h oppli€bl. lo all enlirics ed will suD.ncd. all cuftnl fl.nuc rMsnirion requir€mob uder PFRss. Eirher r tull or modified rtuspr.rile applicdion G d fo' murl phods b.gimng on d afte tdu!) l. 201 3.

'.qun

The Gbup is cun€nrly

Pfps9. Finmi,t PFRS 9 Eflecrl all

l8tudk:

6sesing

ItuMt

pi6$

of ihe

rhe impacl

ofPFPS I J dd plss ro adopr rhe

nn@ial instruenE p@j*r sd Eplmes

ns

PAS 39,

sb{tard on

]C,imtd,

Me6rE .,r.mdallpreviousverionsof PFRS9 Thestudad intodu€s nN rcqui€md* far .l6sifi*1io dd n.srden! imraimd! lnd h.4. rccounriry. PFRS 9 is efaediw for snnal p€rio<ls b€ginning on or aner Jmuary 1, 2013, {nn e&ly ipplicdid pedired Retosp€tive rpplication is equired, bLt providing contmlivc iniomalid is nol mnpulsory. For hodg. Munlin& tne requiremenls e geneBlly applied Reasnhianann

pr6p€dively, wirh sone linnen *€prions.

'ne adoption of PFRS 9 vill havc s ctret o t e olNificdion sd neslllment of rhe Gmupt fimcial dseb ad inprimst nerhodolos/ fd 66cial 6sets, but qill h.vc no itnpacl on the clssifidion dd ne$llMenl of th. Croup's linmcial liabilitie. Tle adopiion will also hNe o efad on rhe Group\ ,?plicarion ofhedge acomrins md on the doEr of its crcdit Amendne.t! to PAS 2q Annuol

In'yMb

ntz8uta a AMitu t Jobt Vtu d b

PFRss 201,1 - 2016

Fah lal@

cycl.)

etnol

meodmeft cldit rhar m mrit that is a venrue capir.l o.gdiation, or olhd qdirying otily, n.y .le! al inili.l l@enilion on s invesirenl'by'invEhot b6is. ro neasse ib inlesbenb in ssociabs mdjoinr lentu ar fan vdue thrcugh profit or lo$ ]h.y also cls$ rhat ir d dtity thal is not self m inv.sddl 6tE hs o irteFst i! o aseiare or joiDt vmtuft lhar is d invohent enri9, rhe entiq may, when lpplyins the equity ndhod, ele! to relain rhc aan lahe nesurdd applied by lhd invsb.n. entit Ndaie or j inve$rert edity 6smiare\ or joint vset inhsb in 3ubsididi.s. This .letior js nade sepdrly fd @h iiv*tndt mtity Ncialc oi joinl ventuc, ct the l,&. of de drre an *hich (a) oe iDvdbenl .',tity oseide orjoinr ventu is innialy Eosnizedi (b) d'. ssoci0tc orjoinl voft 6e.on6 d invsbent enri$ dd (c) rhe investndl .nlily 6s@iale orjoint venft 6rsr besnes a p3Mt. It mddmd& should h. aplied retospEtiyel, *irh ealie. rpplicdion The

'Ihe crcup b dsesing th. potertiol ed@l

An.dr.nr

ro PAS 40,

Iny61i.

ofth. merdrenb

Pm!.rty,

on

ib m6oli&Ed

fiochl

Tnuf.a

of ltrrgtu..t Pmp..ty prcp€dy, including propsly uds

clai& shm d endq should tufd snsruc.id d ddelopmdt i ., d ou1 of invetndi pop.rty. Ir'e men chdgc in Ne (cN wien de popefry meetr, d @s ro nee! rhe definnion of inv€ltnenl popefry md there is evidde ofrbe chds! in use. A nerc .hdgc in mo4emefs iftnritu 'IXe mend,amb

fd

pbpdty does no! prclide elidedce ofa chd3. in se. Tie mmtnnenb shdDld b€ posp..tivoly rptlicd lo ohog6 in w inat Nur on oruns lhe besinning of t]l. muol EDorting p€iod in rhich rhe dtiry fc. appliB th. m.ndtnents. Rot osp€dive applisrior is only p€mitted ii this is posiblc wilhoul lhe e olnindsignt rhe use df

a

The Gbup is

sssing

the

poldlill .fer oflh. dendrenb o' tu aMlidaed nnscid

flflils[|milmil

Philippin.

I

.rpEbtion IFRIC-22, Fo4lt, C@ac! TMddioN ard Atuaw

Tle inrstEdion cleifis tlar in ddmiding rh. spol.xchme. iaL io use on irilial E@gnilion of th. rcla1ed ds.! .xteNe or incomc (or pd of ii) on rhe dffignirion of a nm-Doneby asel or non,monebry li$ility rclatiry io advo€ mnsidetuio4 .hc dat of rhe ralwrion h rh. dale on rhich d entily inni.lly rsgnias lh. nonmdet ty 6sel o! non-Donclrry li$ilig uising parmenb or reeipb in advfle, l\d .he fron lhc .ti!.ne @rsidenlton lftnd. m 'ulriple enrity mui ddemine a dat of t!. tdserions fd @h t.ymenl or F6ipl of adloe considemlid. Ille intrprcLlim @y be eplien on r tuUy tupedive bail. Eiiries tay apply the inlorpetanoD p@spetiEly b rll 6eb, *pemes dd incone in i. scoo.lh3l4. initially recolnidd dn or rftd the b.gimi4 oi th. E oning perioi in wl'ich rh€ e'tit) 6nr 4plies rhe inteer.lrlion d lhe bogimine of a pnor Fponing period pHenred as conptudive infom.lim in the nmcial shreneft ofrhe Epon,q peiod in which Ur. cnlily fis1 applie tle inlerpFtstion.

'Ille Croup k osesing tie potertial efl*r ofthe inrs!ftbtion on its €Mlida@d

nnsoirl

Under rhe rew sbdfl4 lesees *ill no lo$d .lasi& thcir lees s eilhs opeding or finmce lcM in &cddan€ wilh PAS 17, ,.aer tuiner, lssffi will apply rhe singled nodel Under this nodel, will rssniu rhe ase16 dd iel.Ld liabililid for most lses on rhet md Ecogniz int€€t on th. balanca .nd subs.qundy, will d.p@ia& lne lese lee liabiliriB in then pmfit or loss. kdes rirh a cm of I2 nonlhs or l6s or lor which rhe undrlyidg aset is of loN value *dplod lrcn rhse Equirmeft.

l6ss

sh*,

,s*

r.

subsbliolly uohsgFd 6 rhe nN sbded c ies fo dd $e principles oi le$or ,@uiing uder PAS 17. lasm, howeve., liU b. sluird to di$lose more infdmalion in then fDMcial slalm.nte, p€lticulely o tie dsk exposE to Esidul valu..

Enritid roy st adopr PFRS I 6 bur only if rhey hav€ also idopLd PFRS I 5. !v.en adopting PFRS t 6. b mrity is pedft&n b Ds. eiih.r r tull rcrGpeotive or a mldined tusp*.ile apprNh, rith options to e oedi t"nsnion Eliefs.

The

acoutinA by le$o6

The

u'oup .cunendJ

An.ndn..r.

10

G

s*3ingk

inp&r of adoptngPrRS

PIRS l0 .hd PAs23- s.lc

itt Affi.te t Jobt Vatu 'ne meddnmts lddEs trc cdllid b€twFn

u Catuitdin

16.

oJ,4stu

tun

an

lrwtor Md

PFRS l0 md PAS 23 in daling with th. lo$ of oonbol ofu subsidiary tnat is sold o. cdntibuled to m ssooiolo orjoim v€ne. The mendnents ssode d jdinr v-ture iNolvs cldify rhat a tull gain or los is when a t!rofs ro . businN s deined in PFRS 3, ,6jnes Canbindio8. A'y grin ot lo$ resling ton lie sale

jgg'ad

or

mntiburion of

stst On

of

uN€litd

ssd

ihd

inv*d'

ds

ndt

cmrilul.

e

a

buires, howd,

intdBls in lh. dsootote or joint

is

vme.

'senized

only

Jduary I3, 2016. the linmcial Reponhg Slondo.d! Coucil pc9.ned the o.igin.l

ofll

util

b

lne

.fietile

Intditioml A@untirg St 'd.rds nay Bdd h6 coDplered ib broader Evid of rh. resoroh pDjd o' .qDily acmuring thd md dfotber 6p€cts of&@unltng rsulr in the sinplilication of&courlirg fo suh tusdions daeofJeu.ry l,2016 for 6s@ial6

said mendrnenrs

rhe

sd jo'Dt v€nnlH.

1tililil:ilnil!ilt

4.

Sunnory ol Signilicanl Aaounrilg Policis Revenu Recodiliot Rsenue is reosliad to rhe exrdt thal it is probable rhai lh. enmic b.refits uill flow to the Grolp bd rh. rev.n@ cm bc roliably m4uEd rcglrdlss of shen the pa)md is being dide Rolenu is msued ai $e fiir value ofthe ansidsarions reeiled or ie.ivlbL, o*tng irto account 6.r&rually delin.d tms ofplyment md excludiry des or duty. The G@up Neses i6 dene .lmgcndts o€Finst sp*ific cirsis in older rd dtuine if ir is etirg a trimipal or agenl. The Gnup hs cmcluded rhd n is eting d pdncipll in all ofils rwenue sroAmenb sine n i! lhe piimary oblbor ir all lhe Evsue mgeDent , has picina lalilude md h also expscd lo invdlory rd cftdit ns*s. 'Ihe sF.inc ltesririd cdtrria desoib.d b.lov nBl ale be mer b€fore

BOUo

is

reopized.

fton oil tuIs is recqriz.d s in@mo al lhc time ofprodrction. Rewdue il ih. 6ir value olthe eonsidemrion Eeived.

Revenue

osumd

S.le ofeleolnciry uing renemble eners/ ir rhe Gmup is tusniftd rhrug! lh. tdsmission linc

Inbed inmne

is

Eosnizd s

rhe inte€sl

d

whctwe!

deigrftd

&crue lrling

inro

the

nsuEd.t

electicity gensared by

by rh€ bu,€r. for a

rmur

rh€

effediv. yield

on

lhc

Miscelldcous inoome inclnds time wiri.s chdAes, dividend it.me, renb1 inmme dd gait m sale oftuspotutim .4uipnml. Revdue is Hognized *hen rhe Ghup s nglt to re€ive me

Cah md Csh Eouivalot

C6i inclndes cash on hmd dd in banks. Csh cquivaldtr m shofr tem, hiSbly liquid bvstndb thdd.sdily mrvshbterohommoubof c4sh lh originllmtuities of rhE (l) nolhs o le$ lim the d,bs of&qui3itid ad ibar e subje.t ro m i'significd'is* of

Frocid lmtument 'Ih. Cout rMgnias o li@ci'l as tr a frmcial liabiliq in llle @solidared s@mdt of finscial position vhen il b*om€ a parly 1o l1l0 contactul po sidns ofth. inston nt PNhs6 or sales of frmcial 6sea thal rcquiE deliw.y of a$ets wilhin rhe lime li me .sbblishod by Ecll,lion or mnvention in rhe tu*eQle e F6!!ird on rhe ddemdt dtl..

I|utMmrfl[n[mI

hniat Pkognio, drll MeMenet Findciil aseb {irhin i\e scoF of PAS 39 * cldsified a enh.r nmdol ss.t .t FVPL, loans md t*ivablei hold lo malurit {HTM) iNest nenl5 o! avdlabl+foHale (AFs) fmciil ds6. d appopritu. Finmcial lhbiliriB de cl'ssifi€d a eirher fmncill liabilities ar lVPl or olhs findcial liabilities. The clssificalion d.phds on lhc purtoso for which the iDvdlnenrl re acauiEd ed the G@up ddmines rhe cldsification of the finmcial iBhnedb a! inilial reblnirion dd, {hs. allo*ed dd appspf,ac, Hvdule lhis desjgmlion .1 eah limcial All finmcial dseb e inniiuy l@gniad al llt value plus, i! lhe o6e offmflcial 6sds not at !vPL, dtedy aftibuLble tcdion co*. All fDrcial liabilitie e iniriauy leogniad at fair lalue, l$s, i the cae of finmcial liabilitis nor ar F\'PL, diedy lttibulablc tselioD @st.

Th. crcuD s fimdal ssets irolude ljnmial 6sd ar lvPL ad Iotu dd ftc.ivabld md ia nnmcial liabilitiB oflhe nltr. of olha lindcial lirbilitis.

e

ndlment bM

cl*ifi€rid.

IinMcial ds.ts th.i dc clssificd 6 loes od reivlbls re nedred al doniDd cci uing lhe e6*ti!e ideren de GIR) ndhod. AndiDd ost is $loulaLi bybli'g irto aHut dy dircob! pidim and LrN&lim Fsis on eqnisitioq der the Deriod b mtorily. Amofriaiion of discolnb. DEnillm md bflsaction cosb e bld dirc.dy lo llE consolid'tn sdenmt of The $bsequen.

Detuhdion ol Fair

ior lsmcial 6sels depend or rhe

Yal@

Frir valE is tte pri€ rhar would b. @ived ro sell d aset oi paid to ttosfer a lbbil,ty in m ordsly bsadion bdM ndk ! pilticipmls 0l tE msDEmst da€. The fan value h.sllmdl is b6ed on de pBDprion rhd the tuetion 10 $ll lh.

. .

In the pdrcipal m*01 fu lhc ssd or lAbifiq, or In lhc absenc ofa prircipal mrke! in ih. nost or'v{lageou markd for the 6sel ot

liabiliq

Tll. princitd orthe nsr dvrbseous mflkd nusr be rssiblc io by ihe Coup lhe fail !.lue of m dser d a lAbilt is D€ured Bing the dsmplims tnd twket pdicipmrs vould ue rhen pdcjng ih. s.l oi liabil,ty, ssumiq drat twket pdidpmts &i in thet aononic best The Grcup us6 volu.tion IrchDiqu6 tnat

ft

apprpriate in lh. circunsloles md for *hich

suffcierl drt. e inpub aild nininizing lhe Be of unabs. €bl. inpub. arailable ro

nesc

fan vdue, muirnizins d€ use

ofrel*dl obs!F!61.

All 6seir md liabiliries for which frn vafue is msui.d oi dislGed in rhe fDdcial sbcmdls m Bresorizen within the fan lahr hi.mhy, decrjb€d s follo*s, baed on lhc lowest lml inpu! lhat is s4rificm110 tte fdr valE m$uEment d a vhole:

I

Quoed (unadj6t!d) m*d priG in aclive nekeb foi iddtical 6sl5 Valuilion L.hniques lor whioh rhe lo*en level inpul thot is signitmi valu m6u€mmr is dituly or indnedy obd.nobL kvel 3 - valulion rehniqus lq which rhe lolen level inpul thd is significmr value maucmml is uobseruble L€vel

L€vel 2 -

tut[l$ililmmil

@ lfug,iad in de nnocial tuDenb on a recmins btris, rhe Goup ddemins *herher tufm have occmd hdem lrek in the hisehy by p{r€sing €legodanon (b6ed on th. lov.sl I{.1 intul lhat tu siSnificnl to lho fan loluc msDFncnr 6 a whole) ar L\e end of ern Epofring penod.

For 6sel5 md liabilnies dEt

ditrert b the fii.

value ton orh.r obsedable c|llmt n&k i IrmoctioB in lhe insrument or b6ed on a vllurion bchniqne wnose v&i,bl6 include oly dah nom obsedable lwkd. L\e Gdup rcdgnids rhe dfierene beNH rhe bmacrio price dd fin vahe (a Day ditrcren€) in cdsolidarcd slalem.nl of

Wnft

lhe

nosadion

Drice in a non-acrive

compr.hensivc incomc unl€s ir

qulifiE

neket

se

is

I

for F@gnition

6

li.

sone other tW€

ofdsd

or

liibility

I' css rheft

vdiables u$d is mad. ofdala Nhich is not o69cnable- llF difiercnce b€seen rhe lm&tion prie md model valu. is only rsogli@d in tne m@lidared sbemdt of comEehensive incone whs ihe inDub be.me ob€edabL or shd the irslrunenl is nedod of @Snizing dercs8nizd. For @h lrosactior, de Grcup dcGnines dE 'pproFhre dE Dd I difieftnce mour.

L.ds [@s

md md

Rr*ivabl.s

r#iubls m finmcial asd th fix.d d dekminoblo r4mcnb ud nxei i.s lhat e not ouohd in d acrive Mlet, Tnw m not enbren ido th rhe incnlion of imDediat or shod-bn resle sd m nor desisftd a AFS frdcial ss.ls or llMciat EFb ar

natr

Affs inilial meaurenent, lom

md

ftc.ivlbld

e

subsequmdy Dedued

d

mftiu d cod

usirg rhe EIR Detftod, les allovmce for impdmdi Andtiad msl is @lculalel by raldn! inb amur my dimdr o. pldiun on acquisilim md l€ dd @ m inre8El pan of lhe EIR. clcified undd llln ea&gory e rhe coupt 6h dd 6h equivdtnb, eeivables !d Htichn

El!3!!id3$ls@dli!!asEl!E!il!!!€r!I{!!

Fimcial 6se13 md flmoirl liabilities ct FvPL irclude fnmcial dset and finmciol liabililtes held for hding purposs. dsivarive i8tumll, or thN desiglllei by Dmagenenr upon inilial recoslition a at FvtL, subjsi

10

sy

oftbo follosi'g crirsial

desislrrion eliDin&s d si8rifiody Fd!6 lhe indsisrot t€bedr lhat ,ould olhwis dis. &om ndurirg lho ssels or lubilities or @gnizing gaids r lsses oD $em

the

liab nies ft pad of a gout of fmooicl @q fimd'l liabiliri* otbolh nmagld md lh.ir F fomsce se evaluted dn a fNn valu. bsis, in ecordme docmaled ;st twsemdt or irwsbenr shcgr'; or fie fimcial iEtu.t cdbin d db.dd.d ddivalive. unls rhe emb€dded drivaiivc does not significully nodiry $o c6h Ilos or it is clee, vilh lirde d no dtl}5is, tial it Nould nol be seFrdety rNrded. tbe 6seb

whicb wirh r

e

rd

s$6 dd lindcial liabililis al FVPL e mrden in the cotuolid.l.d slalement of fnsci.l psilion at foir valuc Cnuees in fair value ft Fneded in the .msoli&bd shben. of compEhe6ive insne. Inbest €m.d ar incmd is Hord€d in ifte$ idcon. ot expene!

Findcial

Dilidend incom. is Ecognized eo.dinB b lh. tcms oflhe conhcr, or

*hd

the

riglt

of lhe

tililill|lflllllll

Mhent h6 be.n 61ablish.d.

Cl6sified 6 finmdd asb ar FVPL m $e Ooup\ D&ktuble pDrposes dd inveshdt in gllf clDb shdes 0{ote 7).

PllradlsElllliallsass Derivaliv. IiMcial iNtsdll (inoluding bifusLd

€quity secuitis neld for tuding

sy, @ iniljally conhcr is mr*d into md is rubsequaily renedued al fairlalue Any gdns or lo$rs risin8 fron chmges in f.irr€lue ol lhc deriv ile (eeF doso &oounted for 6 rcoundns he4e, is blen didly ro rhe consolidatn sdflmr of onprehensive incde Ddd 'Orhd inade". Tl)e ddivalive is onied as dse. Rhd the fan value is pNilive md s liabilig/ rhen lh. fair volue is neeBtive. r$Erized d

fair

mlu d

.mb.ddcd d.rivoljvet, if

rhe dab ar which rhe dsivarive

q!sdi!4!B!!4!i!r&!

e irilially rcoenizd .1lhc fair voluc ol d'e s'sidsriior reeived lss dielly ltibuLbl€ t!6dion ast. After initial Emsnition, orher fiMcid lhbnitid m subseqDendy nedued d eonizd mt using th. EIR nelhod. GaiN ed los6 m All findcial liabili.i€

in the cdsolidaled shtemdt of@npEhersive ineDe iDpairn, s well as lnmugh the donizarion

psN.

Clssifien

udd lnn cdeaory

ft

the

lsp3i@!!&iB!@!E!4rs!, 'Ine GrcuF

ases

.l @h reptrling

Cnupt Moub

dote

vhetiq

a

who

L\e liabilnies

payable

fi'mcirl

e

'€mgnizi deftco8riz.d

d

dd &ded expdscs md l@s

or lmup of

fimcial eseb

is

A tDscid 6sd or a group of finmcirl nsd is dened ro be impaired ii .nd otly if, lh* is obj*iive evidence of inpaim.nt s . r€uit ol one or moE ev.nb rhar h6 ccuftd ind fte initial r@snilion of lhc 6$l (' immed los evmr') sd rhar lB evml (ord.nll) h6 m impacr on rhe estinaed tutore ah noas ofth. finmcial ssd u rhe goup of finflcial dseb thd cd be rcliably estimated Evidsce ofimpaimenr my inclu& indistoN $ rhe bo'o*er or a grcup ofbono*ds is expsimcing si$ifimt fbdcial dift"roulq, defuh or delinquency in inLi.sl d ptncitd !6,merls, lh€ p@b$iliq ind they *ill mb ba{mptcy d orhe! fitmcial mrg4iarion ed *hse obseoible d& indic& lhal lh.rc is meduable d*rcG in the esind.d tutorc csh flo{s, suoh s otag6 iD d6 or sronic condilim lhal @ftlote tridt

'Ihocroupf6t6s6ses{hetherobjst e cviden€ of inp.iment *ists individully for ftrUcial ss* rhal ft itrdividuuy signiliol r colledively for nnmial 6* rhd e no1

rh,t fl impaim.nt los on l(6 rd 'ide'e ar soniEd con ha bea incDftd, lhc mount ollhe los is ndd.d a rhe

individully iigrincdr rlhere

is

u

objeolive

ftceivablE cffiied difieFnc. bdreen tbe asett c{rying mounl md lhe pEsmr value of ennnatd fDtorc @h Aows (.rcludinS inure exp@&d credit 10$6 rnd hrve nd bs incured) disomLd sl lhe nnmcial 6er! oriEi'sl EIR (i.e., the EIR osputd a1 initirl l@gninonl

dffiined tha! no objolivc evidflce of iDpiment exisb for d individ!.lly 6s$ed li'mcial 3sr l@ or Eetuable, *herher sig'nnmt d no! tho Ner is included in a gsDp of If it is

Nr

*itb 6inil{ crcdii risk chaFcterislic ud rhat gtuup of linMchl sels is individu.lly 6ss$d for inpaimenr dd mue.ljle1y 6se$ed for impdmst as6 rhd Nhich D inpaiment los h or mlinug b b. €.o8niei @ nd included i. t collecliv.

finflciil

e

fd

fftis[||||ilill|ffi

fte .,rrying aHunr.

Ii

e of on aUosd€ for inpaimenl los siall b. l@eniad in lhe con$ltu l.d slalcnenl of

amourt oflhc sset h rcduc.d dhugh th.

The

mour

of rhe

lN

mout

ollhe imtaiment lo$ d@@es, dd lh. &cre6. cm be aher .he inpainen! *a ftcosnizd, rhe previously Hognizei imp,imert lo$ is BeNed. Any subsequenl @eEal ofs impaimdl lss is recogni*d in the onsdlidared sbEnmr of onpFheBiv€ in@ne, ro rhe rhar rhe car.yins value ofthe 6sl d6 not exoocn uhal would hale b.€n rh. Monian cost ol lhc revNl d.& had rheE b€n no impainenr Ecosriz€d. in a subsgumr psiod, rhe

€ld.d objecliv.ly b m elent @udng

*nr

lf m AFS nnmcid sst is inpaiE!, b mout camprising the di,teFnce be$€en il5 cost (ret ol dy principrr pdybed bd dodizrion) rd it cuMt fan vahe, les ay nnpaimdt l6s lrclioury r@cn'ad in .dsolidlied sblemenl of cmpEheGive income, n rosfdEn non $c onsolidard sbrmmr of chdg* in equit b sbrmenr of obprehsive incone. Inpaimenl rev.rels in resp*t of .quiry iNl.undts clNified s AFS finucirl sets @ ,ol rMg,iad in rhe mnsolidarei srement ofaDpreheaire in@ne. Revesrk ofimpaimenr lss on debr iBtudts d reve6ed thouah the €dolidared shEndr of €apr.bedive inen , if rhe incr@ in fot value of th. iNlrumdt m b. objcctilely Elated to d denl ooouing lner thc impaiment lcs ws Ho8niEd in consolidared stment ofcompFhem e income. Itte dounr of revem.l is linicd lo lhc mounl1h.1 brider thc .srying vahe oflh. dobt inrlrumcrt to shal t could have heen had dr* b*n no inpaimmt in the fid placa.

Derecodilim of Firmciol Aset sdLiabililies A flfucirl ad (o. *heF applicrblq r pd of a sonp of flmcial

. .

s*)

is

drsgniad vh.n:

6on th. as* have expired; or the Grcu! ha kafdtd subshridly all rhe dsks dd rrysds of$. 6sor, or h6 asmen u obligdio' b pay dem in tull *irhod mrsial delay ro ! rhirdrany under a b6s{ircu3h" almgemmr rd neiths tufdnd nor ein.d subsi.rtiauy all the rislc md wdds ollhe 6set, but h6 lldsfftd conLol oflhe 6set, the rishb to receive

cah

flos

de GbDp ha rsfeftd th. rtbll to sciv. c6h flovs fm { set o' h6 €nteEd inlo pssthDugh mgddl od h6 Deiths lrarsfeftd rcr di'ed sDhdtully all rhe risk3 dd Ev'rds of the 6sd nor tusfmd mntul of tne ase! rhe aset is eogliDd to th. .xlenl of the Groupt contiNing involvemdi in lhe ,$l. Conlinui'g iNolv€ment rhdbkes tne fom ofi swmr* over rhe tufeftd 'g is n6ui€d ar rhe lower of rh. oriSind c.1rying mount of oc dsd dd rhe ldidm dodl of cmidenrid th.1 $. cDup @!ld be FquiEd ro Epay.

whft a

Finmcial liabilities ft deftcogliDd rhd the obligdion urd6 lhe liabiliq is disondge4 cmeued oh6 expired. wl@ d *istin8 fiMcirl liabiliq is repbed by eorher iom rhe sme lender on subdslially difa* bmq orde tems ofm existi4 liabilily m subsht.lly modified, snch d e$huge d nodifistion is bcNled 6 r &re.qlirion ollhe original lilbili9 dd the @gni.ion of a n* liability, ad lb. difidd6 in ihe Espr.tile c,rrying modb ir Ecogriad in the coMlid*cn srdeDenl ofconprehensive inmme.

Ofis.nine Fimcial Inslrlmeots Finucial a* md flucirl lisbililies re ofise. md lh. ne1 mout Fponed in rhe @Bolidared $Lhml of frdcial position ii md oly if, t]u. n a cmdy enfor€ble lelrl rigl b offse. rhe moDb md thft is m ine ion ro sede m a nelbasis, orto ftoli4 tle 6sd md

'tmgnizd

|nilililn|[ilmil

-15sedle .hc

liibility sibulhslsly.

E!p!d!4!!$!-ad-E!E4!4e44$4!

Prpdd dD.lM dd orh.r cudt ss.ls p€rllin lo esou€ ol p6r *enll and ,iom wiich

tuft

ecoDonic bmefib

e

contolled by rhe c'onp 6 a Esult exp..kn b flor !o rhe Gbup.

Pro6!tv- Pldt 0d Eouionenr PrcPery, plmt rd eluipnen. e slal.d ot cosl lcs oeumulated deplet on, d.p@iction od moniaton dd any.elmulared impaiment loses. The inirial cdr ofthe popedr. plmr dd .quipmenr 6nsis ofib purchEe prie. including .ny inpod duli.s, lrrd ud ey di'diy rbibubble ess of bdngiq th. NB lo j$ vo ing andition md lmrion for ib inrsded use been put iDto opedio', such 6 Epain rd b rhe srde of €hprhdsive in€n in lhe paiod in vhich rhe 6.t e incuftd. h situ ids where jt cm be cledly demo'sden $d tne .xpendinG hale Gulted in e incr6e in ttle fie €Dmic benefib expebd lo b€ obbir.d iion rhe us of m itm of propeit,, plur dd eqlipmdl beyond ia ongiMlt ,5ss! studard of pefomdc€, lho erpenditns N opihlized 6 u lddnioml a( of pmps9, pl'nt sd

lxpendilurcs incuftd aii.r tn. fixod osls hale

nainbm€, m nomlly

ch'rged

ots

*hd

irem of propefry, plet md equipnenl beAins n be6n6 avrilable foi ir to epabL use. i.e , whm n is in the l@dion md mndirid nde$ory be ofopemring in the rr the of rhe d& lhal ft. is nsner inrdded by mdagflent Dep€iarion clNifed a held fd s.le (or inclu&d in o distacal goup that is olEsifien 6 held for sal€) in

DoFoiatior

css

ecordmca wirh PFRS 5, ivo,{metu,4:seb EeldJt lnle dab the dset is deEcogliz.d.

6'

dlid

nd

o DirdktudOp4diN,adrl\.

ft depl&d using rhe unib-of-produdion molhod @opul.d b6.d on .stiinare oftovcd tgsdes. The depldion h& includes rhe explohlion dd d*lopmert coi ofthe pmducing oilfi.Lrr. Wells, platfolm and orher facilities

Einjedim sldd (FcRs) lnd prodlolion welh i, tne eeorhemal towd D,u! tuel colldio' 'rdstFiell-line nethod owr$e ueful liv6 ofrhe plflr de depEciateJ using th. nte heful 'sb. decmined one in rhe mndition n@$a loi ih.e 6sets to be lil: ofrhoso 6sets sholl be dpable of opeBring in rhe lllse inladed by mmogdert.

Lsd imp@veDenb co6if of b€tuenr!, sn prepediu md siL imprcvmdis rhd sdy lud for ib intnded use. I1ese includ. .xc*€tio[ nor-itrfrsdctu urility iGrdhiion, drive*ays, sideNdls, pr*ing lob, od fen6. lfld imprcvmenb ft deprciaLd ovd 5

'€s.

mmmmilln|il

t6Orher

oler

pbpst}. pldt ad .{uipndr e deF*iar€d dd anoniz.d srimred Netul liv.s oflhe sseb d follows:

Dsing rhe

shighrline neihod

rhe

Po*er

Odice

plu!

fCRS md production

flnie

*elk 5 1

0d

orher equipnent

2-1

W.lls in proeE$ p€n{in lo those developmenr 6sb Elding to lne Seoice C.nbd (SC) *here oil in olmercial qudlitie e di@vsed dd e subs.quddy re.lssifi.d 10 W.lls, platloms dd olh.r feilitie" shown unds'Propr!,, plut od equipmenf'r@ur in tne ansolid,ted sbbmmt of nmcial psition uDd comdci.l plod@lim. D.lLlim of$.Us in prcgds aaadc4 upon ksLr b prop€rty, plul ud e'ruipDenl od Elabd nain 6sb m in rhe con'lition ree$'ry for it to be capable of opsarins in the lrrmd idedded by 6mgment.

Cnnstu.tion in ptogr* represenb pmpetyi pldr md €quipment uder cmshdion dd ft sbed ar mn. Tnis includes de cd1 ofcoshctim io inclu& natedals, labd, profFsioml coGtuction in prosEs is nd deprei.red bomwin8 mts dd olher dirody abibnbble nnlil such tine the cdtuhc.ion is empl.Ld.

f6,

es.

md morlialion nethods N rdiercd periodically to depHi{ion md moniadon 6nsis&nl ihe *pecred panm ofecdonic b.n.n6 fton ilm of potedy, plst sd equipm€nr. wlq th. 6*ls d€ rolird or orhwise disposed of, the con md de Ehred aeutulald depldion. depr-iation dd dodizsrion otd dy d.mulaed impaime fion tlr. asunlr ud sy rsulti'g gain or I6s is Ended in lne €nslid:red sbemdl of The usetul lives md deplerior!

.nsuro

lid

P!&srd

d.trciario

*in

e

lhc penod md nerhod of dgldion,

q!!!4!o!!Es!!!!s

'nie Grcup follows lh. full cost Derhod of rmurins for *plontion €sG dMin.d m lhc bndiv.ly 66is ofeach SC aH. Unde. thi3 ndho4 all exoloralid cosls rclati'g ro easi SC delded p.ndi4 dotemin ron of sheiherrhe ma mnbins oil Hwes in @mscial quantit'es.

e

N

'ne erploFtion ssb rcl.ting lo lie

SC whft oil in @nDerci'l qmtities dc discoleEd 10 w€lls, platro'm Dd orhq facilites" shoqn under "Propqq! plmr od equipment' in the msoUdaLd st t!mm1 of linrncial positio! npon subdbtial onplelion of wihen ofi in de developnent saAe. 1)'r the orher hrd, sll csb rehli's ro d abmdon d SC

subs.qenlly

6l6ified

lhe yetu lhe SCs nave

e

abmdonen ifde rca is pemufltly absndoned. SCs ft *pired andor .hft r. no d.linit! plds lor 6dher *plomtion md/or developmdt.

6nsidd.d pmdenlt

Defeftd Dryelomenr Cosb - G.o&m.l included in O0ls Noncm't Assb All cosb incuftd in lhc g@logicll ud geoph,sisl activilies such a cosb of rotogFphis\ glologi€l ed grcphysial studie, .ishb of i@$ b proteti.s to mnd@t tiN stodies, saldies md orher *pmes of gologists, g@physi€l cEw, or orhen conducring thG. sodies e smh 6sb m incuftd. chdged !o prclil or lN in dle

'€e

Ifrhe Hul6 dfinitial 8lologiol dd gsphysical adivniB Fv*l rhe presd@ ofgeolhemal rslre rhal sill EquiE tu rhft aDlo6tion rd drilUng subs.ludt expldalio dtd dilling cosir m scmulared ed dcfd.d under lhe 'Defen€d sdhedal c61s" ecoul ir thc

|I|ilnCII|I[ilililr

-t7onsolntrled

Ths

t . .

eose

sbbndt of finmchl p6irion. irclud. th. fouoving:

Cosb

aseiatd

CosE

oldrilling cxplmlory

eBtudion

of teDponry frcilitiesl .xpldarory rype 3hrignDhic cs uells, poiding dtuination of Nhether the wells cm pod!@ prcv.! Fsflesj sd Cosb ol lMl adninishtion, fime, sEnsal md sEuiq sfli6, snrface faciliri$ md othd loc.l .osB in prpadng lor dd supponing rhe &ill &.ivnies, erc. incured dx.ing rhe drilling of explordory relk.

wirh the

add

If esls condrct d on the diillcd .xpl@tory welh Eveal thd the. vells snot pl.due proved resees. rhe epiblized charged ro exp€ns qcepr when nmageDent decids to ce the mproduclive wells foi leycling or uaL disp6al.

6s ft

pojed's rechnical feaibilit d ammscial viibility b prc explodion md elalurid Ns.ts sball b. mlssinrd io top.ity, plarl md .quipm€nt 4d dep@iaied ecodingly.

One

the

est blish.d, rhe

Defd.n D.v.lom.nl CosL - Sola Poad Pbicct included in Orher Nonowl A$cs Th6e re ccb incmd in the developnmt ofthe SolI lmjd. This include 6sb incr.n fdr rhe constlcrim oflb. ase. md othe dirccdy airriburabL exp.nse duing rhc oNlruclion ofde Inloneible Assels

Inhsible ffeb icquired sepdrely ft beauFd on inithl lugnilion ai @sl. Ille 6t of inhgibl. Lls.ts rcquiFd is lhcn ian voluc s al tE d.L of rcquisiion. Follosing inirial Ecogritioq itusible sseb m tried d 6n le$ rernul !d moniation ed &omuloted

e

modi2ld ov.r thcir ueirl e@omis 1i!6 md ssssd for inpaimcnt uh.nds lh* is u indimtion th't tne inbgible asr my be inpair.d. Th. uodianion p.iod md .he dodizstion nethod lor d inlrngible ael wid' r 6ric uefDl liG m sic{cd al lei rl lhe {d of@h Eportng p.riod, Chogs in rhe *pad @ftIlife orlllc expecred padm ofcosuptid of futuft eonobic bh.fts dbodicd ir th. Ner is @coubd for by ohmgin8 ihe moniadon period or netho( 6 rpp@piare, sd e Mbd 6 chdg.s in

lnran8ible aseb

*ilh fniL liv4

donianon *poBe on irtongible 0s€ts wilh finir€ livs is Eognirn in the llllen.nl of cospt iensire iDmne h dE exp.nse cftgory ansisenl *irh the fuction ol tne inlangibl€ The

Amortidion

is compured usins rhe

tuishlline

Dethod ovs lh. eslinatcd

uetul livs (EttL) of

lntugible d* with indefrir 6etul Iives e not moniad, but @ lesbd for inpaimdr dnualu, eirher individu.lly or d rI. cGU Lv.l. l1E 6se$moi of i'dennib life is di.lrd ddudly 10 detemibe vheo'ertne indefirib liG coftinus ro be suFponanb. f.oq de chdse in usetul life tron ind€finiE b fDie is nad. on r pospc.tive b6is. Gains o. l6ses disiry ftom d@gnilion of M irt ngibL 6set @ me6md 6 rhe dilTerene ben?.d ih. net dnposrl pr@ds {d the csrying mour of rhe Net and arc @gnizcd ir lie sLbment of pbli. d lN shm rhe 6set is dmgnized.

rt!t!ffimllmI

-t3lnvesir'.enr Pbbedies ,nvefimr prcpedies 6nsis1 of lmd h.ld for capi&l lppEcialion or

sbt

d ar

con

h$

w

imDat$enr

'n

Fnt,l b olhe6. Lod

is

value.

'Itle ini.ial cdl ol the invesnr.nr prp.nies mmpris of pNhs tri€ ond my dir@rly ottsibnbble msb ofbingiq rlc ds.t b ils wo*ing @ldition. ExpendirG incur.d.nt $e iNabent psp€rtid hs b6r put irto op€mtion, such 6 E aiN dd n.inemce, G nomally cheeed io dp€nse in the yqr when @sll m incmci. lD sitoations *hm ir 6n h. cldly denorotitd rhat thc .xp.ndi$E irve Esulbd in m incred. in lhc futu. emmic benefib dDecled io b. obt ine! ioD tle 6e ofd ici of inv*lmdi tolslies beyo.d irs oiginally 6s6sen shdard of prfommc., lh. dpcnditud @ spiblizi a m addilional csr of

Inlesbmr pDpeq is del@gnizd {hd oithd il is be.' disposed of q {hen lh. iNeslrnml prop.dy is D€mmdtly wnndnw 6om ce md no futur. edomic bdefil i! exp€ctn from ia dGp6al. Any gains or ldses on $e fttiFmert or dispNl of invghst prcpedis f recqni*d in th. coNolidored slaroent ofcompEhdive inom. in lh. yd of EtiEmert or Trdsfe6 m Dade to iNesmr pspstes vhen, dd only when. lheE is a ch le in ae, *idenced by .hc .nd ai oue.ooupalron, coDDen€mmr ofd op€radng l*. to dolhe. Frry or by tlo end of oortucrion o. developnedt Trssfd r. nrdc fton inv6bent plopd'es vhen. md only when, lherc is a charUe in use, evidencen by di osm.n€ndt of dev.loDmmr w navi$rosell In&resl in Joinr obemtioG A joint op€dion is i joidr o]msemdt wheEby the

orugenent hav€ rigtu b The Grcup

rsgnizd

rhe

pdiff

ds6, dd obliSltioN

in Elalion to

ib

irtftn

in

colmencddt ofotn4{eouprtion

thar have joint

enlrol b

for the liobililies, Elarin8

of rhe rhe

rjoint opdalion its:

. 6sels, includincibshreof my a*held joinily . lidiliries,includingibiheof dylirbnidesinc!ftdjoindl . ftven@ fion rhe s.lc ol ils shm oflhe oltpur dsing ton $r joinl opemlion . sh@ oflh€ soue 6on dre sle of rhe oulput by $e joinr opedion . *pees. inclDdinS ill shm oldy exFD$s incu.edjointb

'nE Goup aoounrl for dE 6sd it cdntuk 4d rh. liabilnies it ingm, the spdtes it incun tnd ihe shm ofirdde iha! ir ems ion the sale of cnde oil by thejoiii opttliots,

lnvdtndi

in a

Joii Ve'tue

A joinr vmrG (rv) b a ty!. orjoinl dosoenr wheEby rhe pati.s thol havejoint cotul 6r lhc llmgemd n,ve righb b rhe nd N* of d\. joirt v.nnft. Joinr @tul is rhe cdhlctually lgEed shdins of 6nhl ofd mtu8mdl shioh qist only {hd d*kids aboul dE re1*dl acririlies F,tniE unsimous oonsenl oftne p€ni* shding control. Inv€t dr in I w i! &cobted for ud€r the equiq nethod of eourin3.

it

ontul ovr P.ttowind, Prior rq beonin8 ! joinr As dis.nsed in Nole 2, th. GrcuD l6t lentu in 2014, PtuWind wa &oolnled for 6 r subsididt in previos ye6. h '.mrdd@ virh PFRS, rh. CrouD me6uEs md rsslizes my r€lain d invdtnor d ib fair hlu. rhm ofrhe is los of cdtul ovs a snbsididy. Any difieren€ bese.he c.rryitg pac.e& nom vdue rebined invest Denl od upon loss ofcdlrol dd lhe tuir ofrhe snbsidi'ry

lh6

uod

|l!il|Iflilttr0muil

disp.sal is rcognizen in pmtu or

los a

u*lizd

gain on

hnaiment

remeaEDenr ofinvshent

of Nonfpdcial A$eb The Gronp 6s6s6 at erch Eponing dale rhclhd theE is indicdion rhd an sscl (e.9., p6pei9, planr dd equipnenr, iNeshmr pmpenis, defs.en ms. md inbsible noy be inpaircd. Ifmy such indi€nM dists, orvha mru.l impaimdr t6.ing foi d

d

6sd)

6s.t is rquired, the Gnup dirorE rhe 6sd\ €ryerabte mout. An lMt mour is 'wBble rhe hkla of m dst or dh-gdeding unit\ fan vdu. l6s costs !o scu md its !alu. h lst md b de&mined for an irdividu.l N! uls lhe Nel d6 not gde6te 6h inflows tnat N loEely independent of th6e lilm orher aseb or grcup of

's*.

\{lleF t!. csrying mounl of o 6sl exceds irs l@qable moug the 6sd is ansideF! inpliEd md is wift. dM to ib lt.ryenble mount. ln a$e$ing value in e. the *rin red tutur. cah flovs e dissunLd h lncir prgenl vdu. using a discout raE $!1r.fl@15 cwnl tw*d ase$Dent ofrh€ tire valu€ of Doney md the rkks specific to the 6sd. ln debminin8 f.n vatue l6s co* ro sell. tu appbFi& ulua.ion nodel is Dsed. Ilrese .dcllations e mmb@lod by lalulid muliples, qDted she pi6 for publicly t ded compmis or orher alril le fair lalm indiarox.

An ssesmenr is 6ade rt ach Eponing drr€

rsgnized ihpiimen.lo$es my cxisbj the Group nBles

b

as

b *helnd rheft i! dy indicdion lnd prviouly my hav6 &cresed. Ilsuoh indicrrion

no longs exbt or sliDrb of rilemble

moui

A pEviously

reqliz.d inp3imrl

los is Evmed ont ifthm h^ b*n i chdge in .h. gtimts uscd lo d.temine tho sset's raovdable moul sine llE 161 impdmat los w6 remBnized. Ifthar is the cae, the c.rrying

mod rhc

of the

as*

is

bM.i b ib Mlrable doui nd incrcsed mounl6noi

qceed

$rryina amoml lhal vould hav. been dolmined, Dd ofdepldion, deprsidion md Do inpaiment los b*n @gnidd for th. dsd in pdor )rs.

moniztion h:d such

seel

6s.t

is

G

cdied

@ogrizd

at

ddu.d

dsolidrred shen. of 6hpr.hdsiv. income unl6s ihe moun! in Nhioh 6e dE qexal is ftared s a Evalurion incs.. in the

recoas comon srax ar ptr value od additioml paid iD capibl in ex*3 orlh. bbl contiburions ffiived over rh€ a8sre8ne pd ul@ ofrh..qlily shms. men 0'e Goup issus dd. rha de cla of sdk r so61c o@ut n Minlained for @h cl6s of sre* dd lhe lDbq of shffi issue!. IDoFmenral @b incurd die y eibulabL ro thc islue of Dry sh:E ft shom in equity a a ddudid nom pooc.is, net oft&{. whe. oy Demb.r ofthe Grcup pucb66 th. CrcuD\ c.piLl stook (Fe6ury sh.H) the onsidsrlid pai4 including ary otriblhble ilcEmenr,l msb, is denuftd fron eqDity itdibutabl. 10 lh. Coup\ equiry holdm util the shfts re cm€lled, Eissued d dbDos.d ol WheF suh si@s se subsequendy $ld ot reissu.d. my coNidmlim rcceiv.d, n l of oy diedy afribuhble incm66l tusolim 0615 md the rehred rd efaeb is iDclud€d in equity.

dlircup

emirgs repreDt lFDuled emin$ of rhe dritiB rhin rh. Goup le$ dividmds declftd sd wirh mnsidmrion of my chdgls in &counlirg tolicie fld etu applied fr@tivelr. Ilt *Lined emin3s oflhc Ctroup od ib subsidieis ft ilailabl. fr divid.nds orly trpon approval md d€ldion of@h of dFn r*potv. BOD. ReLined

Eouilv Equiry

R6de

6ee€ i made np ofeguig tuscrions orber lhd .quiq conlribulions lds ftsulthr ftoh inc@. or dectle of oDe6hiD sirhour los ofc@tol.

such as gnin

or

til[ruiltmilil|lt

PEpe!!s&r&!4qsta!!l!!sq!p!&!, Deposits for is

lrsbd

a. fie b.

c. d.

futur sbck subscrittions is @odei b$ed on tne Eieemrble mount Mei*n dd 1i$iliti6 unles rhe follNing itens *eft nd fd dNincdion 6 part of

under

unissued

i.dt€r.d ir

authdiad c.bilal sloc* oi

rhe

6rr.rlj

tne

dlit

is insnfficienr ro cowr rhe mounl of shdes

There is BOD alploval on lhe prcpos.d hcMe in audoriad detosi. w6 Fc.ivcd by tho Gro!p); fieE is slmkhold6 approval ofsaid pmpded increasq md The application for rhe appnval of rhc popos.d incE6e hs

spjtal $ock (for rhich

bd

dd Ex.hd$ Comissior

6le! virh rhe

a

S€uitis

(SEC),

Epregr subscndon loynenls wiled frcm pGpedive in*sbd for th. Gouph commm shd6 wtich re yd b be issued npon apFoval by !h. SEC ollhe orplication for incme in lle aurhdiz.d opilal s1@*. Ilis will b. eolssifiei 10 'Capibl sd*' upon iss@ce Deposib

crmt h

to compre tne

e

mouna

doul d

neaurtd a1 tr. for rhc omnl od prior psiods hvs used or plid b the drrim adho i.s. Th. la: 016 md (he enaded d rcp.nlng da&. de rhose rhar docled d substurively

ud liabiliri.s

expe.ied 10 'ss b€ @ovcei iFn

e

is prclided sing tne &bnce sh*r liability merhod d all rmponry difftr€s d tie Eponing dare btuen rhe h bes of6s.ll od liobililres od tnen c'rrying adouns for fi tucial €podhA purtoses.

Deid.d tq

bx [ibilili.s r. recogriad for a]l tuahle tmpoary difid.€ *epr ro rhe extot .h.1 ihe dcfcftd d lhhiliris {ise 6on .h.: a) inilitl @grition ofSood*ill; or b) th. inilt.l Ecognirion ofil aet d liabilily in a lrs.olion wnich is not i) i bDsin.s conbitalioni Dd ii) 11th. lim. of dE trsacrioq rfred neirbd .eoutit8 pDfit nor bxble pmfit oi l6s.

DeferEn

d ds.ts e reooFizen for all deducrible bponry difatdoes virh (trin qeprions, md car.yfNdd bdcfils of uuscd tq cEdib 6om *€$ mininum cotpomre opeding Io$ .itrydt (NOLCO), b rhe d!.n! incon k 0vlCIT) ov.r RCIT od Dus.d 'd .hot i is probable th,r sufficiot tuble incon uil be r€ilable agaiGr which lhe d.drclible tempoBry difrftmes md cdryfodad b€ncfils of unused d mdib ftom .xe$ MCIT md uusei NOLO cd b. ulilizcd, Defsren h dsds, how.vs, e nol raog'ized *hd it dis frcm dF !) inilial of m dset d liability in a Fansaotion rhd is ndt , blsinc$ 'wglition oombimtionr md b) d rhe tihe ofllmadion, afierls reirher rhe acounling in@me nor tuble Defered

nie cr.yin8 dount

of&f.ftd

m Fviwed

eeh ietorting drle 3nd Enuced ro lhe will b€ alailable lo alov all or pd ofde defered b ssd b be utilizd Ur@gnizn deferol d ro rhe *knt I'id it h6 beoome p@babl€ rbd futuic each reFonile dote, sd @ '@3rizd t&\oble in@me will aUN rhe defftd d asets b b€ recowred T[e Qdup do.s not 'wgni4 defmd d Nets dd d.f.dti ts liobilnis thd will Fe6. dltit8 the incoDe d holid.y t&\ 6setl

exienl lhat i1 h no loneer pDbable that sutrcimi

hble

at

in@mc

tf,tlr]|iltmil!fl

Defeftd d isls od liabihies ft m*ured at the b Ere rhrt e applicable to the p€.iod sh.n lhe dset is raliad oi lh. liabilily is $tded. based on d r es (dd d lavs) thal hav. bem

seten e suhbrively emr.d 6 ofthe Eponing

dare.

Deleftd d relaling b nds Hogriad oulsidc p@ft or Ios G eognizn oubide profi d los.

Defftd d nem ft Mognidd in eftldi@ b rhe 0nddlying ddsaclid ei.lis in }tfit or lo$ or olhd compreheNirc in@mc.

Defftd t x dsets dd defftd l.{ liabiliie @ oficuenr

lax sseb orainst

entiq md the sme

lMion

c!renl

ld

liabililies

aurhority

olTs.l if a legauy

-d

lhe

enldsbL

defeftd hes relde

riCl* exnts io s1 to the

rme tuble

PeNton Cosl

'lte nd defned benelit liahility d asd is rhe a$Eg& oflh. pl.st vrluc oftE d.tncd boelii obliedon d th. .nd oflhc E orti,g Deriod Fducad by lhe fair lalw of plm ?sls (ir my). adjunen for my etrd of limiiins r mt ddDed bendn 6sc1b lh.6sd eilin8. Th. set ceili'g is rhe p@nl value of my Mnmic bd.fB availoble in lhe fom of etunds toD rhe plu or rcduclions ir tunle ontibnlioG io tne plu.

The con of proliding b.n.fiB und& lh. derined b€Deft pmjeftd un cEnit merhod.

Defined benefil rcsls

empise

plss

is

acbeially dftmined $ing lh.

tne following:

. Ner incre$ o. l]le n.1 &fm.d b.n fit liabiliry or . RmsuMeft of nd defred b*fit lhbilitv or'sr ds.l whioh irolude .@rt seeice ccb, pd sdic. @sL md 8.ins ot lo$es d no' mutine $dlmetu ffi recoglibd a e!pm? in ib. cdsolidftd shrnert of cmpEbtuiv. income. Pd sdic. osts remgnizcd when pl$ mendnei or cunaihst @w. moub re t alt Jden p€riodicdlly bJ deFndmr qulificd & iDnes

Sfli* 6ts

Th*

e

Not inieresl on tie nd defred beneft liabiliB or 6set k rh. chdec du tg do p€riod in rhe nei detned b€.efi. lirbiliry d as.r lh!! &ises frcD tie Fssage af tine lhich is ddmin d by ryplying th. dismut 6te b6ei o gdenmot bmds b the n.t d.lo.! tnefit lilbilig or 6sd zd 6 *p€ae d inen. in lhe Nd incE on the nd defDed benent liability d set is 'wg onsolidried s6hd. of ompr.hersiv. in6ne.

Rem€trmmenb conprising &tueid gdns ud lo$es, rtu on plfl 614 dd dy ch{ge in oflhe 6s ceilins (dcluding n€l inieHt on defned b.n ft liabiliq) @ Eo3lized immedialcly ir ocl in rhe period i' which they dise. Rdesremenrl m nor eLsili.d io @Dsolidared tunent of{dpi.bensiv. insne in subsequdt peiods. rhe efTe.!

Plo 6seb @ 6sd

ft

r lons:I€m esployee bdeil fu.d or qurUrying iNu@ce rhey b. paid direorly ro When m lMkd pi€ lh. Crolp. fitu c8h flors valm b esriD&d by disoutDg exp-red is available, dE fiir ofplan 'l* plm 6sets md llt. n8tui9 or usina ! discoukal. lhat rcllers bodr dE risk as@iatd *i!\ lhe cxpeolod disporol d,e& ofrhose Ns* (o.. iflhe! h8ve no manfty, rhe exp€dd pdiod unlil the serdenmt ofthe Elaed obltrtioB). rlhc frn vatu ofrhe pld asel! iJ highet thd Oie pEsenr value ofrhe defined bd.tu obligotjon, lhe mescmmr of th. Buling defirei b€ne6r as.t is thar

held by

ssd re nd avaihble b the creditG ofde G@up nor cd Fair Elu ofplo 6Els is haen on narkd prie infom.lion.

policies. Plan

ntfitiltfl[I|iln

limiien b lhe pltsmr ulue ofecdnomic b.defiB .vailable in rhe fom ofrfunds f.om rh. plon ot rducrions in ftre sntibulions 10 the plu The Grcupk .ight ro be Finbm.d of sft. or oll ofrhe expmditu requned to s.tlle a d.fined benen. obl*Etion is eoeriad 6 a s.pmre dsd ar f.n val@ uhd md only *h.n

Einbudemert is viturlly Cosls

ud

4din.

Exmnses

Oil s.ducrion opdaline .xpdses e c6t incutrn to pI dle and sell crudc oil ilvotory, incl0di4 trmsportatio, slorage md loadin!, mda o.h.6

Ccb of electiciry sil* pen in 10 dire.t oost in geneclinE el*ticity poaer whioh inolu{tes opmlirg nd einldme c6b (o&\0 fd poNr plart sd fluid collection md ftinjeclion systen OCRS) depEcialim dd oths cosls diredy aits'bured to ploducin8 elelriciq.

CdeBl md d,ainitutue exposes

ft

remgnian

*pen*

a incwd

constiot.

.ss

ofadminisbriry

rhe

busin.$.

Costs

od

Assl R.liEmdt Obljsalim rARO\ Pwisim fd sd retnd.nl obliealion G ruogniEd rhen lhe rccoCnjtion cirsia fo. a sovidon e nd. Tic Goup rMsnia the pfts.nl vtluc olths m$ s ARO seb (itclud.d undd .Pop.fr), plant r.d eluipnent sd aRO liabilit. ) For dE Ensable eners/, lhe Group deprdhbs ARO 6s6 .n t 3bigillinc basis over die esimaLd stul life (EUL) ofthe Flaed ase. oi rh. sewiee @ntad rem, whichdet h shorter, or wiftn oIT B a Esula of inpoimenl of$e Elden asd.

For dE oil op€tuion, rhe GbuD d.trccjoles ARO Tho Group

monia

expse ov4lh.

The Gbnp

ba*d

on unil

ARO liabiliry uin8 $e effeorive inleBr nethod

sr&

Egulirly

asd

contur

6s*s

h.

the prcvGion for ARO

dd

olpodwlron nerhod

dd aognires rccdion

adjNts ih. re1.&d

liabiliq

is. oi @nloint a le6e, is b€sed on th. substcnce oI dtuimlid of Nhether o dd rcquires m sssnent of wh.rha the tulillnenr of the lh. .ltrgemdi ar i'ceprio {tab,'lmsmed or ds.ll, md tl. ruaeddl onvets a Mmgmenr is depdddl on $e ue of s specific 'g ighr lo w ihe Net. A MssDenr is mdc afcr ineplion of tne lse onry if de (l) orthe The

b.

rhse h r chsge in contlotrd rels. drher rhm. rendd or *6ion of th. mgems! a EEwal option is exsised o m .ilension grmted. ules thd tem ofdre rm4al oi exteNidn rd initally includei in lhe l6e tedl lha is o chsge in rhe ddmimtion oi whelhd tulfilLnenr is dep.nddt on o spr.ified as.q

c.

rhw

a.

is a

subsdri.l chdgc

lo tbe

ssd.

ld. reobti.g sl'all colmd€ or c.6e frcn rhe dab Bhen thc grc rise ro the resse$ddt for ey ofrhe s€ndid abov., ed a1lhe chmge in cftumdces d e of r.nqal or dmion pei.d fd lh. 3@nd smeio Wl*

a

rsse$ment

is

nade,

tilril|lilliltfil

rhe risr, dd b.n.lit of oundhip ofde 6sd palmdls !. Fogrizd 6 d Expose in th. cldsifiod 6 opsding le,s. Op.hting lese coGolidztd sbhml of onpretosive incone on a tui8lt-line bais oler lhe lese ren Mininm le6e patbenls se on r shighlline b6is wiiL rhe vrirble re is on $. ems oflhe le6ed contact. sogDizd 6 r expse baed'@g'iz€d

l-#es

where the

le$q r.hiN slbslonthlt ,ll

Re3ach &d Dcvelopmflr cosb R.s@n msb ee dp€ns.d 6 incurd. Ddelopmert exp€ndirr* on m individull pljed rmsnizd s d inhsibL ssel wnen fie Group d ddoNtate oll oftle followinSl

r

rhe technical

f*ibility

of cmtleting dE i'tergible

6sd

so ihat

il

vill

b€

aloilable for

re

m

w

or

. ib inldtion to complere sd ib abilit ro Be q eu th. sseq r i@ rhe 6d will genebte tutui. rmronic benefibi I rhe availabil,rt of re$!rces 10 complete the 6sdi dd r rhe ability 10 ne6uc reliably rhe exp€ndi@ dunng ddelopment, Ltft$ dd

orhd Fl.&d finocing chdses on bo@w.d fi[ds used ro finme the acqubni@ ond conshcrion ofa quali8ing ssei (ircludcd uder pop€ny, plur dd equipmdt) e apitali@d ro rhe apEopriaE as.l @outs. Capilaliztion ofb.tu*ing osts commdcas when me .xpddituts sd borc*bs @sb e b€ine incur.! duing the @nstudion sd rebi.d &tivilies rccesry rd prepire th. 4srt for its inlended use E in pbgt$. Ii is sutended duing *enden perio& in whioh &live d*elopment is int pred dd cN when sDbshriauy au rh. tcrivitig ro prep@ rh. 4s.t for its inlendod se F @nple€. fie €Fiialiario is b6ed on rhe 'eces'y retlted awrae. bmwins e6l.

The

bono*i'8 6srs €pi6liz.d 6

shigbllin Inte$

mdnod ovq llle

expede on

los

psrt

olpoFeny, plmr dd equipn tt

enined uetul Uve

tud borowin8s is

of th.

ltagnirn

scls.

e

@ofrized usins the

Dsi4 lh. EIR mdnod ovs rhe bm of the

FoEio ctrdcv-dmoniroted Ttmdioc md Tldlatid 'tlc consolidd€d 6mcial sbbedts d. ,r6.rted in US OoUm, which tu th. Ctoup s rnncrion'i dd pEsdr.1ion c!renoy. leh entiq in lhe G@up ddmin€ ils ou l ctionil cudcy sd nm inclu&d in the FDsoli&red finucial s@nenll ofceh erti!, m 6*uftd using thtl funolio@l cuscy. Tdsicli@ in fGie! cuftn is e iniriiuy @tded in th. fuclional crency Ere d the d.@ oflh. rssoclion. Monebry asers ad liabilities deDninftd in foEign cmnciB e rcl@slabd ar rhe firdionil crency olosiry rde d rhe reponid8 dae.

All dilTdn6 e ulen 10 lllc @nsolidared senml of compEhe6ive itu@e sirh th. dc.Dtion of difresces on foEkn cufficy borowinSs th.r pbvide, ifdy, a hcdge agpn$ a nd i,v6hent in ! foEisn entiq. m* N llten djEtt b eqliq undl dispNl ofrhe nd invetn4! ar vhich line ln.y @ |Qsli-d in the onsolidcled sbrment of€mprchdsile ircme, Non-mon€bry itm rhar e mduEd in tems of hiJbncd si it foreig' c'mnc) ft tmslded using rh. exchsg. ral6 6 ar rhe dars of initial tMlions, Non mdnebry ilms mdDred ar ion Ehc in a foEis, cftncy d. tslalei 6ing the *hm8t ales ot thc dare whd the fair valE *s dtuin d.

ilmilurmru|[l

cmncy oftbc Coup's immediaie subsididy, P.lrcCrced sd ils subsidioi6, nmely MGI 4d ?.lrosois, G lhe Philippine leso. As at repoding dde, rhe dset dd liabilitits ofrhese subsidi'ies G tmslikd i o the prese alion c@cy of rhe Gioup (the Us Dolltrt ar lne exchmse db al t]l. rctoning d,rc md the ansolid.t d ststemonr ofamprehmsiv. incmc a4ouns ft tdsloled ot rcishred Ne6g. exchuSe mles for the )€d. ne ex.hmge ditr Mcas dsing on rhe tuldion e 6kd di@dy to "Cumularive teslatiot adjutnenf'ecomr in rhe equig s€rion of rh. @Mlidlied lhroenr of lidchl posiio Upo' disposrl ofa subsillidy, th. defer€d cunuhrive b$sldion adjuslsdr mout Ecosniz.d in equiq rchting lo o'd pdicule subsidiary is rccoelizd in the acolidted sbLmcnt of mDpEhssive incde Tho funciiorul

EeirA n-Nl

Pe Sbde Bsic eminSs (lst p€r shs m mmptcd on th. b6is ofrhe weighred arsage nunbd of shes outslodins dwins rhe ,€a lnd givirg rddct e efiecl lot dy s1o* dividends declftd Dilu&! @inss ps sb* e onputed on the b6is ofrhe r.iShLd .vdaCe nmbtr ofshfts otrtuding duing !h. )cd plus lhe weishred ivehge dmber ofordimry shffi tha. qould bc issued on de convssion ofau the dilulile potntial odin&y shes inb ddindT si'G

Obmlha S.menl 'nE cmupt opsatins businsd N orgmizd md m.g!d s.taL&ly !@diry ro rhe mture oft\e pbducb 4d swi6 prolide4 wirh eich s.gn.nl FpEsenring a shbgic busitss unil $ot off6 difleE.l Drcdud md swices od smes diffmt ndkell. Iitochl i'fomtion on bGines sgDenc h prMted in Nob 23 ro rhe consolidded fitucid sbbmenb Provisios d€ r@edzd when rhe Goup hs c pEsenr ohligrtion (leeal ot cotsbdivO 6 r Esult of a pan ernr, it is lobable lh{ d oudlor ofjsu6 embodying eononic bdeliB wiu be requied lo solde rhe obligation dd a ieliabL esdoe cm be nrd. of rb. mout ofrhe oblisarim. If the eIfer of tn.1in. lalu€ of money is n&iiol, povisio6 F deEmin.d by discoutirs lh. dpe.d tuft cah flows 11 r tre-t&r rde rh.t refl4b cllMt nekcl 6se$ne.a ofrhe dme valDe ofnoney o4 where 4propi.te $. riskr speciic to rhe liabili9 Whd di$ounting is ued, de ircse in rhe provisiot due b rhe p6saS! oftin. is rooe!@d 6 m irtrest qpense. Provisions d. revised d each repodi4 dai. dd adjsred to renet $e Elenb Alter ihe Rmnin! leriod Pcr yetu{d ev.nb $ot provide ddilion.l inlomation abour rhe Grcupt silu.iion d lhe rponirg date (adjNrins wenb) e r.lleolod ir th€ fDaciil 3bLndis, iruy Pon vw_end evob rhat ft nol adjudirg {otl m dirlded in rhe notes io finmcial sbrddL vhen

5. Sig.ificr Accoudi4 Judane!!, f,stimrld dd

A$umptro'3

linscial sbhenb in mnpljsc with PFRS rcquires lhe judeDents, estDfts md asumplions tnd 8ffecr rhe ftton d moub ofas6, liabilitid, ircom€ ud exrses dd disclosw of onlingen. as.ts dd oortingsi litbilili.s.

Futu eveft my occu shiob will cse rhe asMplioN ued in 4 ar rhe .stmr6 ro judenent, reflded in lhe srinares dd dsuaptions ofsy chdg! in chmg. nr etrecrs conelidded firdcial 3brd.nts, 6 dey t€cone resntbly d.ffiinable The prcp@tion ofrhe coBolid.ted

Cmup ro

nik

mi

n

|miltr[ilmm$il

-25

elind.s dd ssuptions @ cortinually evalur€d dd d beed on historicsl dt€liooeDdorlErfacrc,includingexpedionsof futuE.v.nblh r.b.lidedlobe Easonable under .he circmsianB. Judgnents,

pocs

ofaptlying tie Goupt r*outins policies, ndagenent ha nNde .h. lollowing apd ftoD lnce involving edibdioni Bhich ha rh. nasr sigrificsl cf{t an the mouna rec4riud in lhc cdsolidlted nmcial sbrment: In lhe

judgDenrs,

Deftminotion ol Fwtional

'ne mritid rilhin

ctu r

ddmine rhe firdiodl cDftncy b.sed on .comic subslance of mdedyirg circllmtuG Elevdt b @h htily virhin tne Croup. Tho P&€rt Compry\ tunctioml cftrcy is lhe US Dollr. nre tu Ftional cmmcy of PtuGrm dd MGI is rhe the Group

A3of Deccnb.r31,2016dd2015,rheG p\cunulati*tusldiondjustndtmountedlo t5.,10 eillionrd $2.55 nillion, esp*rively.

In?ainmt ud vnk-ofofDefenz.r at E plotuimc64 Tte Cmup ss*s inpaimcnl d dofd.d oil dploErion c6b whs fads dd circlNlanc.s sugget thrl lh. atrying oounr of the :st 6ay er@ed ill rMvdabL doul, u'til rhe GmuP h6 su,Iicieftdabtoddenine Gchnicalf.aibi ry md @mmcrcial viabiliry, defered oil *plomtion Gts ne.d not b. asessed for impaimenr. ftquie u inpainenr ?sssnert as sd ford in Etaldion aIMiMol R.lowd t.6 tuttoss

Fad md dddsdccs

lhal Nould

PFRS 6, F]+brution

ann

lor

t fie period for wnich rhe Grcup ha $e +!t b txploE in $e sp{ilio rs hs *pired or vill dpire in the nea fubre, md is not exp€ded io b€ Enewedl . Subshliv. erpodinrc on turlher explontion for md evallaiion ofnin ial Esowes in d'e sp€ifio da is neirhs hudgered nor tlmedi . ExploErion for md .lalu.tion of mineBl HoUffi in rhe specific aM ha!. noi Ld 10 lhc '

discov.ry ofconnerially viabL qMtiris of ninsal isu@s dd tlrc enlity h6 decided to dis@ntinue such adiviri6 in the speiic ar€4 sd is lik.ly ro Sulficient d& ens b indiel. dqq cllnoDsli a develoDhdr in lhe sp€cif1c proced, the .&ryirg mod ofrh€ explobtion dd .voludion 6set is ulikely to be l€oveEn in tuU ftod sucNin d{elopnent or hy s.le.

e.

DoE approvd rh. qirhdmwol ofth. sc 47 (of6hoE Mindod ed Pdry) .ii.r th. cNnim agE.d to rlinquish the sc 47 bl@L This decision v6 b€sed on lhe dkring hid Selogical rist of rhe cllllqr psspe.t dd lcrd irvdbry, hol oI inteF* nw f'min*, dd givo the DOE rquiMen. of drilling ore well for SuhPhse 3. Conseqtrmlly,lh.6toup wDteofftne defeftd dpl@nd cos6 p€rtainins b tnis sfli4 cond&l douliry 10 $12,980 (se rn 20 r 6, rhe

As of DeeDbd 3l, 2016 dd 2015, lhe ouryi'g value of defmd oil exploialion @ss b $10.13 Billion ed$15.92 Dillion, Bpe.ilelyO.lor.ll)

moun&d

IilEflilttililill

c tas s dic d io, oI ra k I an ds enen t Judsnenr is requied b decmine rhrn th. Grcup hs joirt @nlrol oler o mgemeng *hich requhs m sssndt ollhe El.!ilt acliviries $d *to the deisioN in relation to rho$ rdiviries F{uiE lllmiDous c{rent. Judgndr is iequired lo classiry a joinl megenenl.

ClaJsifying .he equires lh. Coup 10 6se$ dEn righri md ohltarions &isins fton 'lm8.mdt Sp*ifically. rhe Gmup mnsid*: the altrsendt. . The shctde ofrhe joinr dd8lndr - sh.rher il is sfuoturcd thowh a spmb lehicle . \llhd the @sement is stuctftd thmusi a sepdare *hicle, rhe G6up also onsideN rhe riEi s dd obligarim &isirg fmnl . lte legd fom of the sepamle vehicle . Thc tems of ine mnhdal mmEEimr . Orher facb dd cftmst n€- snsid.rcd or a c6e bv @ b6is

'nis6se$mc onen EquiH sisnifiorjndgndt. A difi.rcnlsnclusion oboul botb joinl mnbol dd wherhd $c Mdgddt i, a joinl opsalio or ! joinr lentu, nay mrdially inpacl

crcu!\ inv*tlb.nl in ! joint vtu (Ne 12) is tuctud in a s.pan& incoaoFhd ent,ry. 'ne Ooup ud lle pdis ro the rgenml only have fi. neh b lhe n l 6sell ofrhe joinr w.1e 6mud, de etu of rhe mlr..turl Mogoenl. Accordiqly, rhe joii almgdent is clssifred 'Irie

Copitalidrh

ot Derekprent

cotu

ms ft BpibUrd

in esid6c. wilh lhe !@unriry policy discN.n in Noc 4. oi csls G baen o' Msemenas judgnen. that dhnoloBicol ud Mmnic feGibilir_v is con6med, usurlly sho r prcducl d*elopmdt prcjed ha Hched a defo.d mileddne edding ro s eslablisieli p@jecr nmagment Dodel If rh. requiremdls for epiloljation ofdevelopmmi 6ts e not me! slch csls rc expi'sed.

Dwelopmenr

rilial €pialiation

Xsinde dd Asumorio's

Esmprions con.dinA .h. tutm and olher key $mes of srimrid uc.it inq ar lhe d& rhai h.vo a signifi@t rk* of caGins a turerial adjusnrenl 10 dre carrying mdi6 ofNell sd liabilnies vidin rhe ne{ nmcial yeu @ discuseJ beld.

Tle

key

reponing

Btindihe lhpoimdt The Goup

vherhs

d

oJ

PRi,ottz'

ib rc*iv.bles to alss impaimenl ar led. d d snu.l b6is. In deteminins inllimenl lo$ should be lffiden in the eMlid.l.d salmells of incone, rhe

Elids

judsnqa a b whetha dE. is uy obsedable dab indiBring rhat therc is t in rhc .stin.tei tul'E s,sh nNs fmn ia r€ivabl.s Tnk widoG jDolud6 dik inforailion ihoul thc fsm.iol .mdihon md ninnicrl pdtnenls oflhc nomally c@np m,les

nedmble

dec6.

l, 2016 md 2015, the c(rying vdu. of reoeivablA mour.d b $7.36 million million, Bpaiively. Accmulated impeiDenl los$ dour.d 1o $0.05 nillion Dd $0.05 dillim 6 ol DeMbor I I, 2016 sd 2015 (Note 3). No inp.im.nl 10$6 seF t@sniad As oi De@mber I

sd ir.59

Tic Goup cmis etuin deivativ. flmcirl iNlrMenll d fdr vduq *hich reqlns e of rccodtinS dlimlte ddjudgDelrl. Fan vdue ddemindim for d\tivaltues @ &s€d genmlly on curdt fword excimse rabs fd @ntu13 silh sinnr rolutig Profils. If P es e not Eadjly dd€miuble or if liqlid.tin! lho pdilios is E6onably eip€ld b rtret m{rkd pn€s,

lEil[|llnil$il

f.ir value is b,s€d or eirher inren l vllution nodels or mmsemst s 6rimb ofmout dur 6uld be realiDd under cDftnt adket cmdi.ions, 6smin3 d oderly liqunbdon over !

D.Mb6

31, 2016 dd 2015, lhe Coup hd a d.rilotile liability mouling lo nil lnd nillion, HF.iively $10.46 Gee Nore 19) Gin or derivdive moutin3 to $10.76 nillion md los on ddivative dounting ro $0.?3 million were ecogri-d in rhc s@n6. ofcmprehetuive in6ne in 2016 $d 2015, B!€.tively.

As of

Estituiry G.ot^elrnn FieLl Revtu* MGI p€rfomed volmdic Esede estimtion dd rmencd modeling ro ddmine dF r.ses ofde Miibd&a aeorhenal n.ld. As ! i.quiid.nl fd projet fiMciu, MGI .nC!g.d ot il5 oM @si thc New zerlmd tm Sincldr Knishr Mez (Sr,M) in 201 I ro unded:te . @mprehcnsive rhid parry r*h'icil Biew of the Mdbae geothml licld. nis ftvi{ includ.d dalysis of ihc 6se$md1 F fomed in-hoe by MGI 6 wll s a sepanc ud nmsicd nodelin! ofrhe Mribflm ftsde.

SKM 6ede estinalion 'aurc.

As lh. eonmic ssmtnms us.i nry chmge dd 6 addirioml sEolosiol infomdion is obtained duinA the opentioD of r 6eld, srituie of lgvmble rcs.de n.y ohdg.. Suh

chdgls my iapact the Cbupt €porkd iin{cial positio' ud Esulb, Nnich include: r lne carrying r:lue of*pldarion md dilurid ds.ti dd p6p.dy, plel ud equipmenrr . P.ovisim fu decombsioning n.y chdg. - rhere oh$ges to lt'c Esfle enimares d|.r .xpeclalioN aboul when suolr aciivnies will ccu Dd rhe assiatd es of tl*

t

Tho recoCnition dd elryirg !!lue ofdefeftd h ds* my chdgp dle b chm8.s in thejDdgDenb Egarding the exisbn€ dfsuch as.b dd in 61imo1es oftle lik€ly

Eeitui'1s Pwd O Resma Pmkd oil r*edes e slimd.s oft. mou$ ol oi1 rhar m b. economiciuy rd legruy tud 6on the Gmupt oil pdFnie. Ill. Gtuup cstiml€ ilr @mmrcid Bers bas€d on tbe bchnical amplioN dd is calculoled in aeordoF wid, ,€epred volundic mcrhods, sp{iiically lhe pohabilidc nethod ofsrituiidn. Prcblbilislic nethod ls IoM BEolosical. main@ring dd eonmic dot to gen@10 a of estiDaB md then as*i&d prcbabililies.

'5gp The Goup ase$6 ils erimite ofpro!.n m.de on d unul b6is. All porcd Bd. *tn&s de subj.ci io Evision, .iiher upwd or domward, baed on ne* inromdion, slch 6 fiom developm€nr drilling md pmdudion adivitis d frcm chdgls in Mnoni. fooloE, including prcdut pri€, colraol &ms or devclopm€nr pl,ns. E(inat6 ofceds for unddelop.n or panidly d.lelo?en fields re subjd ro gE br mtuinty ovt oEn tutuF life fiu eninales ofEseees for fields thd e subshlially dweloped ud depled.

For the penod end€d o$€mb€r 31, 2016 dEE l6wes for the Grbon 'tavelble us.d 10 cmnule thc dmLlion .a& uscd.

s.6. It

h6 be.n no stnifical chdge in Blirored sm. drimled mdnine Ecovdble Fsere

as

tuNtrililililnil

Lia

of P..p.nr, Pltut h.l EquipMl urul b6n d6 est Dded ueful ltues ofprcpsry, pl'nt Md equipnenl baed on exp€cred 6sd dilizarid a dchd.d d bBid* pla dd sr thol .lso considc!

'8i.s expatcd futoR h hrologMl derclopmdts ,nd mdle beh,vior

E 6tumq Usfn 'Iho 6rcup

@ies

on m

Ir is posible lhar fltie resulb ofopmrions could b. ml.rially offeclcd by ohog6 in theso .slimo&s brcu3h about by ohdg€ in lhc fa.r6 nentioftd. a rcdudion in rne Bdnared usetul liv€s of plopflt plart md equipndt rould in.@ the rccoided depl.lioA &Frccidion dd dortiz3tion dp.re md der@e

D€€iber 3l. 2016 dd 2015, rhe Coup\ d.p@icble pop€fry, plmt ed equipnenr domlod 10 $130.77 million sd t80.71 nillion, rcsp€.tiwt (Nore l0).

As of

Eslituihg lk?aitu nt af N.nJirMidl}RB (..9., prcp.ny, plm! dd equipn.n!

Tie C@up ssesss impliment on ib nonfmcial 'sb{ols or ohmges i' drcDtuG indicare inv*tndt pr.pdties dd inbgibl. ss.ll) wh.n.ver b. Ecowmble. tnal the ca.ryine mourt of o asd may 'or For pbp€dy, pldl dd equipnenl md investndl toFrlies, r impaimot los h ftco8ni*d vhenevs rhe carryins mour of d 6sd meeds ib Fcovsabl. mout n. twvcBble monnt is lhe highs of d dsett n l selling pric sd valuc in E. Tie nd sellins pi€ is the lolth tu&tion vhiL vrlu. ir @ is rhe lmolnt olnrinrble fiom tl'e el€ of m 6sd in r 'nkL diso ircm lhc conrinni'g use ofe sset plest value ofeninitd futu 6h nos! dpec&d

ed

from ils dirD6ol

ot

l&

end of ils uEfUl

life.

tuft

In d.tcmining th. pr6dt val@ otdrirotn mntinued ot prcpedy, fld e{uipbed

nak

e

.s1im0Ls

cah flovs exD.@d lo b. gddaiod IDm rhe

dd iN.shdt prcp€nis, rie Grcnp is r{uiEd dd dd sMolioN dFl oo narshlh aff*r rhe coBolidaGd fmmcbl slalments,

ro

&tivilie in tle wesl Limprm Oilfield (WLO) remined on sNp€sior mode for rhe ld sevoh (l?) yem. Ihe invdnn nt in \rrLO incildcd in welh, Platfdm and Oln€r F&ilitiet' .MUt undd prcprq, plart and equipmmt in the €n$lid&d sllremdis of lnocial Dositio' moutei ro $6.66 nillion a of Dembe 31, 2016 sd 2015.

Msagenot ssssed rhd rhe siid invehent is fully ecolenbl. 6 SC l4{ hd nor }d expiPd, wi.h &. l5-y* .xLnsior oi tE SC s rppored by rhe D€ptumt of Eneq/ (DOE), frcm D*rDb{ I3, 2010 to D*nbs 13, 2025 od in lhc vi.{ oflhe qisriry Edselopnenr erivitics led by Pi&in Ptuldn Ltd. (tilkin) of$. Urirci SLB ofAnsica. B6ed on oil pnd disljtg al Da€Dber I I, 2016, the pri€s have nor sme b€16* rhe bre*evd lcvcl lo! tne Conpoy in $ fs 6 ib WLO invehd is mn@ded. Th!s, no ihpaimenl {6 @og'ired for 2016 dd 2015.

A3

di$n*.n

On

D@b€r I l,

pedining oil the

pric

id

ro de

Nole

10,

poductian

2016, tne CoDpmy H.ded d inpaimdt lo$ mouliry to 13.33 million in Gabon, Africo Eed for oil podndion. Irie Gbup belid.s lhal the low

6s

l is u indi€ro. d\at the asets inpaimenl reding Gee Nore I0).

in lhe globd m&k

Comprybp€ on

nthl b. inpoired ud tha ptmpkd

E|[r!ruIililt!

The Elabd

balrces ofrhe Goup's nonfimoirl 6els follow (Noks t 0, I3 dd I5): 2016

Pbp€ty dd equipnent IntuEible 6se$

Inv6bmr

2015

$133,&70,569

i140,724,197

3,017,0.19

pmpdies

31117

1,233,236

!1,1t1

Eiindks ,lsst Retimnt OblisdiN 'ne Goup hs ldios l*ol obligrion 10 dMmmission or dhmmll. it3 ssets ielal.d b lh. oil produdion, seothenal ers$l Fojed ud eld power prcjeot d th. e'd of e@n respdile

sflice cont&t. In ddmining .h. anount ofprovisim for reslomlim cos6, 4umplioN Md *lisates e rcquired in iclalim io lhc *p@Ld ccls 10 t6lm sjl6 sd infBstncbE when such

Eoeria

ditutl.

prenl value of rhe oblisarion ro dd pad of ur. bold* ofthc FLl.d prcperty, plst ud cquitmhl whioh arc being depNilred Dd mdd4d on r staidlline hais over rhe us.tul life ofrhe rehred 6sd (for the me$able end$/) dd baed on uil of prodldiod (for lhe oil obligarid exjs&. The Crcup

€pihlizs i\. pemt

v.lue of this co$

The FlaGd brlmces oflhe GrcuD's

rhe

6

s.r

r.tndenl obligdion follw:

Perolnsa/ - oil produclim MGI ' Geotbemal ene€/ pmjecr Pdosold - Sold Do{er pioi@.

s931r33

t35t,304

l4t,l93

Tle Gmup reviews de ca..ying moub ofdefftd d at coh Eponing drre sd Edu€s 'ss prob.bL tuft eble prc6t rill b. availtbl. them ro rhe *nt lhal n h no long.r lhat sudjcient p{n io !.11o* !U or ofde deferr€d d 6sd ro be urilidd. Ihe Crcup beli4.s thol it rill geneac sufa,cior fitu Mble piofit b alloq dl oflh. d.fdod ta\ 6sls ro b. utilizd As of D$ember I l, 2016 ud 2015, rhe Gbut did nol Fogniz defmd ta 6seb on cedin NOLCO dd MCrT 6 .h. GbDp b.li.ve lh.t ii noy not b. pobable thd sutrcidr bnu. inoone will be alailable i0 rhe lEd forcssbb ftbE asritui vhich lhe b bcr.rits cm be

6 Cabr.dCab EquiELrb 1016

Cahmhnd C6h in banl6 Clsh equivd.nts

l4,l?6

Sa,?45

4,521/5r 3;35;192

t4,7t0l2l

sl2,9t{533

$t:.516,605

r

7,82Lq03

*s. dt'

C.sh equi!.l.nb to nrde rd int.rcst o he prevailing banl deposit vrrying p.riods of up ro thEe months depdding od lhe inm.dia& sh requiEmmb of the Gbnp, dd em inLrcst alth. pEvailing snon'bm dep6i1

Cah in bdks

.m

ruMr$ilttililr[|

-l0The Grcup one

ys

Inl*{ $0.11

7

h6 no shdt-lem inveinmb virh periolis of md. thd dre noorhs bur lss tho 2016 &d DeMber I t, 20t 5.

6 ofDecember 3l,

inmDe e@ed on cash in

nilliondd $0.0?nillion

Flutrcirl

Ald

bdk dd shon,teo

in 2016, 2015

invesrnenb mounr.d b $0.15 mittion_

dd20t4, respedirely.

c. F ir vrt0.Thmugh Pmiir

orhs )016

.:015

15.4&7

12,ll3 fl56,211

$162,14s

N.l Srin on fai value chsgEs on finmcid 6sets 01 FVPL included in rh. dsolidared tudenlj orconpFhmiv. inone do0ncd rd $16,404, $1,192 r,l $26,123 in2016,2015 md 2014. idpcclively. D idmd inmme reiv.d ion cquity suriti.s dobred b $2,131, $1,704 md $2,059 ir 2016, 2015 ud 2014, Bprdively (Nore 25)

reed in,Trifi (FiT) revds fron Ele.l.iciq sales ro PHINMA

El*ticit

lesallowm(e

T6sco 1515,113

$ 1,726,10t

sales ro WESM

for

inprimdt

l6s

ft n.idy du€ t@ FiT srl6 lo Ndioral TrosDission CorpoEriot (Ttmco), sale of e,ectricily io PHINMA EMgr' Cdpoiarion dd cl)l1Miun opelfu lhese d. due rirhin one yed. Ille ca.fi'g valu6 6 ofDecemb€r 31,2016 ud 2015 apprcxiroL ihei The Group\ ftceivables

'n. Eeivable fro6 iltli{e FFesb

'dla6 he&ing &d collerible

useousd dd noninlasl on reldd pafry t rErctioD, rcfs lo Nole 26.

rode by the Gmup to Petollind. This is within one ya. For the relm dd cdditioa

abl. b.lor shos3 the dbcldw offtonciliarim of illowd@ fd impaimenr €eivables fro6 q coMrtiM opeBtor: Thc

h$* d 2015

Balre d beginnin8of)* Eflet of f@iFr cudcy tulation

B"i{e

ot erd

ofyetu

(3,0s0)

12.931)

$5395

|Lil|ntmm[|r

.lt

9.

Pnprid Elpenr6

rld Olh.r Cum.r A$ec s2,472;21 653,513

pftins ro rhe mour oftund r!!t lh. crolp is requiEd ro conply with Patndt Accou! (DSPA) dd Debr Seeice Rserve Accoul (DSM) oIMCI tud Perdsola, Esp4rirely. The 6bio&d c6h is $d to pay loi rhe fonhconins debt swice soheduled ir Apdl md Oclober ofde.y ye$ uril rhe lom is tully paid oft lhis ale includ.s uused ponion ofthe St@t Righls prcc..&, {hich qs h.ld undd *mw a@urt.

ResricLd csh minly the Debr

Sfli€

b snraenrr Den ir to advdces nade to ldious conbacroB for tn€ conshdion of such d rhe MGPP ud sold Pwer Poj@l (No1o l0). The dowdpilmdb vill be applied agaiNl fu@ billin$ h rhe come ofmstuction. Tne cuftnt ponions e esli@&d lo he applied lBrirst progrN billirgs wilhin d. fr@ rcFoniig dar€ dd m clEsified unds ''Pielaid expejs dd otber clllrmt 6sd '. Ihere Nft rc doNnpaymot lo otulrn)s that N '@ rlated p!ti6 a ofDedb€r 3 t, 2016 dd 2015, aD€dively.

Advmces

pow pldb

.xpM includc prep d itulfue sd pEpiid ftd. lrcp.id 1ax.s pei$ d.dibble rirhholdins h6 ad prior yedk bmm€ h PF .id

Olhs pdr.in

!o suppli6, crude oil

crnit.

invsto.y sd udram defed€n fi'rcing c6b.

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-34Pows Plart includes MGh gsrhend powr pldl which were completed in 2013 PtuSolar\ phtuvdlbic plant Bhich vd @Dplebd in Feb'nary 2016.

Tne CoGtuction

h posEs pslaiN

ro th.

in Alo .stimate md bsfes tum oonsideEd 6 non6h investing &rivilies.

chdg!

Depletion oi *ells,

coMlidaed

fncilnies is of contreh.nsiw tncome.

or

elsticiq

exps.

chdeed to

pd

pDti

or

ol otl produolion under @s of sales in rhe

los follows:

sar6 (Noc 2r)

95,231,3,9 2.795353

Cdral dd adminishlive spmses

2.

dd'Fn .xplodior ssts sd d{elop'ent ccr N

pldloBs md odfl

$Endr

Depldion dd depftciadon

C6l

coNhoiion ofMdbzfra Phae

rd

(Nore 24)

$2.?35,992

223,773

$r,25op?s

Iqc&!-A!9I!is!! baftls oi oil (MMBO), wirh dait oil prodrdion mgine 6on bmk oloil per dry (BOPD) 6om lou dil nelds (Ehe, Avoun4 lbouri $d Norrh Tcnibrla). T*o (2) AvoMa sells wd vor*ed over in Toial crude ptoduction in 2015 reached 5.15 frillion I l.?40 - 22.910

2016,

stabilizins overiu pmdudion

'nc Ooup r@gnizd inpaiment los on rh. liseis loc.&d i0 Olbon, Anim {hich m used in oil pmdErion. nE Ghup beli.ve lhat the low crude oil prices in rhe ddke! is u indicolor lhll th. Esct mighl b. impsir.d ud tnus p.onpcd lhe coup ro p.rfom impaine't rsring ofrh. ln ssBsing whethq

iDpdmdl

is requircd, lhe

srryrng value ofrhe asel or CCU is compaFd

moun. i! th. hiSlet ollllc ssol tCGUt feir ulue {irh ils eovdabL dout. Tr'e 'wvsdle .hr n!tur. olthc GBup's riivities, infomition ot th. les o6t !o sell ud rBlue in use Givd wilh poLntial pwh6e6 or fdr value of m aset is usully diilicult 10 oblain unls 'egotialim sinild tdsactions e laking plac. CoGequenrly, Nls indicoted olheeise, lhe 'wwmble mounl used in Bsssing n\€ inpaimd. lo$ is raho in nse. TIE Crcup [meGlly etinrLs in use 6ins ! dh6!nLd 6h llow nodel. 'alne The

tutF 6h l ows *eE

discoDncd

L $.ir

pFsent mlues

sing

a

pFh disunl

6L of

Group re@e.izd m nnpiidenl lo$ mourtirg lo $3.33 nillion. fie cdrying dounl of Gdbd ssel beforc lh. inprimenl G $15.35 niuion. AsofD.6btSl,20l6,liecarrying dount ofc$.n ssol ator t!. impaitu t dodts io $6.52 nillion.

IlE

fl|[rurumru[|

-15updde on Devclment

Etu Erp6io,

Prukd |EEP) ir 20t0,

lim b inc6e codc oil pr.ductid r. -25,000 - 30,000 od mdiniz the life ofrhe Ehc Mrin neld by l) opriDizing lhc ovailable i€owmble oil rsr$ in iie existirg D6d@ion nekb by installing No (2) otEhore pndErio pladms sd lh. subsequent &illing non dBe platfoms, bd 2) splorin3 for n.w p.toleuh plcped shich @ add lo crud. Dbductidn The EEP, ahich @nDenc€!

BOPD

Alid lhc Cabd Bbvelmenr appowd lhe plaifom cmhcrion for rhe EbDe md 50!tn*r Eba4{ori[ Tchibala (SE€NT) exp.Nim prcgM or Decmbd 27. 2012. de pldfom iopsidd ficihies design md hbric€iim rft undcibf,en in 201l, *hile the rusDon md instala.ion of po.ls w@ done in 201.1. After m l3,nonlh conshcrion peidd, rhe Erme ed SEENI tladoms dived in C$on o'1 *6 insr.lled in Sepbmb€r 2014, jl liDe Id lhc dritting ofrhe (3) the pmduction wells rd uother de (3) SEENT relh.

Atd

dlilling oD.rdioN d th. SEENT Plitfom. rhe Co6relldion Il rig noved 10 lh. Avounr Plrtfom in erly lmuary 2016 ro oordud wor*o!.r opmrim on so (2) Avoma wells *ith dcfetive submsible pmps. As a shGsic Dde to cop. *irh falling oit priB, th. snsdium decided ro @rolude lhc drilling togm at thft poinr The Coniellation II rig w6 demobilizcd

nek, i.ord.d gs and aata snknb in sone ofrhe welk. h.chdicd faihres dd tdsiei poduction doMliDes, de drlly produolid Mg.d fton I 1,740 22,910 BOPD 6npm'l b 2015'r m& of 13,730 - 22.140 BOPD. Nonerhel6s, the con$nim mMspd Mlve (12) linings for rhe y@ 2016, eulling in o net @d. dton of 602 MMBO. Crudeail mketpdcefordey6z0l6 dgen 6dn $27.30 t56.30psbzftl.

Despne n\e natural deplerion oflfie

,lrow E!.lreli.

Wo*n'e roinbin sble rydall prcdu.lior of ibo Etom. field, woi*ov.r opadi.ns sse c@deted on No (2) Avounr velb (T IBSM-2H fld EAVOM 2H) to repb€ n\en defedive subrGiblo pumF. ft6e workovm ained to brirg b.c* --4,200 BOPD lo rhe ovehll pbdn.tion of.he neld.

To

d

The wo*ovd op.ntions tn. ! IBSM-2H well. *hich shed o Novenbs 19, 2016, wm concluded on Decenbs 06, 2016 sio' @Dple&d DomiroloFty!. ESPS. Ilr. w.lt a6 hdded over lo Prcdrclid, dd inili.lly prod@d -1.500 bbls on Denbs 0?, 2016. Tne Hydraulic WorkMr Unit o:IWID skidded b EAVOM-2H m Deoenber 07, 2016, dd its wor*ov.r onpleed .n Dffib€r 2q 2016. The well v6 put on,line on D{.'r'bd 2l, 2016 !t a sbble ote

v6

Ea^ioD and kftstued Field DNloptu PLm reddy tss.d a !s Hydodbm br rhich intuduB neq fircal hs fd aI upsftm openro$ *hich irclud. incMed golehm.nr she ud oyaldei doruen cost recovcry, dd lhc inp.snid of 35% income d on proft oil. ln the lttr1 ofrhese .hdgEs, rhe Field Llle Gabon

h6 h.er @rductirg a cmprdhdsiv. @nonic modeling dd lahation of rhe Mdin Esenes, *hich will be subjd to tne Dryi5io6 otde nfl Glbon* Prcduction sheins cont&. (Psc) srth.

Elame consortiM

Ehe

ne* 6scrl EgiDe will bke efred one L\e td ofthe sploihior IioeM (Ebe) *pirs in (Aloma vill .xpire ir 2025, NbjL Eboui will .xpire in 2026). Afta llly 2021, lhe consoniM *ill appt td a new PSC Dersins lne dre (l) 6elds, whion rill alrady be b6ed on The

July 2021

liltruflll[!ill

-

16,

clmnr 6onomi. nod.ls d. beed on drilling oflnEe (3) wclls in lhe Etdne liense bdoE July202t, *idr tunier drilling toges ftdn 2021-2024. The cmsortiM h clllMdy ehining tno nost optinal drilliq prqlm to ensure ndinum rmvnble oil rhile eGurirg positive The

rtu

for

dr coFonim ncnb.^.

Sh'Io|| Wdt E plordio, Prcjtt 6WEP) In m etron to ndimi& lhe remaining i€verable oil resffs {ithb rle €tanc Mtuin con@sion, tie Ehe constrim *icked ofi.a Shauow Wd.r lxpldarion Progm in 201 I lo idenrii ptuleun prcteots for fu.!E ddllins in the shallowd p,rri oflic bl(*.

*s able ro Bap cmitt d lo drill

UsiDg lhe a!.ilabl. 3D seismic dab eguiEd iD 1997 od 201 I, the Consodiw our drillahle prGpets ir tn.* shallow dd by 2013, dre @@nium

yib

es,

prcsFcb, mely o!ok! md Dinb{ Ite ovoli pMpd v6 drillcd in Augsl 2013, Nhile Dinba wa d.iuen in FebnEry 2014. Boih s.lh h&l oil 3ho*s. bur *eE h4o shalloq

One challenae th.t ha ane np in rhe Grbon con€$ion is lh. .nsglnce ofIDS s6 iD 6!re prcducod oil offoli (4) welL. In July 2012, so (2) {ells h lhe Eboui net msifcs.a }l2S in rheir prDduction, whil€ No (2) velh in Etan field yield.d Ii2S in 2014. Sine $e Eboun field

rftsvred oil, rhe tudy ofd€ sw*te qg po6s rhich ains !o ad.4t$ lhe s66 nm tbese $u veus, wa tued in 2012. Ho*ever, due to lhe rodt deline in oil pices, rhe prcjd re put on hold. stiu

onLtiN subsLn.irl

Bree,fu|d Prcjds Urynde

In 2013, r Water Knock-Oui Slsh 16 itrrrlled in de Avoumr Pl.fom io oDtinia th. cdde going lo the Flooling PiodDcrid Sldagr dd Omoadins (FPSO) wsel.

etud

AsMl

FPSO ln@g/ity td inther

ndiniz de lorg-lm @biliry offt. disting FPSO,.he Petmlea Nae\N, d Topside Inle8rity Ase$mdr w6 joindy cnied oui in 2013 by Allied Maine Sflices sd BASS to identi6, atuile aclions to roinhir th. ves.l\ shcMl intgrity dd ense mrtiruoE otmlion thrcughout the life ofdE field. The DNv clN ReDeml 2012 for lhe Nanripr v6se1@ approved in tull &ms innid-Ocbbd20t3, rh the dificalion ulid dil h ode.

Iulp!!lsalrl3d!!!

O!.ntor RMA (HK) Ld. applied ailh rh. DOE for a tufs of op€ftship 0IK) Ltd. ro il5 nryly Imed Singop.re-bascd suhidiory RMA W€l Linapom fte. L!d. (RMA Wst, whjch EqBr the DOE appmd oD Mry 24, 2013. By the 6xr hdf of20l3, RMA @Dtinued il5 Erjes ro* for €s.nes c.itifiulim md reswon sirnulotion, rldgside furnd drppinA 6frhe Wst Limplo field for additiomi leads sd pr6ped. In parallol, well td.ciory md dnni4 objdive pltuing *ft ilso cdducred to*d& aly poducrid md tull field developmol ir Wcst LiMpsm. oI' Jouary l,

2013,

of SC l4C2 ftom RMA

RMA w6r sm1th. final h&pdddr lxp€n Repon oflhe w6r Linip (Ga6ey Cline & Asmid6) on Seprobq 5, 2013. Tle WLA liel,l hs PBvcd (lP) oil reserd of 9.6 MMBO dd a Proved + ProbabL l2D Hwes crimare of 16.5 MMBO. This is b6ed on NGmu ul,rdaltrellderclopmmr prcerm !.b.dulrd D 2014-15

!

rnL[|ilmiln

pd6 the nd E ort olcafaney, Cline od Aseoi!&s Mes of the Wen Linapam A stutue. A@rding ro rhe

In M&ch 2014, RMA shded wirh (GCA) od the cadifrotion of the

rcp.4 the Wen Linapace A srutN hs Prov.d (1P) resedcs ol I L6 Million bmls, wilh Prcven + Prcbable (2P) regnes of I3.2 Miuion b€ftk, md Pmven + Prohable + PGsible (3P) ffides of 22.3 Million bmh. lunns, GcA indicar.d rhat all !hr. cas esflrd from a thEe Nell dwelopnert whieh w6 agFed upon by ine Consonium duling de Tshnisl od Opm.iig CoDnid.e Medings OCI''OCM) held ar RMA offces in Melbome, Aushlia m

am.

On

d

5, 2015, lhc DOE gmEd incunbdr opdroi Ri,'-A W*r addnidnrl on.nodh 5! 2015 ro show p@f ol6@cial oap$iliry, whicn RMA W$r fiilei to This pbnpred 6e DOE ro l€mimre the lam-in AsEmenr (FlA) bdeen Pi&in

lebrury

*reGion

prdide

util Mmn

dd

theFilipinopdtreBonM{ch12,2015. nis olso.fielively lemirotes tte Pitldn'RMA FIA, also stippin! RMA wesl of il5 inlolvdenl in thc bl@k.

Fron April to M.y 2015, th. rmairing Consonium n.6b6 sougl DOEt fmal app'oval of pdiciparing iftEG in SC I4C2 follolin! rhe exit of Pilkin dd RMA Wei. \r'triL su.h appioval va soud! n aly lppoinLd Openlor Philodrill pres.nLd its propd.d 2015 work Pogrm sd Budgd for the block - corsisring ofr*hnial sd mlmercial audir of RMA Wen\ conplebd *dlc thbu8iolt ib ODdbhip, binling US$59,950 ova liv! (5) nortns.

Following Philo'lrill s r+ssmptioD ofopeEto6hip orlhe w6r LiDaplcd bloc! the) tude pedt with Philodiiu in lh. fom'l Eqnedro fomeropsarorXMA W6ronJue 1,2015 b h{d-ova of ill lechni$I, leed md f'Mcial delmd* in RMA Wcslt posssio! during ib tne EveBion of

i

c

witi oil p'i6 mnlinuing to dmp rhFughoui the end of20l5, rhe Cdsofrim *d in g6dd aglMer 10 postpde dy fidrd dewlotmdt in the block. Hov.v.r, th. eMniu aeFed conlinu !o keep thc SC elile by suboilting a Wort PDgrm for 2016.

De.nb.i

ro

Philo&ill slbnlr.d b lhe W Pme6 lhei p'opo*! 2016 Wod( (WP&B) Pros@ & Budsd for SC 1.1C2, which consisb of.he @ndDc. of m ROV (remotely oD.FFn vehicle) doanlole swe! ofrhe old Wel linlpsu rells in prepdriior tbr rbrrdonmflrpc€duEs Tle @hnicrl md conDmial audn of $e blek will cmliN. in 2016, ildglide €nlinuing etrda b the G&G dib gd.6t d by pr.viols opralor I(MA wen Linapom I1E iobl budg.l for rhe rbov.Denrion€d acrivitiB is US$23,390. ltuEndg/ she On

13, 2015,

sw

Philodtill soughl lppoml 6om rhe Jv Pder fo. the mduc. ofa dow$ole W6r Linapacm wlls usins d ROV (molely opmLd v.hiclc), iD p,!pr{io foi ddlu.l field abddomai ltc W patheF irsterd oped to Eslasit rhis wo.k a contirgdt ofllF o!-goirg ldl'niorl md smmsci'] audn of RMA dd olhd cdt&o.l In eely

sNey

201 6,

of tne old

lB hm condrcrina ib G&G nudi6 on $. bl@k to tunhs Wd Linapao bl@* 10 b€ div.d fo! pFdudion. To{rdr the end of20l6, lh. cmoriiM discu$.d Philodillt propGei wP&B for 201? b be subnitld 1o .he LIOE. Note llul in 20,4, pdiou op€rdor RMA dsiged enhadd Dounudder c€solulions (DuC) to TnroDgionl 2016, Philodrill

rMgihed

die

replMs r lD s.isnic d!l!3.1over lho w$l l,inap3g bloct a pd of then fm-in adks, bur a$ nol able to setne the brlm6. Afta xMA s sDbs.qD.nl . tom the bloot itr '€Min'ry 2015 DUG *eDr bold of rhe ffised 3D d.tM.

|r|!il]ilLmml

,33, pd ofthe 2017 sc l4c2 wP&B wirh I tolrl budget of $472,924, lhc remaining consortium nenb6 auocaLd i lim budget of $l?4,659 to pay RMAt oMding balm@ of rhis 'cquning dabd from DUG. A Conrirgdt pogm of$293r65 ior pNibl. Qbtildive Inrdpi*rid As

(Ql) works 6ing DUG 3D dal'la is aimed ro udat€/nodiry lhe dwelopmenr plus '.or lo fomrlate enlirely nea plds ld lh. blo.k.

ryt

well dsisn

/

PIRC ard lh. othd le6 apprcved die said W?&B od DeMbs 20. 2016. Philod.ill has subniftd rhG wP&A lo de DOE on Deoembd 2l, 2016 .nd trs aptov.d on teu.ry 25, 2017.

Aftr

th. &mindion of the FIA with Pi*jn. PERct pdiciparing

idssr

in

sc l4c2

is back to

Gdkml Eftra Gtuth.tul Ru.*atle Ene.g Senn. Contrct (GRESC) No. 20lA-02-012 PeboEDerS/ signed tfie Seri€ CoDtlot for lhe N{aibm Geolhem.l Powd Projc.t on tebruar l, 2010. Afts vhicb, IERC mnduded pEiev€lopnent adivnis in 2010 uril Also, PERC fmed a Joinl ventore Cou!, MGI, with TrdsAsia sd PNOC'RC.

201

L

laller pan of 201 l, th. DoI conlimed rhe com.rciality oflhc 20-Mw Maibffi Gdnmal power Prcjecr, *hich allowed MCI ro p@ed ro rhe prcjert dewlopment shge, iNolvi4 l) rhe &illins ofso (2) *els ro 6npl& rh. sE prbdDdion od reinj.clion w.ll copejdes, dd 2) the @nslruolid oflhc si.mteld dd poser plol teiftiE,

Lrurit th.

'Ih. mnpletion of lhc sLm rcqui€mdt lor lhe 20 MW Mdbrra C@themal Powd Plor (MGPP) wd su*stuUy rchiewn vhen MGI (billei ia fBt pbd@rid Bell, MB-l2D, in JulyloAugusl2012!o!tobldeplhofover2,000m.Simildly,thediillingofnwcondeGft iqedion well MB l4RD to a deprh of 1,900 n in Ocrobs,2012 rh Fsulting gdd p.m.$iliry sidsfied tli€ *€ll requiFnenr for cddeMc flDid Einj€rim. Along qilh the 201 I vok-oler or welk M0i-6D, Mai9D dd Mai- I I D, MGI had dE ,*$ary w€lk for the 20 MW facilit.

MGPP\ I l5*V Trdsnhsion Liro sys&n wd suc$tully oarneoled io tn€ di$ing MEMtaO lineon sepbmbs 10,2013. upd conpldion df rhe Eliability dd perfolme Brin& lh.

MCPP wenl d comcrcial op@lids d Fcbnuty 3, 2014 MGI drillcd so n N w.lls in 2014 10 conlim lhc *psion ofthe Maibm EsoNe. Well MB- l5RD v6 succe$tully complcled on Oetobtr 6, 2014, rhile wll MB-l6D ra drilled dd complded on Novmbs 16, 2014. Due rd lrt good now Gd Esuls, MB'l5RD w6 lai.r decided b b€ the pbduction well forin exQansio4 md MBI6D 6 the roinj.otion *eU. Witn the

sble perfolrrne

of the

Heroi,

MGI d€ided ro psue & expansid of thc

Mdbarda Projrcl (M2). IlEe is ot le61 5 MW qe$ ste@ snpply lion the 20 MW *elb, dd sirh the J MW capacity ofMBlsRD. d expssion ro t 2 MW wa d.cid.d dd Aprovcd tn 2015. The separations for rhe dpmion bl( ofi in 2015 {irh inirill disusions wiih potatial suptlid sd contBolor. Discsiors sid pototal oitules rm llb conduccd during ih.

fisl sohelule! Paentiv€ Mainreme ShurdoM iPMS) tm Mmh 07 23.

2016 the fiEr rojd PM! sin€ the pldfs onddiil op.rdions in l.tnrary 201a, Major emponedrs on the Sl€dlicld md Po{er Platrt qeF Eirbisned. TlE MGI rem onpld.d all shltdoM o.tivit* 6 prog@me!, Tl'e p.ws plst *a slrchr@iad 1o rh. Srid d Matoh 29, Tbe MGPP hod iE

ILililrnnmilill

t9, ud resDn.d rlead ofrhe orisird soheduL. 2016 ar 5:16 AM

nmrl

tu11lod 20Mw grss oulpul by ?r15 AM. ab.Ll 12 hou6

MGI drilled rhe .ew Maib.m-2 GO) reinj*rion sell, MB I 7RD, lo a io6l dc,t]l of 1,900 nec* d tuly 08, 2016 nsirg DESCO Rig 30. Dnuing md c@pldion rsr 6!h5 indjcot d rhlt rhe well EquiB a plnp in ods ro be $ilized for brinc injetim. coftndr. MBI?RD is being injded wid, posq tlant condeMrs i. atmpt ta enheG itr ..pacity, sinilor to what vd dme d MB- l4RD duin! ils edly otmlioN. On rhe Stufidd sd Resedoir sil|e, aell MB.l5D - inrended 6 proiucrion v.ll for lhc l2-MW Maibatua-2 cxpdsion p@j*r is o' @tinuous dishorg.lelin8 sin€ o.lober20,2015. Itie well will be shli in nid-Jm!!ry 2017 rhm it is exp€ftd dBr Maiba@-2 costrutio &tivitje in lh.

Pad ll go into tull drivc. FIow m.a!rcmdts indiete rhat rhe well h6 oulpui of 14 0 MW. 6 of Decdbs 29. 2016.

se

r

Eirj*tion load for lr!ib@a- l md Maibffi-2 robls ta 74 kS/s rd rle combin d capac y of *elk MBl.lRD Dd MB- l7RD (73 ke/t is dough b &..!. all ofrh. rinjerion load. well MB.l6RD sill be ued a . sbdby rcinjedia well yhen reeded.

The cobbineJ

FroD

Juu.ry 0l

10

Telac

solr

megy *pofre! to tle er.id v6 sold to MCI'9 Oma*a, PHINMA Ene.S/ Coryomtion.

D.cmber

153,06?.70 MWn. This

ws

31, 2016, rhe roral

Power Proi.ct

S,LT E".tg, S.tui.e Contrct ISESC) No 2015 A3 I 15) The Seoice C.nMcr for PC€C Dry6l FnoabL .nsgy prcj.cr, rh. 50 MW Tale Sold Power Poj.ct (TsPr), re sisnei vith the DoE on M4h 19, 201 5. Tn€ elli pDj4l is sinden in dD cental plains ofl-umr mrsistina of nd tdnin wilh hiSh imdi.ton lalues makiq ir highly favouable for phorovolbic (Pv) ele pow.r d.v.lopn.nl.

PGIC a*arded rhe Dajor elr equipncrt supply contacl fd lh. TSPP ro GeIlfu fm Consgy d June 19, 2015. Cons&/, rhroush then bcd OnshoE Conhctor, Pliesoo Inc,, o@nite! io 6nDen€ rhe sold fan srstuctim rolivili.s by Au3B1 2015, siln *Fecled ohpl.lion of.he 50-MW $lar fm br Jdury I l, 2016. PGEC adden tne Civil ed Struot@l Workr for rhe Teh sne b Medio Cmstlction $d Ddclopnenl Co4odion on Jhe I9. 2015. lhilcanleh Enlearises (d elerical nm b6ed in Taho City) u{lerlook lho supply, d.livery md iNlallatis of ihe 5.9-kiloft.ter 6qlv tunilsion line linkinS dE Talac sold f@ to rhe NccP 8rid, on Jue 17, 201 t, PGEC sd odiliole Coup EEI Pouft coa. GEIPC), incdp@Ld a joinl vdlure piojed G.oup. Petosola Colpodion (PSC) ro underble the dev€lopmdt ofde TSPP.

Dlu fm lot ovnm, Lrisil! IrdBlrial Port CoDoralion (LIPCO) fo. rhe 55 hek sole d*elopmmt This w6 Nigned to PSC proDeny o, sctldber 15, 2015. As th. LI?co is eirhin rhe Cenral T*hnopdl(. which iJ Dndq rhejurisdidion ofdE Pnilippine E onoDic Zonc PrZA), PSC w6 oble to r.gisler 6 Esnonic Zde Ulilili6 Enb.prise on Jut 28, 2015, ertirling it to tne ingtivs av,ilable ro PEZA loalm, od ohblinB th. r.ivs of l-GU endGddts (rhe Tdl.c Cityt fav@bl. endoMent *as n*enheles sonshr Dd w6 semd on SeDbmbs 3. 2015) ud for the TSPP ro b.n fit iron s dp.dil.d tusude oflhe Envibmedlil Conplim@ Cdificall (ECC).

On June 22. 2015, PGEC md

.x.culed

a

Iae Agrdent

f'n

o

On

Ausun 4, 2015, rhe DENR EMB Resion III issued PSC wirh rhe ECC. fl e$mri.l p€mn fd 8rcund uorb ro cmdc. on tle sold pdk sitc. Aho, on Au8lst 27,2015, Lle

ne.ded

mfl!flilt[fl]il![

Nsioml C.neisrion on IndigeDou P6pld Rcgion trI (NCIP) isued rhe CefrifieL ofNonovslap (CNO) lo PSC, sbting thd no r€ral domriN or irdigdous p.oples aisr yithin the The DOE suhseguendy apgoved rhe

Scptenbt22,20l5. It aka

bsisment ofthe

T'jrc

Sole Sflice C.nll&t !o lSC on

Allmdion ofD.claiatid

of Cmerciality for the TSPP on scpldbd 24, 2015, cdcludins $e prqecfs PE,DevelopDent s14! od comnencing virh the p.oJedk Dwelopnml Stagc.

Sepbbd dd Novemb.r 2016, PEZA issred *ve6t pe@ils for TSPP annodid4 alloling d*elopDenl iNide LIrcO b go nil-blasr.

Gsued the

B.tvs

M.dia Conrdction Dohilizi for tie sil€ cteein3 in 6ly tuly dd by Novenbtr, 6 lbte b cmplete m!.h ofrh. inteml tuds md foundrtjon wo.ks for lho sole fm dd the snrd buildins. Cons$/ s piling F s&ior Cdeon ini.iakn de pilins *orks for tne slu pmel sub.trd& in late sepbmber od @mpLled it by mid-No!.nbs. Phs lft, rhe on$ore corslruclion sntrlor, onhenc€d with dE inslldioD of sold modutes on Ocbbs 13. 2015 dd cdpleied it on lmury I l. 2016.

Phildech commenced lh. ercdion of.he 69-*V T/L pole on Ocrober 3, 201J ud w6 able lo conplek tlr *hole 5.9 kn tunision lim by de i]ltrd w@r ol DMbd 2015. Philcanbh *6 able to complelc th. swilchydd by tll. .hid s*t ofD*.mbs. 'Itis follo*ed 6on NGCPT ipprolal ofrhe sysm tinpad study Dd Faciliy snldy by Psc. .xeuLd m Onnibls lno md Seurity ABEden. (OLSA) rirh lddds Developnst Brnk oftlE Philippin6 (DBP) md Philippinc Notidal B6k (PNB) on Novmber 12, 2015, esidg. Iod moDd of?2 6 billion. The OLSA la EsisGred with rhe Registry ofD*ds on Novenher 13, 20 r 5. ln rh€ memliDe, Perosolo

joii

t'n md rlGmi$im faeniie ,eF 30yo dd 100% coftpl.red, Bpedively, prcmplins rhe DOE b nomimre rhe TSPI b be FnsUsible. nr solar fan va complered by DidJsuaJy 2016 od s6 able to dpon powd b th. gri'i on By nid-De.eDber 20r J. the soltr

On Mmh 07, 2016. u\. DOE issued th€ Ce,ailicare of E dorsent fq Fed in Teifi Eligihility (COE-FIr) oftho TSPP, codfmins lhar $. prcj.cl is qlalili.d !nd.i $. FrI systcm slbj.ct !o onplide wirh the ftquiEnents ofrhe EnsS/ Regul,rory Colmission (ERC), Dd v'lidding lhrl F€ta{ry I q 2016 tu rh. st d of t]l. pbjelr comercial op.6.io..

olr April 06. 2016, ltuSold ex*uied ib Rmeeable Eners/ Parment AEEmenl (REPA) *irh lhc Natoml Trmnisstd Corpmtd (TrNCo) dsudng lhe prcjet's revenues fom tbe FiT palndrofP3.69 wliiom2016ro2036. IneP\EPArmkefledonMayrO.2016.

R4uhlory CommGsion GRC) lppoled or tuly 12, 2016 lhe Ceirficaie ol Cohplidce d a ftsn-in-Tditr elilible p.ws plet (COC-FIT) fd rhe TSPI. *hich qDafin* lhe plsl ta @iv. $e FiT paynmli of P3.69AWI for 20 ysu.

The Entr&/

petuSde aDpletn tne l@l Vdiable Rene*€ble Entrg/ (VRE) bst wirh NGCP for lne TSPP lst D{€mber 0l - 02, 2016 ro e6u. rhe @mplifce oflhe on4ite eleclrical etin$ ro PhililDine Crid Code n nd,rds. Rnob VR.E bsb reE conducred wirh NGCP on Dedber 27 - 23. 2015 b sr elTativda of rle planCa BD@e b Ncc}-cdrolled pffield. To rddree drL poleily isus .nouni.rod duing the FmoE VRE 1615, NCCP will Hne fDal drb inbgrarion duing ine 2d *ek of lmusry, 2017. Ans passing dese Es, NGCP {ill issu. Prlrosol& qilh lh. Final Amrcral io Com€t c.dilielion.

til!mtMIru[l

t.lrosoLr .xeuGd ib Co Lqrion AgEment sith NCCP on D.c.mb€r 27. 2016. This l3rDeot allos Perrosolar b s NGCP\ 4Gn Ridtif way (Row) ovq rre 230-kv Concepcion-Sd Mouel Iire lor dE omslruclid md utlialim of Pedsolart 69-kV Switchirg Sblton, Fm.cting the TSPP io rhe NGCP grid.

10 b Decsbs I l, 2016, de iotd endg dpon d to .he of P553.7 MM br.ed on rhe FiT pne ofF3.69 / *wn,

Fom Fcbn.ry

*j$ rsoN.

gid h

67.393 MWh,

lizd speinc bom*inA c6b Elarins ro finmce chuEes incMdl in the mNtucrion of tne pqs plMr. CQitoliad sp.ciic b(mying €sr doDnred ro $0.71 nillion dd $0.02 nillidn in 2016 rd 2015, resp..rively, Tbo ra& Eed to ddmin. dr. nour ofspr.ific borowing @sts .lieibl. for clp aliation we 6 39%, which is dle efadile ln 201 6 md 2015, lhc Grcup copit

c.llderal b s4fre Bowkas In 201 l, MGI &qfied prEek of lad ntrn Scioce P&k ofrfie Philippines, ltro. o,1 Phillom Pmp.ni*. lnc. mouling io $0.6 nillion ed $0.2 millio4 rcspetively, to b. used a pNd pl&r sne in rhe Maibrc Pmjed AH in sto. ToD6, Ba&n96. h @rnelid wilj] th. lMs, MGI h6 pledged a ponion olib lmd add pioFeny, plbr dd .4uipnent modins ro $4.5

nillion 6 collarsal.

Reai

sllL

Pledged

(land to bo used

6

sserl

pow.r plant sie,

Ch.nel(undd Aopsly, pldr md PSC also pl.dged aU df ib dd t5?.5.4 million (*2,71

l

l

e s follows:

uda

?rop.rry. pldl Dd equipnedf)

eqdpnflf) $l.5iiuion.

plopeq md e4uipmmr mouring bnlon)

s

mllal.ral in

@melid

to $56.14

millior (F2.30 billion)

lhillloDin2016md2015,

Det ntd Oil EtploEdor CorB

Brlm€ .l

b€ginDirg

ofyd

$t9,tl2,5?t

r,89,64r (32,930)

Tlmfes b

BJmrr

Nells

end

5d plaifms

ot'€r

(l.rote

l0)

(6992266' 5 |

(3,309,403)

0,ll,l,ll,l

e6

Unds rhe scs enreEd inlo wit! lhc DOE overirg cerr.in p€roleun conlrel in !sio6 localioN in rhe Philippines, rtE pdicipding oil compmies (collecrively knoln E ConftctoB) @ oblieod to provi&, .1lll.ir sole nd! .he sedic*, bhnolo8/ dd fddcing n@sary ir the p€rrommce ofden oblisalions under dre rcft!.8, Thc CoDtBctou @ ako obliged ro spend sDeified doub indidred in the anhcr in diEcr prcponion ro then wdk obligdrioc.

Howevtr, ifthe Con?cion f.jl lo cmply vilh lhet wrk oblE rions, th.y shdl pny lo the gov.md. .he dount rhey should have sFnr but did nor in dired proDdtion b rhet wdk obli8atiom. Ti. p.nicip.ting comp$ies hav. Opadng Ag@mdi! Mong 0lloselves whicn goled rheir dshb ad oblisdions uds dEse conhcb.

nilmrurufll

Addnions petuin to

&v.lopn.nl €sb incuftd

for Erane exFnsion.

illl remv.ry of1h6e defdied c6b is dependent upon lte dis.ov.ry of oil in onimial qudtnies ion ay ofrhe p.lrolem conssions dd the su@s of tubE d*elopDenl the@t Tlle

SC 6-A - O.1or-Mald]tu Rlnck

In

tlly

201

l. Pi*in Ptu1@ Plo entered ! fm-in agrdd. io acquiE ?oto ,€nicipaling IDihemoE. Pirkin s6 6sig!.d 6 n!. nea Opsalor of SC 6A in

interest in SC 6,{ block.

lim-in obligalid, Piikin, &quiFd, presed ud inbled 503 s{. km. of 3D s.ismic dab fo Ph6e l. Tne sisic equisition 16 onpletld id Novehbs 2011. After shich, Pirtin bee@ proNinB dd int ipdins the sisic drb in 2014.

As ib

on Au8us 27, 2014, Pirkin se't a lerler to irlom lhc Filitino Jv D6c6 of ir iddi ro *iihdlN fiw m. oosonim anr @mplding Phee I (i.e inrs?frrion of 1D seioic dala) al lhe cnd of D*mbs 2014 widour paynent oatcnrty. li&in will on .ver nU dah, rep.ft ad mb^is gen.nled duidg Phe 1 od will subnir b DoE ,ll t€mrds relabd ro Pise I work prcgrM fd mdHorery The paftE6 opprcv.d Pi&in\ withd6wrl upon fulfilmsr of all L\e lbm

Dri4

d

de SC 6A Technic.l sd Otenling Cmitte. M.€tings (TCM/OCM 24, 2014, the lppbved the pmposed 2015 Wo* Progm ed Bndget (WP&B), mDposen mainly ofcmlqical md G.ophysicil dDdie, will a bbl budser mount of $173,170. Fomer SC 6A 6pedr The Philodrill CorpodioD ws de unsinoudy el@Ld to asme the opeEbxnip fM Pittin.

!tu6

Novdbr

c

prst

dllt

d lh. of 6.it o4oin8 Geologic.l & Cophysical (G&G) srluario. orrle.qrhm ponion ofsC6A 6l@k. Touds dE Diddlo ofthe 2015, Phibdnll pnposed th. @nduct ofBrsdbdd P@$ing for rhe 2013 lD seGmic dat . ro be follo*ed by a QlKridiw lnrerprcbrion (QI) vortoo\ in ods to enhm€ th. prcspetiviir or lhe idenlili.d prcsp€cb. Tl€ Pdss usimously rppwed th* dirnis 6 pan of tne 2016 Wo* hoglu & Budgd. Il'e DOE rppEEd lhc 2016 SC6A Work Prcgm md BD4.t (wP&B) mounting ro $759,990.50

The Philodrill Corpo6lior

'nrcu8lout 2016, Philodrill cdductd Geolosicrl ud Gdphysical (G&G) *o*s for ihe Ocron

bl@*,6panofdeDo!-approvrdWoikPrcgimfor2016. n.seinchdc l)biedbDd FplocesinE of rh€ 2013 3D seisDic da@! whiofi Philo&ill wived fDn Downunder Cosolutim (DUG) ltui Sepremb€r 05, 2016. 2) on eoing seismic inberturion *o*s on rhe r*ly proc6s.d dai4 sd r) on-goins Qulibriv. hcrpd.lion (QI) vo*r on th. oclon

D*nb.r

02, 2016, llE SC 6A coMniM di$Esed ro rh€ DoE. The 2017 sc 6,{ wP&B h6

Philodtill's popsed W?&B for 2017 to bral bndgd of$454,76?, wftn a Fim ptocM of $416,014 fd th. ond@l of &h pr@$hg ' oflh. 2013 3D s.imic dala md Qdibtive InterpFtction worts over tnot pD.scd dlt se! md 0 cmiineFnl poerm ol t33,753.70 fo. preliainary weu dssi8! studies for prcsp€c(t rhrt cr b€ mtled ro drilhble On be

slbni@d

PIRC dd lhe o6er Pirtd* approved rhe siid W?&B on Dccdbe. 20, 2016. Philodriu h6 subnitlci lhis WP&B lo the DOE on D.cemb.r 21, 2016 sd w6 appovcd on Jmucry 25. 2017.

rLililililtilnl

!eboEie.s/\ Pdiciparing Inl61 in SC 6A block exil of PiUtu Petuleun on MN 14. 2015. sc .7 - oIlth@ Mi,.bo ontt Pu.r In 20t 2, th. sffonim ft4uestd fton

tne DOE

inc@sed

b

16 65?%

6oD 5.001%, wid dre

m enensior of SubPhae 2. Duri4 thc ye.r, Ihe fmo!. include seisnic

fan{ur efaorrs h,ve bm miod out by rh. o!€6hr. plG3ing dd drilling of one *ell.

hs

In Jdudy 2014, the DO! appoEd a thre+yes *dsion 10 lhe 7-yd Explo6tion Phe of SC 47, b which INOC-EC subhided a Wdt Prq@ for SubPh6e 2, imluding E o€sing md inblprbrion of2D lines and prcsp€ct matmlion ahich nay l€d b dillins ofrhe

ti.

*iln

on Fehruary 25, 20,5, lhc SC a7 consonim oSr..d io rclinqlish th. SC 47 bleL r€pply fo. rhe sme on€ n is ofreEd 4ain by rhe DoE. IhisdaGiow6 h6ed on tne qisling hieh geologisl rist ollhe clllml pospcct md l.ad invdlory, ldk of ftom f'nines, fld sivfl the DOE requiEnenr ofdrilling on€ w€ll for SubPhoe 3

Ho*evs,

d

cdhd

oprion lo

bbBi

votu w6 senr ro DoE onJuly23,20l5. In a letlqfom J&urry I6, 2016, ih. DOE do lo4s rcco8nized SC 4? a dons rhe sflice conbacb in Nhich PeroEieqy is 3 meDb€r. Tle DoE fomally appoved $.Jv\ dinquidndr of SC 4? on }6rh 10, 2016, *ith rhe ofiicial bination dare reckoned ar rhe end ofrhe ? ys Explonrio Period on Jmuary 10, 2012. As a r€ul! the Perl Contuy ha wifid offrhe defeftd dil *pl@rion c6r Ehred to rhis mourina to $12,930 in 20 r 6.

A

L.h

of Wirhdra*al ofrhe Joinr

tne DOE drlcd

5, 2005, SC 5l mdbe6 (Alcom Gold R.surces, TmsAsia Oil, ed PERC) sigrcd a asEenent *ith NdAsim Elss/ Lrd. (lars chflEEd lrme ro Otu Erers/ lnvsbenr Lld, OEL). 30% pdicipaling inlercs in SC 51 lill b. eded by Norkim lpd slcGsful acquisilion of lD seisDic drb md dri inE of2 *DtoBbry wells.

o'r AugNl

fm-in

For Suhphae 2 coDnihdg tne rD *Gmio dab oler Atgm s6 rquired in Jue 2007.

'Irtrcueh ils oM C&C .volulioa Opdator OEIL d.cidrd lo focls d the noihm block (NW tete) md ro ElinquGh all ib inreer in the sontnm hbck (oflshore cebu).

otu E sg/ &ifled so welts but boti vd€ u6uBfut. Fitipi,o f,mo6 (cos6 capit l, Tru' Asia dd PIRC) did noi cFnit 6\e {ells 6 eming vells. Sinildy. DOE did not cEditrhe wlls 6 cmtliel io tn. sc comih.n! but grv. otb 6 nonlhs lo .dduct ,ost-soll mrlrsis. pGctull ofDnBr2 cdDen@d on Febddy 20, 2014, dd th. resulb wde 'nalysis pEsdlcd dldng the OCM on April 23, 2014. OEIL conoluded lhal il is not ssl€ b dnll $)avhee on the Dunat prsped. OEIL also *presd ib inGnrion ro wirhlrae ftom rhe SC 51 sd b Esign frcm Op.mrdsbip. ne folloving &y, a famd l.tei ofvilhdnyll dd Esig tion v6 subriftd 6y OEIL to lhc SC 5 t Jv lFnres (TBlAsia Cos od PetoEne$,) {d io rhe DOE. The

OEL subeitted a leed d@umenl lo ite DOE io app€al dle $bs ofDuhdl.

The lqnl docmflr aimeJ b poii our ro DOE rhd rhe opeie h6 drilled th. w.I 10 s@d&dj dd rhat rh. htl pssw eltl.&r blow-oul a.stiiurcd ! forluilou wdt whi.h rendeFd On Junc 10, 2014,

imposibl€ rhe

ful6lnot ofrh€ objarive ofrhe well.

mil|[tmilmil

In 2015, mo$ ofthe acrivities

OFll

!.rr.

fd

SC

5l focued

on

lh. adridishiw dmsition bbulhr

abour bv

DOE Esgnized drat DulDr-2 {cll Na nonromptimr duo lo ire faitc b r@h tho obj.c.ive jmbbS pde6 (TAo, driuing deplh. bd pERc) md rilh DoE md infomcd rhen ofrhe consoniuD's plm ro continue wilh lie lh rbe proposed wo {prcgidl ( I ) Cdducr pHsu. sludy using ihe dnllinE rsnlrs of Duha! I dd 2 md existing simic DoE dab ro eshblish thai ddllina in the ma is not fe6iblc; sd (2) condud dobil.d giavit swey {ithin Feviously idenrifiei sltlonri.s s! dfrhe Norrh Blek. Th. Ptum atso requsLd for

It.

exte$ion of$e

cos

sc,

d

Swie Codd

ol) F.bdq 15, 2016, a m&ling rs h.ld mons the SC 5l Jv P{rtnm r,o disccs the cu@nl siturion oflho Sdicc Cdber alier fomq CrpeElor Ono Ends/ of6cidly dpre$od ib inbrtion ro ldve the bl@k. T6Gasia infomed the p€nneN rtrd .he DoE is menabt. io Sirc cl.mce ro ob on€ tne rcnaini.e tortld Aune arl lhe righE md obtigalions undr sc 5l. h lio of drillida a wll rhe p.tu6 rould poposod a rdisd Work lmslm shioh will hctD detmine ifthee @ stil olhd drillabte plospecb 6ide non dc Duhd srrctuft on April I I, 201 6, lhc DOE re4u6kn tne Filipino a@nium Denbds (Tm-Asii, Alam od PIRC) !o fubfth docmenhrf, requiEm€nr io fomlir rh. tusfd ofoutSoiDg OpeBtor Orio Energy sloa/oPalticitolin8In!.rcsb md tben* fron dle blck. Assmin8 Opc6lorTm-Asir fodiuy submiftd lne @nenium s d@undrs td rhe DOE on Mry 18, 20t 6. wilh de DOE opprcving thc subnhsiod m ,De 09, 2016.

July b Octob€r 2016, rhe DOE h6 moirain.d cmuielion witn Ob ova wnled TniriDg Fud pryndb duing then Opebcnip ovs dr bl@*, totoling ll24,763.00. ft *e rslved thd the Filipino @nsofriu mdbds bay .xecule a lrnd ofundsbling ro sdle Otlol Fmaining Tbining Flnd balde of !124,?63.00, only who the DOE h6 .xlrru@d its lqal m6rs against Ollot Ef6d 10 p.y such blldce. Upon execurion ofsDeh undetulins, rhe @nsonim m uddLle de Subphde 5 Wor* Pmglm for the remrining two (2) ys of the SeoieContuuntil2019 shich ircludd I P@ Pre$uE rtody Dd I Cmvit swey ovq

Iroa

letroEnergk Pdicip.ting InbHr in SC 5l inmded to 20.05% fion 4.012% uDon OEILT rsignation rd qil fBn sc t I, *irl nea opdaror TmsAsia Perolff coDonrion at 31.35% dd Alcod Pebdlem & Mimmk Colpo'ltion at 46.60%.

SC 7t - OlIshD.

Notrttu Palo*e

'Ihe joinl sludy md bid goup @nsistina ofPhil* Perolm coaoalio! PNoc.lc Md PetoEnersy ws notified by rh. DOE lhd lh. grolp son rh. bidding for AEr 4 ofrhe Pnilippine lnrgr Conhcling Roud t (?ECR .4) l,sl Februlry I4, 2013. Th. block is le&d in d*p*ar.

olishore Nonhwei Pd.]m. Af€i fbali2rtion of cdtu relm. rhe @.sonim fomlllv 's siged Sdie Contd 75 on Decenber 19, 2013. Seretary tetilla thcn skrcd d behalf ofDOE

onDedber2?.2013.Undertheresly *su1e{tSdiceConflo!lhcfi61Sul}Dhe ll consisl ofc.ologic.l & Geophysicd (G&G) iudies ofrhe Northlest Pdrwu B6in ud tie condud of a 2,200 line-ktn 2D seisDic sw.y ovd SC 75 for die dmtion of24 nonrtu ar m estinacd €s of ust3.50 nillion.

lollowilg rhe execrtion of Sdi& Contlol (Phil.x PcroLurl PNOC-EC, P.toEner8/)

75

M Dembs 27, 2013, the SC 75 conrdiM meriry on JmDry 16, 2014 to

held a kick'off

|l]nmiltmiln|fit

_45 -

dsus

my fotrord. operalor Philex PerolcDm sBey oEr SC 7t a pan of Subphe 1. sGmic lhe

pEsented lhe

foeard pbtr

ro oonducl

r 2D

Th. M^r' voteg.r Explor vssel af Subird L.pblatiu co'meiced rhe SC ?5 2D seisic sNey o. Mmh 3l, 2014 and 16 ddys df line ic4uisition, t]le !e$el cdplelcd th. 2,237 line *n sw.y d Alril I7,2014.

*s

Throughout rhe s.cmd balfof 2014, CCG Mbbai commission.d fe th. pree$ing ofth. n$ly'equired 2D $isic {tab. ARKeX Lrd. onplebd the prHsina of ihe supplmenrey sEvity dd iagnelics dab dn Jme 20, 2014, wirh copies oflhe neuly-conpled gNig dd nognclios dala lo tie ensonium by end Junc 2014. Th€ d4isior ofrhe Joint Venft for the ray fo$ard, e ner to rcquire noE seinic dib o' sd ner b driu, riu depdd on the

sl

pdd

rtsnlkofrheirtrpretioroflhelinestob.conducl€dir2015.IDAugust2014,deSC75 coMdm aptoved the applicltion aftne boadbod pncesing ro rhe enriE 2014 2D seismic dara sd b snme fie qurlity of dib. Addnidal cdr lor brcdbmd prcssing mountcd to A..ivilies for

SC 75 in 2015 focu3ci

o

tio on-going Geologiel & G@phlsioal (G&G) wor*s for

Pd6

ResulE of the twine gnvity swey rcquiren in 1014 vse p.Tsenbd ro rhe Jmuarr 12, 2015; while the inldFdrid ofrhe 2D .ebnic d.6 wft pi6.ded

d

on May 22, 2015.

on sepbmt r9.2015,rheDOEplrcedSc75,slorg rh adjacflr bl@ks sc 53 od Sc 72, ud* Force Maj.ue du. b t{. geotolilial ldsioN in the west Philippin. Se& By tnis tiDe, the a'sdiD hs alr€'dy ftlfiUed ib Wdt Pnglm fo. Subphde l, cmisting oflhe icauisition, Foce$ing dd inte'prehliod oi 2,200 linckn of 2D s.isnic daa ovd SC 75 D4embs 4. 2015. .he DOE apprd.d lhe Rovis.d SC ?5 Woft Prcgu & Budgcl (wP&B) for 2016, shich @rsisrs ofa -1,000 sq.kn 3D seismic surey *ith a budset of53.50 MM. Due b rhe enfdmen. of Fd€ Maj.ure by the DoE shich slqted ai lhe end of subph6e I on D€cembn 27, 20 t 5, no qDlodion work will 6€ done in rhe block within lne Wen Philippine On

S€ s displkn Tod"E, fie

wrd

lnlil .h. I@.

blel i!.rill

mde

Itu

M.j.e

h Inrd.

MajeuE. punidseiplmiod

Piilq Petoleu

is rhe OFraior of SC ?5 wnh selo pdicipaling md PtuEners/ with l5%.

idivnid d-hold.

idfts!

PNOC-EC Bilh 35%,

DcDber I t, 2016, 2015 dd 2014, the omponding percmllges oflh. Crolpt diciDation in ln€ vdioDs t.tol.!m SC .M e d follow: As of

2015

2,52591

2.525%

Wel Linopacan - SC l4C2 ooton Malajon BlEk Sc 6A

ilFil|[!ruIl!t!il

12.

Inv6h.ntinr JoinlVe

urc

Tle invetumr in r joirt v.nluE ep'Mts PeLocrent Petrowind

{6

rnooDonled in the Philippres

d

40vo

inl#l

March 6, 2013

s

PdoCEq prindily ro czr.J on the gseml Susins of gaerarin8; disiributing po{d dcrir.d fron ren wabl. .nrey so!rces.

O. July

15, 2013.

EEI}C subsc.ibed b i 20% equi9

she

in

in

P.rowind (Noh

1).

r wholly own d subsidiiry of

tuiting

md/d

PtuWind.

disNsd in Nob l. on Novenbs 1l, 20r 3, Petucreen ed clpasia enreEd inro a sn@ Puchde ACrenent (SPA) 6 10 lhe sol. oflctrocrmt 40% .{uity she in P.lrowind.

As

as of D*abs 31, 2013, P.lroGM still holdq 30olo eqDily ! sukidbry in lhe 2013 Fnsolid!&d finscial sratemenls.

On

she

in

lehwind dd &6DnGd

fm

14, 2014, ?.trocreen rceiv.d lhe paymml sal. of $e shorcs, od th. D..d the bmfer of shfts 6on PdoGEn to CapAsi4 exsuted uDon

lebnury

Astrme.r, mve.ina

*a

a

ol

s.lisfadory compl.tion of all lh. cddilions prec.dcnl uda th. SPA. P.1ro6rcen lst ils mntol in ldowind afte. rhe cmsmnatioD ofrhe SPA. A@rdin8ly, Petowind csed 6 a suhsidi'ry ofPdoclM (NoL 2).

ft*iftd,

PtuWind beme a joift vdft htueen PtuGrem, CapAsia md EEPC by vitue p.di6 epvding lhc nsnd ofnmagiq leblwind

of de SA sienod betwcn lhe thEe

Th€ Grcup reco8liad umlized srir on EDesEnenl of iNetuenr mostins ro $17.22 million, s.in on s.le oI iNesfiFnl mourlirg lo $2.67 millim od sh@ in deco'solidaled rebined emings momring to $l.I ? Diuion. Toral gain on disposal of invsbenr momred dhpNalofinv.shdiMountedto $2l.05niuion. IIr. Group\ nel pre.eds a a€sult

b

ofll

'ne molemerE i,

thc cMyinc valrc

oldE Oourt invstndt

b.gimirg of y.r Additonal irvestnenl duirs ln. ys She in n* iD6me of rjdinr *nru€ ItrJaLion adiumenr Balme ar end ofyw

Balse

Selected

.1

findci.l infomlid

of

PtuWind 6 of D.cdber

in

joirt vdtuo ir Perowi.d

in

2015

$,7,t66,952

$27,6J0,546 630,333 241,431

(,{53,470)

$26.343J96 31. 2016

ud

2015

(r,t85,95r) $27,166,952

fouw' 2015

(20,344,934)

LcuiJ

521)5'.'72

$22,010,100

n]tmuililffi

_17_

SDDary of sbrenor of (@pEhdsile incone ofPetowind for

d. yer sde!

Decemher I

l,

,)015

codud.xrnse.

t,3d31,166,

(6,20<,3?r)

3,362

t!t24,303 Grcup\ shft of lhe nd iname

t2r1,431

ll.Invdtn !lPmD.dd As

ofD.Mbd I l, 2016 dd

2015, rhb

eout

cdsists of lmd dd pa!*jrg lot spaF (loco&d in

T.KitO silh totol erryirg volue of 13l,417.

The fan vdue

ofth. inBtn.rt prop.did ofrhe

ODup

mountd

lo $40.273

ofd

r

of

31, 2016 md 2015. The GDup did .or obbin $e sdices aDpiais md demined the fiir vilus of tbe Gbupt inv*nnen. prop.nie or lh. bsh of recenl sll€ of ihe sinild propenies jn the 6 de inreshot popdies md ralinA inro econonic irioN peailing d the lime the ulnarioB Dad..

Deemb.r

me c6

m

As of

D*nb.r

3

l.

2016

Dd 2015,

ecod

v*

tne

fln

value ofrhe

invesbdr Fopdties

is

clNin.d lndcr

iBi8nifidr ndunt ofre.l pbpdty llx.s on th. i[.sb.nt pDpcnjes, no orher .xpens @ eme! i' relation b de iDv6h{1 ploDedid in Etuep1 fo.

weE inoun€d! ed .o iname

11.

OrhrrNo..trmtA!!4 2015 $3,233,236

trepaid Ht - noncu@t ponton D€fsred developnmr db

1,

0,633

2,017,331

l,553Jtl 0,403,066

$t0,232,321

itmm:mil||r

-43 -

As of D@mb€! 3 t, 20 t 6, bulk ofrftis ecomr p€tuiB b the &quir.d esment of ngh ofvay

by PtuSol& mountins 10 t3.0.6 nillion n.1 olmotiatio, This also i'cludff soft*e used fo. rhe geological nod.ling of MGI ficld. Dei,ils follN;

Brhm6 .1 b.einnlq ofye.r

$3y'73,562

Brl.trc6rr.trdolls.

AduduLt B.lmc6

d

3ll4t37

:64,314

l/1o9.721

rnod2lllotr

.l b.gimiq ofy6r

l23lt5

rdj!!rb.

Ctrpnhriv. rlushliotr

?J76

(167,6,()l O.,r7r)

(r69J1r)

l0l5 BdmH d b€simins

ofld

$7.144

1,40,51L

1,212,671

BalmG

ot

begifring

olys

195,224

Balses il.nd olyd Cunuh e @ndion rdiundr

195224 2,01

$,212,6rJ

$50.6r1

$1,233,236

of rbhl of way dlsed by Pebosold ro cmtu! op.ia1e, pol6, wir, cables, rypratoi dd e$ipmdl od sNh omer dd move for the tusnission lin. (* Note l5).

lfld ighb refss to smr of e'3denl

minbi4

Epli€ shotus

epair,

appmtN dd

Amonidid expd€

'e€ded

chdAed

10

pol,t

or 16s

follols: 2016

General ald adbinishtve .xFns6 cost of elecrriciry soles (Nole 23)

2015

(Xote 2a) t9,551

Efss ro th. Goup\ oumul,rive inpur VAT c{ryov.rs vhich will b€ ulilizd in priods. fu@ M,jo,ty ofrhe input vAT pet ins lo MGI. MGI is ude4oina a vAT EliDd prcces oedns the yes 201 l, 2012 od 2011 wirh a brrl mounl of 12.25 million or Pl 12.01 nillid. Th€so olaiDs hNe ft* been el*r&d 10 lhe coun ofh A@ah oflb.

The inpur VAT

tiltil$||[il[ilI

Prcpdidd

-

tmwt

ponia

(LLA or the AgEment) *ilh the olr April 23, 2012, MGI .rhred inio r Lmd ree Narional PoNer corpoBrion (ilPc) Md rbe PoNq seoror Asd ud Liabiliris MmSmenr CorDdlion ("SAIM) ovd rhe MGrPt sbfi€ld lot in Slo. Ton6, Bahgas

&rmdl

U.der rhe LLA, MGI will le6e rhe smneu lor for a p€riod of15 ye6. enen&ble for dorher 25 upon muluil igftendt of dhe pdies. PEDiid idlnonc!ftnt poni@ perhiN !o th. sd!&c Enol patbenl paid for thc le6e ag@mert. Tle clmnr podion due in oDe r€d is shoM a pdl of PEpaid xp6es dd orher cuM. asets id tbe ansolida@d ibrdmts of

yff

DeJet?d de]elapmnt

.o!s

Deleftd d.v.lopn.nl w* t.itoin 10 the 6str incurr.d for tho IoMw Phse 2 p$jei oIMGI mountins $ Laa million sd $0 7l million in 2016 md 2015, Espstively. D$dopmot c6r llso includes cons incftd for rhe 50 MW Telac Sold Poqd PBjec. molnrin8 lo $0.46 million s ofDeembq 31, 2015. o]r Fetru!ry 2016, dev.lopnenl esil mountina to $4.44 nillion wse spiblizd ro pDpefry, plani md equipnent upon Pebosold\ sh of@hnddil ot.nlion.

Remiding brldce ofdefeftd d.velopndl cosl ofPrlrosolr 6 of D€cember I l, 2016 pedins 10 costs incured for the !h6c 2 expmsion poj@l Dounrins to $0.1 I nillion.

Rdlricted c6h p.rlains lo rhe Penl cmpoyk shre i' tne scry nrd fq rhe abddomd! of rhe Gabon ases. Iltis ilsd incl es e$oa !o seDre paymdi dd dischtr3. oflhc Groupt obltalios and lilbililies udd lh. Fldiry Prcdrctior Slong. od Ofl@ding (FPSO) conb&t.

The moDr for rhe shft in scmw ofthe Pmnr C@pmy's obUgdion foi th. FPSO dedlcted fro6 the she on lifring prcc€ds dlring lh. fid lining made by Ebe in Nolember 2002 md will be Daid bel io the GrouD d tne sd ofdE anhd *hich is in 2020.

'6

As

ofDeenbd

31, 20 L6

dd

Dccember

3l, 2015,

rhe

Pelt

shee in tne a6rdornmr of ihe Ehe Main€ $0.21 billid dd $0.23 niuion, rcspetiv.ly.

lemit b

Tllis cdsisb of prcpdd expds.s md ecuity

&tait

l5 AcootrhPr]rblc.'d

Accru.d

the

Compey mntibured ib addnidal 6c@v fud doulinA to

ErD.u6 .:015

Wilhholdine taes md vAT paFble 72],,t51

55.t23

53.6.:7

$t3,795,72t payrble ctui* of p.yable to slpplis dd cont!.to6 rhd daclormen! coNro.tion sd opqalio"s ofoetay proj*b.

A6unt

Acmed intffir Dieble

slaiB

ro

mal

of

inlsi

on

e cmtly

involved in lhe

lMi

ililtiltntilIilMltl

Ac.rued *p€nses

m 6 follo6: t223,117 &2,527

33,140

r{!!,12!

Dividmds pa'€ble Ftuin b Ncl.imen Olher

pay$16

mirly

pcdain to

cheb a ofDsnbd 3 l, 20 t 6 sd 20l5.

raded secuily serices, utilitie dd

Ille Gmup's rccodb pryabl. ud accned exp€ns m dne wilhin de .ttoxiMlo dFir f,n uhs 6 ofDsmber 3I, 2016 dd 2015.

16.

Sioniem

.d

@tu

oniniu

ya.

dnes.

Cfrying lalues

Intrg-t.rb h!trs P.y.ble

Gioupt lom pryablc pcrtais

The

E4!!l

10

l@s

avaihn by lhe Gtuut. Belor

e

the deoils

ofthe

$1,137,420

Clrcnr podioD of lorgrm lMs pay&le Unmodiz.d dcftrEd nMcine con

Unmortizn defeftd ntuins

cod

qp\

shartaemea ldrkm lM! pafabk PetoEnergy entered inb bsecur.d lom oltMenr5 with equiry infNid ro Pctowind.

PettuE

(12J54)

sl5j32.@0 $r0r,165,6t3

(105.952) t16.539.074

$r01,:05,990

(1,660,a3$ (2,03a,622) $9tJ05.133 $99.171,163

wios

lendd speifi@lly

ro 6nmce

July 19,20r3, ?tuEners/ enlcrcd inlo o sl,50 million lomagEmst tn vrioB led6 mul inllrsl ralo for tle Fidd (i... six ndlhs frm isue dd) of 3.393%, we.y six nondis b€t.d on a b.toh'ek rrre Pl6 a Fc{g..d spBd. Tte subjeot to epricins knorofde lod r fttslos\6soledonJulJ la.20L5

o'

td itun

rith

2)@

Or NoveDbs 21. 201l, PetoEnssl .ntcftd inlo lddirion l lod uounting b $4.50 million (P200 nillion) Nirh laioB londeG witn inrered nL ai 5.45% pd onD. lnerest 61e ot lh€ in noe shall b. .alcularcd o a 30/360 diy count bsis Md will be paid *ery I nontns j! ye6 ftis bd p.tion. bnor ofrhe lM is tto Tne lhe last &y of eacb thr*nonth i2) setled on Novedb.r 21. 2015.

r

@6 rd

|flilniltiltr|illnl

OrApril27,2015,P.lroEnerg/enteEdinromOmibusCrnitLin AgrIHtwirhthe D.v.lopnent buk ofthe Philippine rhich prolides ! cEdit aeiliry in lhe principal moud not exc€edins t9.10 nillion (F420 million). o'r May 12, 2015, PetoEner8/ avdled lhe IiFl ddrdoM mouling io $1.10 millim (?60 million) si$ u inlddl rate of5.l5% p{ 'mun subjert to repricing evsr qu,fu payabL. nE lou is pq€ble within one y* which nttu d sd PehEnr8y oteE l into m addirioml lod dounling io $2.50 nillion lom wi$ v4ious len&B wirh m inr*r hE of 1.9647% ter annu subjed to reFici'g ev.iy q!ds.

The l(fr is payable in $o (2) y.m qilh natuiry on July 19. 201?.

On July 20, 2015,

()'r Ociobs 15. 2015. ddirional $l.91 nillion (t90 nillion) ws &am ftom the DBlt ftdit facilig wirh d inlercsl mL of 5.00% per mnm payable {irhin onc ya rhioh motuE! md pdd

PtuEnss/ edd.n inb addilioMl lM moDnling ro PI 54 nillim vith v{ious lenden qilh tu interest F& of5.25% ps Mun ln@$6te mthe nd shill b. c.lcul&d on a 30/160 day @ut bais hd sill bc paid .vcry 3 honlis in mff in ud the naturity is on rhelsld.yofeehlhr'monrhpsiod. ne bd of 6t lM is 2

oi Nov.nb&

23, 201 5,

(S1.30 Dillion)

'€s

on Octobs r 4, 20 r 6, addirional $3.42 million (iI70 rillion) *a drrw ion ihe DBPt ordil subjer lo Epricitg dery qds parable within f&ility wiih s interst de of 4.50% p€r one ye& with oatuit d orbbd 9, 2017.

mu

P.tocrun

s

lhd-kn

nd long-M laM Wtble

unsrd cEdir line facilit moutrg 10 $2.64 nillion million)o' D*nbs 19,2014 lith vdiols lmde6 5% unurl inreHr ptyable elery quder. l)Ii Decembd 19, 2015, I LI niuion (?49 million) ofthe robl ficiliry {a emtci, rd ihc remoining b!lo@ *6 Eale6ed in Jdu&y 2015. All of thse l@s wse strled a of PtuGrd ("124

aviiled of ! on -y@

5

Novenbfl 2015, ledocncd .nld.d irto a 5-yee cEdir line frcilit wilh Chimb$k in rhe soln or $10.62 nillion (1500 Dillion) wirh d Mu.l iiest tdc of 5 2a% subj&t b rcpicing Day le wery May sd Novdhd As olD€omb.r 3l, 2015, $3.50 nillion (F400 millid) oul of rhe br.l feility were grMted o' Nownb€r 2016, PtuGIM .vailod addilional $0.60 millio (Blo DiUion) lM rith the sm. inllr.sl md Fincipal matuiq dae 6 ft. fiFr dardoM. nie principrl is Doyable semiunully shing Novdba 2017 aiiq a 2 yes s@e pe.iod fton the digirol drawdoM. Pri'cip€l due *irhin d. )qt mouting ro $ m milion (F4.3 nillion) w€re duly clNified d cmnt ponion of the long l€m lM. In

MGl s lDnglen la6 pcrgble o]r SeDte6bd26,201t,MGIbgether $ PNOC R6erabl6 Corp.btion od Tm$Asia enbred into a 12.4 billion (d 154 nillion) o'nDibu l,lD tud Secuity Agrmol wirh RcBc dd BPI rpdificdly to psnially fDme the d6igl! d.v.lopDenr, proclllme4 onstruolid, op.ralion 6nd oainrenae 6f ia geth.dtl povor plot pojEt

prereminrbd its l@ md paid lh. endE Emrinina outshnding pri'ciP€i rmsnition of fitue cost d eninglnhmst of lom douting lo F58.40 millid resultins OuttudinA dra*dom pqtoring to this lob f&iliry s ofDe.enber 31, 2016 dd 2015 amounb io $2,01 I (o' Fl00 dbusfld) dd $43.7 million (or F2 06 hiui@), respatively.

h

2016, the MGI 10

ffiillmlmruill

on tune 2, 2016 md Ocrohs 10. 2016, MC! together r h PNOC Rc md PHINMA Energ/ co@o6tion, dbed inb a Pl.40 billion dd P2.l0 biltion P@jed t4m facil,ty AsEehdt sith RCBC steoifi€lly lo partully fime ine desis4 ddelopndt, pocwndl ud oonsbudior oI ils r 2Mw ssrhemrl poqd pld. expdsion proj.ct md to a'solide fte oftbdiq td lotu undd 201 I omibus AEFem.nr od inoid$bl osa in omelid anh &. coNolidltion, .nd lo fooc lie Norking *pibl Equimenb dd orls 3lneEl cdpo€& purPoses orthe

'fte rcr Ml lM dounring !o P2,10 billid h6 a lm of ren (10) yem fim rhe DE*dorn Da@ of ocloba 10, 2016. hteesl is paFble semi muall, md pnncip.l is Fyabl. in t'enty (20) semi

uNal

palmenb

tuin8 April

12, 2017

is fixed for tne fid tve (5) ves 6on DnvdoM D.1e, bos.d m the sw or the Ytr Fixed Bmchndk RnL .n lhe Pdcirg d.te sd rhe ru3b of L7t% (the "Initial for rh€ €naining five (5!yu of tht Raie on tE Roprioing Do&, lhe b. rhe ftigher of(i) rhe im oflhen pEvailirg 5-Ycd lixed Benohmdk Rrre plus the mdgin of I 75%. o. (n) lhe Initial Ratc.

Inr.€s 6& prwailing 5

hrft$ Lil rill

im

inrst

).

hdsl

'ne M2 Expflsion l-ls modring b Pl,40 bilion h6 c ten ot eelve ( 12) ytr includin8 L'rify{ix (36) mdths g@ teriod im Inirial DBwdom Dat ofJune 2, 2016. In&rc$ is payoble semi mully, md p ncipal is D6)6ble in.ighleon (I3) senion@l payDent within Mhe ( 12) yea fron bd lfrer th. lnili.l Dm{dow Dare. is nx.n fd de f6t s.!.n {7) w ftm de Initial DasdoM Dare hffed on de $h ollhc psailirg 7-Ys Fixed Dschne* Rde on rhe Picing Daa dd th. ltplieble @gin of (l) l2s% per mun prjd lo connmid OFdiors ture, or (ii) L?5% Ds md fiom dd rnd the cm.rci.l or@rims Dote (tne "Inithl InbEn Rne'). For subo.qudi DrawdowN, inteEst e sill be rhe tne 0) -diy sinple avm8. inl.rpolate! ote b6ei on rhe l€mining renor dd €mputed u6ing rhe sdatll-line nedod on the Rep.icins Dars..he incest fd lhc mdning file (5) y* l€m of rhe hm will be l]le high.r ol (i) lhc sun oftie iien psailins 5Yd Fixcd Bdchntrk Ralc ptu ine applioable n[gi., or (ii) rhe *ethtd ave6*! itteEsl mle

lnr*n 6b

duinE dE

n6t

seven (7)

yffi

oftne

LM.

De.mb.r 3 l, 20,6 sd 2015, the MCI hs ouabding dbsdovns ol t5l .69 nillion (t2.57 billion) Dd $43.71 eilUon (?2.06 biuion), respelively.

As of

Th. lM evenarns @vsing the onbbding debt ofMGI irclud., mong olhe6, minrerf@ of debtfo e{nity ud debkefli@ cov.Eg. ntios. As of Dmber 31, 2016 dd 2015, MQI is i. codpUdce rith $e sdd lou @v€mls.

PdoSoLt\ lang-tun loN pdtdble

12, 2015, tho Petosobr, together with ICEC md EEITC, $ tnid prfry ndlagon pleigors, $d enreEi i o a P2.5 billion (or $55.25 nillion) Omibus lid dd S4uity (OISA) Agreemst wi!'r PNB md DBP spccifially to psnially fDde th. &si9, dcvolopDenr, procllMed! corslruolio4 operario' ad minisdce of ill T&lac sole poer p@jed.

On

Novenbd

As of Decmber

3l. 2016 dd 201t. lh. P.rosolr dEvdom r

MI

of i2.49 biuion

fully pay lhe L@ fd lh. tcBla e6!nr of each Lndt vithin ts.be O 2) y€m 6on dd afs th. dat ollhc irilid dBwd(lw imeditely follouing lhe Lam SiSning d&, rh. paymenb to h€ made i' every t*enty-No (22) Mi-enu,l p.incipal insr.lbnmLs comencin8 on PSC snal

|I|[llNl[I[ilN[l

lh€ dar€ the n6t sniveEary ofrhe inithl dra{dom ( rhe'Pdncipal Amoniation Dae), inclusive. for rhe arcidmce of doub( dfa grc. pdiod of s.lv. (12) nonlhs ftom lh. inilial drasdosn Dai.. TlNs l]l. coftsponding mout on lhe ,jEl semi'o'ul pa)Denl n duly

clGsifien 6

cuft.t pqtion

PSC pl.dCed all of

ofrhe

longrm I@.

ill propcrty md equipr,enr 6 @ll.teml

in co"ecrion

*nn lhe l@.

Defftd fDmdns c6b m incidmbl cost incrre! in obbininA .he lM which includes docme ry shp d! hdfs ia! .hatd mo4rg., r.l 61ar. nodga8e, p.lfNional f€s, uu8ers lc ed oder @str diEctly afribuhhle h obbininE de l@. As ofDecmber3l,2016 rd 2015. the poftion petuininE b rhe rtrM .mosr of rhe loan mobtin8 10 $l.67 niuion md $2.la nnlion is presenLd 6 dedulio, liom the 1@s paFble ecout md is mofrizd over tne lile ollG lou usins lllc efrediv€ inrffir ft merhod. Anodiarion ofdefdred co* *ill b€ crpiblted until all divni* n.ssry 10 pEpar. lh. Dover plml for ils inlcndcd lse m subslodlidly mnplcle Delails oldE Cnupa umoniz€d defeftd fimcing asb follows: Baloce ai beginniq ofy€& Defeftd fmcing ost on lM draan

Ls moniutid

duins rhe

Balanededdorrd

Ider€*

2,733J39 1,06sr00

yd

11,67J,130 t2,l4l

expmse Elded ro rh6e loffi momred dd 2014, rcspativ.ly.

b

)_4

t9.03 millid, $4.93 niuion dd $4.52 nillion

in 2016, 2015

Tdbl pdeeds fron availndl &m lon3i.m d.bt mourted sd S2.20 millio, in20l6,20ls md 2014, Esp€dively.

Tolal paymerir for

l$s oourei b

f55.77 Diuion

sd

10 155.71

$20.00

nillion, $76.73 nillion

nillion h

2016

dd

2015,

|l|il|||ililmill

I

7. Depolie ror Fut!re Sto.k SubscriDliom D.rosits fo fururc stx* subsdip.ioa pfrin b lobl oBidedion eived iiom tne noncontulling inlGls i! .xos ofdre althonad c.rit l oflhe dtili.s qirhin u\e Gioup, lilh rhe pu.pw olapplyina the a Da)menr for fihE issum€ ofshms. Debik folloN:

se

EEIPC

EEI?C

Pehsola\ ipplidion fd incHse in anthodrd capihl Antr @mplelim of oll $e rcquimenls, tho ercu! reclssifi.d d.Dosits for tuorc slock sub!&ipion fton liabiliiy &colrn b equity acour unds nonqntullina ideBt On July 12, 2016, SEC ippbved

i$t.

As df Decdher 31, 2016, dE incme in authorized capibl of Ptucften ud MGI w6 yet ,ppDvcd by lhc Philippir. SEC, lhus, lhc b.ltu* of &tosits qs not cl4sificd d .qui9,'or in rc...dme wirh Philippine SEC Finmcial Reponing Bull€ti No 006 issued in tou&y 2013.

l3 A*r

RedEDenr

Obu.lion

rxe GFup h6 ecogniad iE she in t e abadormdl costs Nmialod wi$ dE Etom.! Avouo. ad Eboui oilfields locared in Gabon, Wd Aftica, G€timal field loqr.d in Sb. ToIm tube6, md pho'ovol@r tPv ' ,le potrn Ia.l|l) D lel&

Movmsb Bild@

in this &counl follow:

11

b.ginning

.:015

ofys

Additio.s or chage in dnntus

Tmration.diusnid Balu@ d crd olyee

(Nd I0)

O394t

02,2?5)

$196

tuiluilt||ntuill

Discount hre of4.63%

Eb6.

dd

for 2016 md 2015,

15.50% uerc

Nd

in

slinatin! dE povision

for rh€

oilfiets in

Gpedively.

$931233

$351,304

$1966,511 ln 20 L6 ed 2015, ihe .hsee i' estimre Esulred 6on the adjusbent ofc.rryirg mounl oldE obligliion md dimur nre u$d. ne etiin.c q6 piovid.d by.third p,iyqperti a engaged hy rhe cmoniln op@ld of the o ne& in Gabo'\ Wei Aftica. This also resuhed lo r in rhe b@k v,luc in 2016 md imMe in ilr bool value in 2015, of "W.lls, Diotfoos bd otl'er 6ciliti$" a€oui undd "Prcpeily, plm! Md .quipmcnl" in the Gnupt mnsolidared stmdb

ders.

offfdcial ncitio Note l0).

The addirion in 2016 pctuins ro provision for rhe presenr ulue ofthe lcA.l ud @'tudive obUsrriods b rend. Ure silr uron disDodiDg

frikis

ofrhe Tdlac

$ld roNr nlel

fuuE .slinatcd @sis of Dd rmovinA tbe opsaring

O. Novemb€r 21, 2011, PtuGM dd ClpAsia ASIAN wind Holdings CoopeBtief UA. (CipAsir) drded inlo a Shm Pwhse AgEemert (SPA) which * oD. i1). !odi6 nulurl .gFomenl 6 lo lhe sale of2.375.000 shes in Ptuwind hcld by Petocre', which is equivalent ro 4crl ofrhe total issued dd outsbnding shes ofPtuWind.

Sinul6{6ly on Novenber 21, 2013, PtuOtU, EEIPC dd ClpAsir enidld inio a Shseholded' A3tesml (SA). T1'e SA sill golem rftei. ElalioNhip 6 lh. sheholdex of P.tuwind s vell ff mnbining thcir Esp.div. nehs ud obligdio.s in relarion b Paowind.

Fuihs, dre SA cmbiN DrcvisioN regdditrg voling EquiEmenb fo. relevdt o.livitid tlal re'tuiE umiDo6 mnsenr ofall rh. pdies.

CapAsia {tr sivd tull vorinB md emnmjc rjghls 6 a 40% shGholdfl. On F.biu.ry 14, 2014, the olosing date, PtuCrcen lcr it ontul on Ptuwind 6 a result ot ia sale of the half of itr inbE$ of

3(I/o on

Ptuwind.

'Ille SA 6nths prcvides fd

oll di

put optioN:

cd :idlnwtur\ P$@d

In de absen€ ofa Liquidit Evdt by .hr sixth MniveNary ofthe Closing Da!e, CapAsia Inwfror may d my p.inr rhdend, by winlr notice (tte Pur Norie') ftquiEs retloc@n or ib deignee !o pwhse {ll oI its sh&s in Pehwind .r r vdu. dral sroll e'sG CapAsia Invdld IRR of fificn !€!@t ( l5vo) for ib invest nent.

d

Mivdary

lehc'6

ofthe Closing Dab, nay d my p.int rhs€frs, hy sftld natic. (lh. C,ll Norise'), crll upon CryAsia lNesbr ro Rll all of ib 6mor shde in PftWind b ttuGreen or it designe ar r ulue rhd shall dsure CapAsh lrvstor u IRR of isdry pe'6t (20%) for ib iNetuent.

In th. abscnc of 6 Liquidily EEnr by tbe s*enih

rmll0tilm[ml

-56

ex orclPAsj8 Invslor lhrcW! r Liqlidity Ev.n! ClpAsia Invdrd shall oflhe lnvesbent vith PetocEen follo*ing rhe soheiule b€jry: Upon

.hft

the

Fof[

(a) Affs capAsia Invsld n6 r*iv.d u IRR of Ndty p.rc.nl (20%) d ils Invdlncn!

Pelrocrccn shall re*ive Nenty nve p*enr (25%) ofrhe profb liom rhe Inveshenr oler m IRR of taenty p.lgt (20%) ud up !o d nR .o CapAsia InBror of sory five Drenr t75%).

(b) After capAsia Investor h6 Eceive'l u IRR oftwenq-tv. per6t (25v,) on ils Inlestn n!

IGEC shall i*eive fihy ps6t (50%) ofrhe pbits ftom the lNesbent Ner d IRI of trenly-file percenl (25%) dd ut 10 d IRR 10 CapAsia Inv.sor of thiny ps@nt (30%).

h!es. ha received eluiq IrX ofrhi4 pmmt (30%) on ib Invesbenr, t*ive smnty-ivc pr6t (75%) of lh. prcnb ircm dE Invetndt ov.r m IRR

(c) Afra CapAia pGEC shal,

of thidy

Liquidit)

perdr

lvot

(30%).

shall

nm oy

ofrhe fouowing:

(a) A $le of dr oI Petrowind's epilal sle* b (b) Tmsfd ofshde by lhc Cmpmy rishb of capAsia iNestoq

a

tlinl panyl

!o a prcposed

trmsf.ft. {hich giv6 ns.

(c) An inirial pnblic ofl'rin8 ofrte sh.H of Petowind (d) Any orber proce$ or

tserid

investor to div€sl ot ir5 sh@ in

on tne Philippine St@k

io

$.

ag along

Erche3€ (PSE);

of i innik Dbre a $. lbovc lisling lht enrbld CopAsia Petowird

Ir 2016, CapAsir\ mother 6Dpmy, CAIFIII PTE Ltd. (CAIF III) n%orided for r pmposed sale b a thnd paty of ib 99 99% nenbdship inhn in C5t&i! rhich oqns 40% intd$ it Pelrowind. In Flarion ro thir, it r$ aCFed thct tie SA enrd€d pEvioBly by PtuCe4 IEPC dd Cip^sia shau @a. ro h*e efiei M@vs on a lAtli A8r.malridrd ifio by th. padi€, thcy rc*rowL4.d md odimed lhat c.pAsi. Inwstols ht Option od petocrst CaU Oprion shau

c6e

ro haw

my

elTecr on rh€ dare of rhe

clGing ofrhe sale which happ€n.d in

As .h. pdnies acknowledged dd cofm.d lhll th. call ed pul olion shall ce6e Dpd sig'irs olthc nq SA, PcttoOM droogliad lhe ddivdive lidilny 6 d December 31. 2016.

Cai on derivat e witeolTdouiing b $l0.76 million in 2016 ond lss on dciBtive for rhe yem enden mounling b $0.?3 nillid ud $10.76 millio weF 'w8rizd D*nbq 3I, 2015 0d 2014, esperively.

Unda lh. dislirg laws ollho Rcpublio ofde Philippins, d 16. 60010 of PERC\ issucd @pthl n€k should be o*ned by citihs oflh. Philippines td dE Compmy ro om dd hold &y nining, peirolem or rcn mlle dergy @ntlct @a. As of D*nber 31, 2016, lh. loLl issued ed subs'ibed apibl sioct ofrh€ PMr C.dOdy k 99.64% Filipino sd 0.16% non-Filipino a compmd ro D.cenher 31, 2015 whereir lhe total ksued sd subd.riben opilal siock otth.

tllil[iltmilm

57, c'oup

is 99 76%

Iilipino od

0.24vo

non-lilipino.

Decnber 3 l, 2014 . capibl stock @rsisrl af330.000.000 3ulhori7.4 sd n1,824,220 Gsuei a oubdding connon shues vith p6r vilue ofPl d0.0224) per shm Tohl capidl stock md addilronal plid in crpibl douled to 95.12 million md $25.24 niuion, Espedirelv.

As oi

S€cuitie dd Exchdeo Commission appoved rhe incrcso it ,urhoriEd ctpiLl shGto 700,000,000shG dPl rrvalu!€rsn@ 9ut oflhe enlire in@s in th€ audorizd epihl .rek, 136,912,I I Q @nmon shes havc b.d sbscribed lhoughrfie SROonMay ll to l5,20l5. fte subscriprid of 116,9l2,l l0 @mmon shms addirioml paid-in clpibl Doured b $10.33 million. mounrd ro $l1.4,r nillior\ otrr of On

tue

3, 20 15,

riom330.000,000

'hich

D*mbs

tle P@nl Conpmy\ ciDibl slock coNiss af 70Q,000,000 autboi*d dd 410,?36,310 issued md outhding c@on shfts rilh ts ralue of Pl ($0 0201) ter sie. Tobl mpibl sdk dd addilionol t.id-in spibl mounted to t9 39 nillior md $15.62 nillio', ft sperively.

As of

31, 2016

od

2015,

r,oallL .?015

Bah@s

ar

b€Aitrirg

afyd $35,620,533

The

G.oupt

Dffib]'',0'6

t

ck

sdd

of capibl eloo* follovsi

o) 1'0.?]6

EilLlllllll||lllx

- 53-

Thft r@ A pp

no d@l@1ion

tq tu.d

of6h

dilidenlls for rhe y€m 2016 Md

201 5

[br1 t "zs I 5, )003, fie BOD apprclod Re @ k ed

ie lpproFieion ol t0 ae aillion td th. oselopnenr On lmu. ofthe Eboui oil fiell ir Gabm, i' addinon b lhe $0.56 millian o4jnally appoptia&d mour. Pdicipation ir rhe d*elopnd! oflho Eboui neld by lhe Cmup is ba appeved bv luly 24, 2003, the BOD approved additional appIopnalion of Eoinei ffiings amounling lo i L0 niilion fd rie &v.lo9mei of the lbosi oil field in Glb@, west Afric!.

On

On February 19, 2013, th. BOD sppnved addiridal .ptroptided r*ined emi4t mount'g ro $ r .09 niuion 10 ever for rhe Gdup's shm in th. cdr ofthe omiited N.lb in tie oilicld in Gaboq w61Anica.

Ehe

Tor.l aFproprialions for the developnml ol t te oilfields in Gabo4 wel Atns a of million. Furths spasid of the soid oilfield is Decmbe. 31, 2016 sd 2Ol5 mouten b

'3.l5 As discu$€d i' Note l, on Ilne 9, 2015, P.tsoEnereJ sold ib l0% inl.ct in lion 1009'6 io 90% The EEIPC, bringit is oM.6l'ip in 6 m equit Ersaction sime rhere v6 no ohuge in mntul

ltuGFd

PtuGEd b

tudon

w6 .eounr€d

'Ihc efiect olchmge in rhe osnmhip inldesl iD PtuGEd on rh..quit) ,Ei6mble of Petolnels/ dDnry tb. t€r G sDo&iEd d fouo*s:

Edrtn ftd non-conlrouirg iniw$ .6mcmounr orlon intull'ns inGFu sol4 nd ortbred.dr Exc$ orcoEidsation @iv.! Bogtized in equiry

bolns

Considedion

t1.359,171

Al PecoEnerg/ s sepraG findcial $lm.nll, lhc g.in 6on sile @o8niz.d in rhe compEhensive incone mornLd lo $2.l2 niuion in 2015.

The prinary

crcdit raling

sbhdt

of

objativ. ofth. Groupt mpibl nrnagd.tt is io eGUE rha! il ndnllins a tuns sd healrhy apibl raris it oder to snppod ib busite$ od ttwimire sheholdeN'

Th. croup msss€s it 6pibl sdcM sd nuJ:es djDshenb to i! in light of chmg€ in sononic cmdniohs. To minlo' q adjsr rhe cipilal slruonE, the Grcup my incrde debr 'E Aon crcdiioN, ldjust the dividdd !€ynd! lo shd.lDldss or i.su n.w shsH As of D€cmb€r is

bbl liabiliri.s

3l,

2016

ed

2Oi 5, rhe

Glup noniloF copibl

using d d.br-lo_equitv

tuiq which

divided by robl eluity.

lilil[|ilL0lm]l

Dembe. 3 t,

As of

2016

4d

2015, the

Croupt soui€s ofcopilal ue 6 follows:

$115y'A717f,

9;9r;1r

$115,710,442

9;9l,3rl 35,620,533

2!822X69

ryGfle

tqu

lIso'l7J

$136.130.61,1 'Ihe

idle belo* denonss$ rh. &bt-ro-equily dio ofrhe Gbup a

of

22,449,424

r,859,!2L $134,610,942

Dsmb€t 3l,

2016

od

1gtetn!

Acmutu payabl. dd ecrued .xpci$s Dep.sn for frnuft tuc* subsdption

r'366'5rl

Asd dilment oblblrion orhs .dncllffit liability I

oa

p"br

Basd

$9,l4qj

.auir

1.40'1

i.q',tdi.

on rte

Gmupt sseMen!

rhe prcvisioD fo. (benelil

ton)

the

@tiol mmag€md obj*dve wde m.l

t.3 in 2016, 2Ol5

rd

inc 2015

l2!3,rm 5,219,303

(tr,432,03t

$5.963.77:

m|fiilffiIlIlll![

_60'Ille comtondts oftie Dermd

h 8.b

Grdpt

ner

defsr.d

d

liabililid @ 6 follrysl

06biliti*) n.osniz.d i.

di]4flr obrigdio ulFlird aor.ign .rchug. lo$ Acmed dich.d |iabiliry

Asd

PBviion foi r4babl.

&"1

los*

(l'5J-'t3or Def*d

6

{,'6:i1o6)

(r2t6J62)

ard rc.ogniz.d

in .qutty:

7)u

(sr,!2e,{r8r 'Ihc above deferen

d 6sd dd liibili.ies e pMted

i!

lhe

co@lidlted

61,317,536)

shbed

oa

fmcial pGnid a follo$:

!016

Defded insnc d Ncl5 - nd D€fded itrene d liabiliries - net Nd defeftd inon. d liabililies

Dcnb{

rfjr7j36)

2015

(t,6U,496) ($r,3r7,536)

dd 2015, th. Orou! did nol rcagnize defenti ld as.ts on NOLCO md MCIT s the Grcup bcliwd rhar n my nor b€ pbbtble lhal sufii.i.nl dable i'cone will b€ ovaihble in rhe ns fcssble futu .grial vhjch ltc Lx benefirs s be Edizd.

As of

31. 2016

Details ofde NOLCO md MCIT

follo*: MCIT 20t9

2015 351

20t,1

2013

s indic&d on lh. Inplenenli'g Rules md Rqllarions of $. Rmcwdle EHs/ GE) Acl ol2OO3, lie NOL,CO ofrhe RE Dev.lopd dhins rh. fi611h@ (3) yem f.om lh. st d of @nDercial optnrion shall be died over a a d.d@lion frcn 8rN inmde for lhe n*r scven (7) €nseutive t x$le yrrs imcnia&ly iollowins the )d or such lo$, subjel lo the rouo{i.s Fo. MGI,

a)

nd bcm pFiouly ofasd 6 a denudion ftd 8rc$ in@m.i od b. r enh litrn rhe (J@ri6 dd tol fDn dE availDmt of instivs p0ided for in the RE Acl. The

NOIrO

b) Ih.lo$

had

should

Foi tSC, on .ruly 23, 2015, 6e tSC reststotrl vith PEZA 6 5 E@nonic Zde Utihis Enlearise lo biablish, opdae dd n.irtain il5 50Mw solar Facilily pojd !r tne cmbl

tLiltillllmIlfiNl

Tehnopdk dd iho sle ofeldicity in &6rdoc. wid, tne alEsent i popoels s€t foib i' ib appli€rion.

ill grss i'cone emed frcm suM wirhin rhe PEZA .conomic zorc in lid 6fpayi4 all nalimal td lEsl incme la{es. GrGs ir@ne eded i.fd ro E o$ ela diived lron uy bNim* &tivity, n r of retDos, dEmub dd dlouu€s, Ie$ 6s ofsoL! cost of producrion .nd .uowrble dpaes 6 defned by tEzA. Inoo'e 3seftd fiom sour6 oubid. ofthe PEZA snonic ane sh.ll bt subject io reglla @rp@L n@s.

PSC shall p.y

lie

sp€cial

ra Ee

of 5% on

AU o.ha incomc oursi& th€ Rx md PEZA

lhe ftconcilidim oi

the slaturory

d

i.gulolioN

ft

subj*r

nte b rhe efi.ctivo in.me

rd lhe RCIT

d

6t

rde sho*n in

of l0%.

lh.

coNolidlred siaLnenb of incdDe follovs

Add (d.dDd)

trmiline

In6no slbjrct

ihs

dbfDard

capir'i sains $bjErd h 6ndr

rtrcoft non mbris subjcrd

(0.,4

Mucrion. hdponlton Sro$Ee

{d

dd loidiq .xtens

(rs.r)

q

l0l5 t3,t27,t93

r.,,70.,?0e t4,49-112 !!,ll?

n|liluilllllil

.62

21.

Cor olEldFicit! 5116 !016

.2015

Depsidion dd Mortiaiion (Nore I0 Puich!*d snices od

uilnis

1,34t.531 222,106

lusine$ 0d alai.d dpenses 55,21t

$tr,1rrt61

32,1t4 t?,113

B6€d on Eners/ Resulatidn l-94, all p@r pmducd shall *l 6ide one cmbvd p€r kilovan_ hou (?0 ol^\Th) oflhc tobl eldicit $les oflhe energ/ gensiring f&ility whicn shdl be applicd 10 Gensarion lacilities od/d dets, rcsoEe d.v.lopnenl pojeb locrtd in lll bdmsay., nuicipolilies, cilres, prcvin@s dd EdoN T1; GrcuP recqliz.d oyary r*s mouiins $45,769, $32,114 md 29.605 in 2016, 2015 md 2014, Bpeivcly.

Under th. CRESC No. 2010 02 012, the R! D{eloDer shall pay rhe Sovcment shG equivalenr 10 o'e $d a hsrfps€n! (1.5%) ircm de ssle ofssrhemol sEfl pFducd md such gd.Ftion, trsmission dd sd. of eleclrjc power incon. incidentol ro md eisin! gerembd nom geothedal enssl {ithjt rhe Conhcr Ars l6s 0615 5d expenses inc!ftd lneMn. MGI isedad gmnmst sharc dolrting ro t50,990. $69,750 sil 155,2t I in 2016,

otlt

ftd

2015

dd

2014, rcspedively

Elebic,ty

sales of

lessolai

also

PtuSoltu st rteii only

ls3 rn gpvmtnl she mourins

in 2016

(s

ro t41,471

NoL l0).

:1 C.mnlrDd AdDidirhriveErp.htg 20t4

Sddis. *ases md bdefiis $1,192,112

Depleiarid dd motiarion 243,013

Enietuinnenq

mcdenl ud

D5J5r 63.3t6 43.531 .13,332

3t,951

milil]||illlull

$s2.291

t1,729

3t,3J9 ]]7,249

WiFofi

21,339

22,305 35,241

33,,101

43,439

31,123

t 1,695

of defered expldarion

Gadline. oil

dd lubrimb

S*uriq mdj.dibnd

sfli6

l6.t5l 21,n31 393,312

52.12t

t3;1?,r5J .Othed

'Dedin

to

niqlloeo6 *pde

chftge, lringe beDeft

)5.

Mi*.llmeu

es

$3,9ll,032

seh s developmst dd r.roduction expses

ssiJh4,

nolsiation, brnl

Imome

Muisemflr incobe (No&

$r30,532

26)

1722

19,307

t),\92 2,131 $2

|,6t3

t24lJr7

Mano€sdt in@ne Etec b adtninisrali'e fe€s biue! by P.lioEne€/ rd Pdoccn Pebowind Fdrhe ems od sondition .f EI&d ls tusrcrioB. s.. Nole 26.

26.

ro

R.l.Ld P.rly Tnn!'ctiotrs Pdies e onsiddd to b€ Elftd if.no pdty h6 tne ,hil'q, dielly ot indnedlv, to on!!l the olhs torq or *€rcise signiliml inilunc over rhe olh.r pfq in D'kin8 frmcial od opsatinA de.isions. Pdis e cmi&Ed 10 b€ Ehred if m. rrt l'6 rhe abilitv, ditcdlv or indirecdv to 6ntul rb. other Do.ly jn m'}jng fnocial ud op€nting d4isions d lhe pdies N srbjcct to Mnon conbol or comon sigilianrt i'oln€ (refftd ro 6 Af6liet) R.lcled pdies mv b. individuah or corpmio entiies.

ililNilillllmmrl

Stnificflt tmsdions

wilh ElaLd panies

md

I iin

i,

I 'l'FJ8'1'04'(lL'3.

a

Ontuly19,2015,PERCNailedofa$0.70nillionlomtonHouseoiInvestenrs,Inc(Itr), oayabloorDecember9,20l5ail.12%i sst These loms hale beo tully piid 6 ol D*mbsll,2016 md20l5. p€rfon irtml atdil sewi6 on PeboEnds/ HI chlres ($l.l30) ps n@lh. Al$, on MNh ,. 2016, ?etoEndg/ eryaled di6 f* ofF56,OOO HI for n Ge'enl contuls dd Swlen Inplemmhrid Revi.a.

PeEoEnerg/ h6 engaged HI to

Mmh 2015, PWEI aviild of. +20 nillior (or $0.42 millid) lM iion PGEC { 5 6% unual inbE$ payable in June 201 6, This wa slled-ovd ed pai'l on DMbd 29, 2016 On

m ad,Citioml loM 6on IERC doutitg F20 Dillion (or $0.42 niUion) payable in Moy 2016 !r m'ul inrst raL of 6.104% ftis wa slled oler On May 4, 2015, PWEI availen of

ad did

on D.cember 29. 2016.

Mnasment

in@mc

msagddr ud

Advds

e

Ef*

orher

minirol

to

ti'ffitins chdgfs, lMagoent fees for &@unling l€al! swic rendeFn ty PetuEnerg/ sd PdocHn ro

tupton

Einbmmdt

of

.6ls ud

exD€nscs.

TetB h.! cor.ltions .f b@tdio4 wnh ELtetl poti6 oulshdinE bdm€ d yd{nd e uNecu.i, inrss!tue md $ltlo TleE have been no e@d&c p@ided or ftceiled fd -y relah! pany @ivabl6 or payabls The Gbtrp hs not recogniz€d my inp.illMl on moub due tron amlated coDpmis fo. the vds ended Decflbd 31. 2016 dd 2015 This ?sssndl h udertaten e&h ftucid,q! ihrcuSh n €view of lhe fmooial p6 irion of 0tc r.lalod p,rry md fie d.rk l in vhioh lne relatd

!!! squE$de4!Gv\!4!ls!tr !

The Gbup ha a prcfil{l'ery pld for dnecio6, offi€r, nMAen in its byl,Nr The uou! th. lMr.rrd @caion ofdislribulion BOD. poviden

dd poff she

sna0 nor

ex*n

5%

md

endoy* d indi€t

d

is ar rhe disci.lio ofrhe oflh. auditd ineh. bef@ income d sd

lr|milililtiltfiIil

'nie remDeBrion ofthe Gsupt

dtebn ud

olher

mmbe6 of ke! mrtged.nl !rc 6 follos: 20t4

Salai6 md {ages md orher shon+m bm.fit (Nor. 24) RdiEmenr

27.

errse

$320,536

,7)61

Fina!.i.| hsrrtrn.nt 'ne Croup s principd fDmcirl iatuenb include sh od sh equinletu, shdn cm i.vehdrs, hding dd invctndt secuities (finmcial 6scb d FVPL), @ivabl6, Gtiden cas\ lod payoble, leoud payable, &c@d exps.s tnd divid.nds pryable The niin purpose ofrhEe finscial instiumdB is lo tund the c'oupt wo ina clpilal i.quiEmdts, caEeodes od Frir vdues ofFidcial hslrmcnls As of DsDbe. 31. 2016 ud 2015, rhe c,rrying mounb of i\c Goup\ frnscial 6sd fDdciil Uabiliti6 DpoxiDab tnen fan vatues ercepl lot lMs payoble. Tle frt ulue ofrhe loos Davable 6 ofDember3l.2016dd2015 Dour€d to $120.19 dillid md $120.71 milUon onlolr{i b then c,rryins lalue of $l 15.49 million 6d $ I I 5.71 miuion,

fd

'n. n

lhods

ed smprioN

used by rh. Group in estimariq the

C6h od cah equtr'ddt drt Rec?ivabkx

D@ b ih. sbonrm natuc of $e carrying moub rDpDnmat frir

Fan

vaks s. bed

Foil valGs ae

lIont

payble ard

eL't

experLrd

fai' vrl@ of

D@

b

m

iGtudb,

vil*s 4

on published quo&d

bed d

rhc ahon-t

carryiq

flmci

qM@n

n!ft

plie.

ms*d pnes B d

of ille

mout rppFxitu

of dtr

instuenb, 6d

fan volu€

F i valws e bas.d on lhe di$oured value or exp€ctd fuM cash noss uing dle lpplietl. int*$ hr for3imileltpc ofiNtsmenb. T1r fand@ for 2016 dd 2015 for ihe 5 yd renq l@ is ddived uing rh. pnjsr.i T-Bdd @upon Be or 1.863% md 4.51996. respetiwl, plB 3.202% cEdit spErd for lnE 6d 6ve yd dd 4.303% lor ihe seond five t4.

The faf vde ofrhe 22 yee bor lod b derived si4 rh. prcjd.d T-Boi 6utd re of 4.6,1c44 plu 2,250 cEdn sprcld. For rh. so lobs vih 2-yd te.or, 2016 ud 2015 fair valu is ddi!€d Bins rhe Ersury nb of 5.964% Dd 3.39?% plDs a mdn

|nililttiltmtl

3pled, of nil 0d 0,0?3%,

6pdtely.

Fai value is eiimared usilg a modilied bindnial optjoB pricins nodel which asi$ oft*o p*: pricc c fld rhe bekrdds indElid trc..

rhe

The followins bbles shov fnddd inslDneqrl t@grircd at fair ulue a ofD€emb.r 31, 2016 dd20l5. TIE fan mhe G b6ed on rhe source of vllutid 6 oullired belov:

quol.d pnce in active nskeb fq identical dsds or liabilnics (lxv.l l)i those illolving inpft orhs rha qudr€d pnes included ir I-qol I fiai: ffi obePrble for ihe 6set fl liabiliry, eirher di@dy d indislt (Lwel 2): sd dara !hos. wi& inpuls Id L\e 6set or liabili9 thrl d nor b6.d on obsoblc 'wkei (uobsewable inpub) (kvel r).

Mekebble €quiB

lrvestud

in

$.uirie.

soll.lub 3hrs

t

i,,Jrdablee{uityscunies

In 2016 md 2015, there

*ert .o Msf.6

oi

fin4cbl

iNtuent dong

all lev.ls.

D'ivdive Fipmcial Instuen6 The onbined fat value of$e oplions is enimtd using . sodilied binonid options P.icing nod.l which @nsisb oftrc E1s: dl. Dri@ lr* dd tie baclaards indudion @. Undt a tisk-

neltal csumprion, rhe Fie lr* is ued lo pftdjct t ie Fbtiil upuad md downward novededts ofrh. comp$y value 6 of valurim diL. ltc bookMds induction @ is B.d to onputelhov{lu€ ofrheoprim givd tnepFdioled vllu6 inthe pricel€. It.baora&ds indndion fte is nodili.d lo incoDoe wsal Nunplions t]l01 @ b€sed on mMgdents ju4Dent md *pe.brios.

These Bsmprim e. 6 follos: G) The projered ofid pri@ is rhe bmk value of

Pehwitd al 5rh yer (2020) (b) Polrowird shm p.ice voldiliry h Nm.d d I c,/0. (c) Thert will b€ no dividend d*ldrrion for rhe 7-y.& projeolron (d) 9Elo Fobability of liqnidit evdt.

|l|l$ilfltulfl[[

Sioifimt

Unobserable Inpub b Valurion The signifmr uobsflable inputs lsed in lhc l.t valw De6ument crts@z.d within of rhe fan vabe hi.@hy togoltd wilh a qumtibrive esilivity maltsis s at Dadbr 3 l, 2016 ud 2015 re a shorn below

De.riotion

oa

@hnique Modified

inpub

hobabilir,

binmid ofliqlid'ty

B6e srDption 2016:99% 2015: a0%

se$itivit ofrhe

input

hel

1o

3

fan

Iftn€ prcbobiliiy is incrcdd bC 5%, tne dervatile liability

Iftbe

sp,rt

prie

is

increddl

by 5%, rhe dcrivotive liabil,ry

pie

spor n decred.{i by 5%, the &iivotive liabiliry will be

l0Y!,thode vdive liabili9

sill inclge volaliliq

is

by 1.4%;ifrhe

d*ltred

hy l0%,

Risk Mmsqenfll Obiectv* ed Polioid Tie Goup nmag6 dd nainains ils own portfolio offidcid itstlmdls iD order to fud i6 oM op@liors Md capibl spendirG. Iihddt in sjng lhese finmcial ituhmmll @ tne follo{ing risk on liquidity, ne*d od or.iit.

Firdoi.l

lte

'ain

finmcial nsk disin3

60r

lhe

Gmupt

6neid instlmois ft

Iiquidit is& meket

due The Liquidity risk is lhe isk dd rhe Gsup L ufrbl. 10 ned ib lidcial obliSdions 'hen crcup Doril6 ib crsh flow position dd @enll liquidrty posttion it Msing its dpcrc to liqnidit sk. Ih.Crcupmo'biN a lflelof@hddsh equivalenb d€n d suficie'tb finmei$ opsalionsaldro nirigare rhe.ffels offluctuarion in c6h no{s Tomvda shon_ Lm ud lonsaem fiDding rcquimdts, de Gloup inldds to ue i.bdrllv gddalod tunds 6 sell 6 b obbin lod 6on firsoial i6ridio6.

fiililruililmm|tlll

-636bl6 belos sumne@ lhe matu,ty Dolile of lh. Crcup s nmojol 6srs od fidcial liobilitiE 6 ofDsenber 31, 2016 dd 2015 ba€d on .onr..tu8l palDenti 'IIrc

l[J,1''J'o,gl3j

l-'s&,]714/ld,!r3

]llr3t!L.!!q!r

--_

Mff-"iJ"*oldl|i,.

Mslerrist isrheiskofIo$ onfutu omings, o' fan vatues d on tuluft o6h flows rhrr nay chdgc $ Day Esult tron cbMA.s ir ndlet pi6. The Mbe ofa finncial 'nstumr a rcsuh ofcnmgE in equity prices, foeign cumncy *hmses nles, increst es md other Eouitv Prik tus* The Grcup closely noriroB dE pric6 of ib

s*ltilies d ! d.ily bais, e *ell d dtityiFific f&d shioh oould diEdly or indioOy altar rhe pice oith* instue.t. h 4e ofd dpsten d€fine in its pordolio ofequity seuritics, $c Grolp Eadily dispde or tade lhe s*dtie for rcpl@ment sirh ndF vi.ble md ls riskv nad@monic dd

i'wsdenr surili.s de subjet la pncc tist dne ro chmges in nor*er ulu6 of irorrunenls disin! eithe. ftd facto spi.ific ro individu.l instuenb s thet &su6, or l0do6 afi*ring nU instrDmenb tldei in rhe Mk t. such

||lil[nlruili$ll

69

'fte mltsis b€lo* is psf@ed for Ee.ably po$ibL noMenb in th. PSa inlex (PSEi) vith all othe. veiables held @nsrant, 3howi4 l]le impet d ircm. befw Lx (due 10 changes in fair vab. ol.quity suriti.s md goll$@s whose for wlu6 m rqrded jl lhe mn$lid,ten sbnmb ofincone). The Grcup used rbe d.ily avdS! ofnovdots ir PSEi Die indies, pls .djDs@d b.L4 fd cquily s.curiti€ 2015

t29s,l

$11,635 o 1,53s)

(]u) Th@

is no

0,20D

orhd imD&t on rh. Cbup\ .guiry oths lhs lhose alFady afaering

i'6ne

FdFih Exchdle Risk

ExD6!re 10 cuoey risk eises fom loeml rd adminisirtive .xpM, ascls ed liibililies in clffides olhd rhM ih. CDur\ tuncio'ol ctrlHcy which is very niniml sinc. ihe Grcup's oil Evdues ud @stl rd *pens e dendDimEd in US Dolls.

Cmncy sk is nonnoEd dd iinlyz.d s,rldaii.llt od is mslged by de Group.

'Ihe msl]ris helov

demonfab the ssitivriy ro a @mbly po$ible ohrg. in tne PhiUppine leso dchmg. El. which is lhc dly solff olrhe Gmup's fcisn excbd8E risk, rirh all orhs vdiahles held coNbt sho*ins lhe nnpDl on in@6. befoF ei (due to chdgps in fiir v.lu. of cllffioy seNitiv.lo finoshl llss md liabiliti6). ne Gioup used the yeu'aveBge ldsasl fmm rte Businss Mmird InMrtioMl in rhe sal'6is

'n. follo

ng able er5

ine foFign clmncyidoniml€d 2016 Dd2015:

fdd

GoUDE of D6emhe.3l.

Ps F642,113J15

fiMci.l istumorl

f,qoivrletrt

of rhe

Peso

5r29r4J33 Fl,531,172,611

Equnaknt

t32,535,605

7,t52,211

3{2,060,92t

6,379,74s

r,trs,t3l]tls 22129299 5J42,O712r4

Aoourl

Ar

1r5/a12n

1,333,511,609 39,.061191 5,.{45,131,401 115,710,442

pa'€hle and aened

334,5)6,610 13,795,721 2!9.662,m0 4dr9,l0t 597r.689114 120,106t30 6,129,360,031 134,506,16L .P,tt50.504.,t 9r rt9r.6'7.03r, (F4.da1.143.42) (Xo<,/r3,763)

ofD*.hb.r I l, 2016, 2015, rhe exchdAe nt s ed

F47.06 per

S

lot coNeBion

ffi

?49 72 md

I, Espsiively.

ltmrutmmill

-70-

fie

fouowinE 6hle dmons@s rhe s.nsitivity to . 6o@bly po$ible chsge in US dollar *chmAe iaB. Wirh aI otird wiables held corstonl, rhe efed on the GbuD\ inonc b.fo€ is

(s.rr33I54)

4Ia3,3!4

2015

($4,?7r,933)

4,111,$A

Ir msr

Rale tusk Ine Grcup s exposu. ld ntukd nsk id chsges in inteEi rabs r€labs p.imily ro .he df l6s paylbL is fired fo! tlte crcup\ Ioms payrblo sd deivalive liability. Inrere$ fixr tue (5) yem dd vill b. i.tric.d thft.frer.

d

Tie bble belor demonshbs the sensilivity b i mmbly posible oh{ge in i.bsr Nith iU olho vriable held conslait ofrhe G@up\ nd inome The Gioup usod u:. f(Hosled ore-yed TE6ury Biu mb in psfomina .he atlFis b.lo{.

nrs,

(s1,700,722)

Th*

h no othcr inpoot on rhe Coup\ eguit orher .hu thos. alreldy afaeiina

iMft.

ofcrcdit ri!* silhin rhe Gbup sincc nosl of iE limcial 6sds de *ith coMdium op.rrls, a$onSn cEdit rLk is innat tial. Tfie 8rG ldiNm .xposuc of rh€ G@npt oedn isk ir eq!.j b the canyi'g moub of the nMdd !sls.

Th* !e signifimr mncdhtim

TheGbuphs!v.lld.t'€dcEditpolicytudcdablishci.rcdilpreduEs In.ddilio, seivablc bdoB E h€ins ndnild.d on . r?gule b6sis ro ensue rintly ex{ution of 'e6sary

intdention.fforis.

|l|m]tmlI[Nll

,11ddminE the crdir qulity by clN for lom-Elded oaolidtkn ${mcnts of findcial posnion lires baed on rhe follo 4l

The CrouD

C6,

sh.nM inwthat ofthe fidciil insritution.

in bmks a1d

Epftrion

b6en m $e druF ofthe

sudrades

md &e

66ed on the prlment behavior ofthe €dbD&l'. Htn 3n& p.nliN to i€eivoblrs ftom ansnim oleer nd irterest l*ilable ftom shoden inwsbenrs sbdrd grde p*i6 io orher lteivables. Borh re neither pal due nor jnpair.d.

n..,iyzrler

dd

Th. i.bl.s b.los sbow lh. credit qu.lily ty cb6s ot 6sei for lomjelftd coBolidare! sbr€meltr of fimcial position lines, baed on the Gmup's ftdil ding 3ystm a of Decdb.i ll, 2016dd2015:

Hiehqrrd.sbnd[dgnd.|Dditrp'nld

'-

HLsh

srrd. sMd'd sad.

","!

md

inpriftd

t-

Ftr n$lgeDent purpGes, rhe Gmup is o.8diad ido bBinds unils b,sd h6 nve Epotuble segnentl 6 fouows: The oil poducrion segDent L

e4rg.d

in

'Ihe g@th.mal dergy segFent derelop6

on lhen

prcdlcb md

lh. oil dd nin@l exploEton, dev.lopndt

sd opsdr6 gsrh.lml sllmfrelds

md

dd

pNa

oer&/ *gndr 6i.s oul$c gae6l b6in6s of goeding, lrdsmining, odor difibutina pord derived im sird 6eEJ sollrs. Sdin8 2015, this w6 noi presEd a opdarinBsegmenls ois b€cmeajoinircntFin20l4. nE crcup l*e up ib shrt in n.t eminss of Ptuwind sd ps.dts it tn. coMlidaLd sftmmb of inede ud.r "she iD n l inon. 0N) of o joinl lentu". 'n. $lr derg/ Fgmmr tries out solar endgy oteFtio's olmc croup Other acriviries Fniin b G.mh od investnent diviti6.

The wind

n|[$|lltruLil

-72No opeding segnent have been aggrga&d lo fom llle rbore repotuble oDdling s4m.nts.

Mafrg.ment nonior ii€ opdding Esulls of ib busine$ lnits sepmtely lo! tle purpase of nBldn! daisim abour Bo!i@ .llo$lion sd prfonme ase$mmt SegEen! p.rfomatce n elalucd bascd on opraiing profi or lN ed is is!red consistcntly sid opemrins p@fit o. bs in lne consolidrtd fmcial $alm.ntr

o&loDd.!d.iao!0

oenJot s,z:.rr 6!rrsr)

ru!J)

nr.l'

'h,-h.

D6dh|'dt|'!6iil

o,qroD ct6,$D

(6rJ4&M) or,o?,t{)

r"eo

{?t{!4r

n[lruillmmilN

1l

cja.bo 00r1d1)

28,t60.t1

03dijt)

ffi

l

cicroup investnenb, Evmues md .xFds.s

29. Arlic.Diluled E.ming, Tne conpubrion of rhe

P*

e

eliDi'ed duing consol .rion

Sh.re

Golp's emings pq shft follossl

Ndhconeatbbubbl!b.quii}

\redd d.i4

oumbs ot

shr.!

{|

0,7r6J10 t0

004J

21)]]!L 100076

she e olollarcd sin3 tne .d incone aittibut ble to e9ui9 hold6 oflh. P,Mt Cmpanydiridedbytneweigjjkni!mg!Nmb.rotshG OnJune3,2015,Seurii6sd Exchmse Conni.sim apprcvcd de inclse in the aulhdizd copital frcn 310.000.000 shes b 700,000,000 sh6 at Fl ptr !'18 ps shde. Our of tne otiE incl%e in ihe Nrhori4d capibi Embgs

per

slook 136.912J l0 cmon sh4s h.vo b@n subscrib€d rhrolgh May I I ro 15. 201t G.. Note 20).

30. NorcoDrrclli.g

rhe

SlNt Righ

On'e.ing on

I .r6b

nonculrolling inrssb NCD p.rLin to lne lO% shdcholding! of EEI-PC in P.doCEen, l5% shmholdi4! ofTrs*Asia dd INOC it MGI md 44% sh*holdings oi EEI-PC in Petosol& As

ofD@nb.r

MGl Petsosol'

3

l,

2016 md 2015,

and

Ptuwind

e

dti1i6 incorpo*n ud op.tating

in de Pbilippites.

lil[il]Lllllllll

As of

D*mb.r

31, 2016

nonconholling int Es6

dd

2015, lhe a@@uhbd b€ldces

ofdd

ne1

lo$ ddbulable to

N s tbllos:

2t16

Aannnhr€d

brbnsof troro

mlling

MGI

rJr2,05?

4,313510

94,002.0?3 N.r imon. nos) rrrtb .bl. robcotrtmlli4 i.reBt: MGI

2,868,633 116,042,125

ro

51,597,l]1

1.501,,153

',923,363 'Ihc summeizd firacial infomalion oftise subsidiaries is provid.d b.low ir Philippine Peso which is rhe .uhidiriet turcrioDsl gllftncy. This inlomalion is bzs€d oo dount! b.fore

inLr@mp,'y elimiDarim.

Th. 2016 dd 2015 fil$cial

sbbmetrr

olri

infmiion

nclrl Posiiio!

lor MCI

lollo$:

P596t05y'11

t310,497,164

3,?59,030tr39 3,353,103,714 (457112,133) (652160.361)

(2,13F4?!M!!9!.!!!.1 I

Fr/60676,?77 Fr,lr9,730,l4l st t n.hll

of

conprche$iv.

F?39,3t6p37 Pr74,45l,lJl (6,13r30J03) (566,3:14,479) sbbr.trIl Nol

sh

Flm

0f csh provided by

Operaring

{ud

in):

a.tililies

Finscing aciiviri.s Ffted orrm'ed.hmFnE N.l incEe (d*Me) in sh

f33a;4r,115 ?272,161,1U (9?,910,65t 022.330,735)

o490r]6a Oj3plo)

(15r,&7J13)

(470q0o)

lutMilmlllfr![

The 2016 finmcial

infooatior for PetuGrem follow:

Slltm. olFiuRid

2015

PNlllor

(265.631!092) (123,n30,3!2)

Equity Slrl.n..r

of

(439,610,963)

(90fl4l!!)

?1, | 75,541,169

CorpFl.nrlv€

cain (los) m

P71.71?,r98 F255,095,413 1;1vt,493,0\5 |,192,7 15,994

hon.

P11,,r53,609 ?u.405,103

t0,3a2,7r1

ddiv iv*

Exp.rss Nd Dcome(lN)

(33.393,5Q2)

(.17,436,004) (40,700,46!)

Pa-4,&U26 G!a6qrj'o)

Net cah provid.n by (used in)l

Nd

inM (defte)

Tl)e 2016 fbanoiai

Sr.&nent

ir @h

inlomtion

for Petosole

(36s,062)

(6r5,443,r51)

(P6,696,0r6,

P13,404,374

follo*:

orFi.'mill Pciliotr

lt!5,1!6,356 2,959,r09J?,1

q Q21,1 29 r)

eJm'usl2n P9?3,!r00,5

|

2

P1.261,266,540

2.339,095,003

01) G,31r.334,933) F10q,303,0s7 | t,526.663,5

St'&me ofcoDprch.Ntv.iron.

r:peb6

(Je6'360.r2t (lr,e'J6)0)

(F739,r25p93) P76{,360,3?5 (172122Ja0) (2.337.066,0s9)

Opeding aclilili.s

ou,323I9t

Firuoing adiriries

rfferorroRie*(husemk Ne, 'Ihere

incE*erd*@ej

wr€ ro

diridends D6id

(2J0lPl2)

h6n

b don@d.ollirs

(!l.025J7rJ.q

3,252,930,639

!! ?!f?!:!!L

inrffit.

[[Nrr[unm![

-16The

. . .

inc'ls

in nm@nlolling ideEb non slo.k issuoces fbllows: Decmbd 31, 2015,ledosolar onvcned ils deposir for fito€ sbck subsoiiplim i!1o oapild $ock vhich in*a6.d th. nonco.lrolling inrffir by t4 49 million As of D.mbd 3l,201s, !tusdd isued 3,100,000 comon shaB wirh $2.04 pe value. 'ne i$w6 incBed rhe nonontrclling inleresl by $3 05 niuim, PeL'ocFo aiso issued 55.250,000 shd* rhich ircmed the non€nt@lling inlerl by ft l I Diuion as oi De@mb.r I1,2014. MGI i$D.d 743,330 oomDon shfts with 100 pe valG. suoh stook isum6 incrt8.d 6r nonconrolling intffib by $0.l3 million.

As oi

The

incr.s.

Plrd

in

ron€tullina inere$ ftoo stock i$w6 dG in'ffit i' rh. subsididies.

mr rsuh b tlE dilltion of $c

Conpmy'3 efietiv.

31. ReD{.ble E.ere/

ad of2003

Jmu.ty 10, 2009, Republic Ad No.9511, )n ,4d PMorkC fie De'elapnd, Uilizdian and Cohnetualtdion of Re@able Ewrs Reerc andfar other Pwpetsr, othe ne knrM as the "Rdsrblc En.€, Ad of2003" (ih. ,\ct'), b.cme efidtue. The Acr ains !o (a) &cled rhe qplod.ion dd &vclopnent of rene*able derg/ rcsouM suoh 6, bur nd lidicd lo, bion6s, sole, *ind, hydb, aeorh.mal ud o@ oer8y som6, including hybtid systeNj to achi*e ends/ slf-rlidoc, thFueb lhe sdoplion of sldait$I. endgy development sbabgi6 to ienua lh. coubyt dependen@ d fo$il fiieh sd tiereby minimi* rh. colnLyt exposuE k, pri@ nudrrim in the inMalioMl m6td, the efab of *hicb spLl dou to alnon all s€br oflh. *orm, (b) irc'se th€ tilizlion of rcn.{ablc energy by iNlitliondiziD! the dflelopDent ofn.tional sd leol oaPa6ilities in rhe use of m.wable dergy sysbnq rd pmndling irs efiicienl md @sl*lTedire mnnscial rypli€lion by providi'g dd nd-fis.j jncentires: (c) mcouEg. lhe d.v.lopnent md ulilizaiion ofMeq$lo endg/ Gouc 6 rok ro efftc.iv.ly pdd! or Ednce namtu dissioro dd ln*by balmce rhe goal3 of esndic gro\t r md d*elopnenr with lh. Do&.lion of h*hh md enviromml; ud (d) esbblish the n€€3.ry hnddolue 3nd menrin ro calry out nsdrles sptcified in rhe On

6sl

as pnided fd in the Ac! Ren uble EnsSy GD ddelopds oi RE faoilitis, including hybrid to ln€ qlenl oflh. RE .mpoenq fF both poad ud non-pwer systens, in proponion ro 'nd y lpplicarions, 6 d cenili.d t'y lhe DOq in m6ulbnm wilh ih. Boord oflnvesbenb {BOI), shall be entided b the follwi'3 in€nrives, mong otheN:

i.

lncone

Te Holi&y (lTH)

duly r.Cislf€d RE

ii. iii.

- For the

d*elop.r

shaU

rd

sevs (7)

b..xenpl nom

y.d

ol iE @mneEi'l opsaliats,lre ldicd by rh. N'tionil

inmm€

he

Duq-fEe ImportotioD ofRE Mmhine.y, EqDipn.nl md Mrrsials - wirhid the Insl6 (10) yes upon issMce of a c.nificatis of u RE develop€r, th. impat&ton of t@hinsv ud €quipnent Md nat rials od pft therf. includins mtttol ud mtmunicdion equip'enq shall nol b. subjeol to kitrduries; Sreial Ralq Tu Riles on lquipnenr od Machinery _ Any law ro die dnltuv nosiihtuding, isl1y ed oths hes oD civil tdk, equipnent, dfhin.ry, ud oms ftcim.s inrdven.rt3 ofa EsisEd RE dev.latd eluslly md exclusiv.ly used fq (l les &c@!lacd nomal 5%) of$en oriBital cost shall Dol dc€€d one fd ! holfpd@r den*iarid s n.t b@k uiue: NOLCO - 1he NOLaO ofrhe RE d.v.lopt dui's rhe fftltI!& (3) y€m 6on ln s6:t ol mnmdial opsarid which iad nd ben previouly ofisd a ded@lid fom 8Es

ll

iv.

'n6fre

truIlruuilfl[l

shrllbe

v. vi. vii

c

6on sFs incone rot lhc rcn swen im.diotely following rhe ,@ of suh l6sj

ied ovd

d

d.duotion

(7) co$.curive

dible ,€4 corlomte Td Rd

Ane. selen (7) yss ofrTq RE dev.lopes sh.ll pay a mrpoht 'll (10%) dlble in6ne s d.lin d iD tl'e Nrrioml Incml m ils rel De€nt s mmded by R.public Aol No 933?; Revenu. Code ot t997, Acleden Depdidid - If, sd orly if, o RE psjed fiih b receivc ITH b€f@ depreidid in its tlr b.oks sd be Lxed brscd opeclion, it n.y apply fo.

d

of

h

r

!*lee!

flll o

zeo Pmml VAT Rac - nre ele of tuel or powr Sremled from Enewrble so!6 of enss/. th. puchAe oflocsl goods. pDpdie md sedi6 nened fd rhe dd.lotmmi, cdsindio. md insbllatid ollhe plonl feilitiE. a well a ihe tholo ptw$ of exploGrion dd d.v.lopndt of RE soNes up b i6 snvdio into powr shall be subie.t

ro do rsFnr (0"/o) vAT; viii. C6h I'cenl e oflE Deleloprs for M;sion

Elebificrtion - An RE develops, Ac! shall" bc htitled ro a cah 3qe6.ion-based incenri'e per kilosrt-hor iaE gdenled, equtualenr b 6fty ps6! (500/") ofde ui!e6.1 chdge for p.*s need.d lo seriG Dksionay al6 Nh.rc i! opdabs dE smq Td lxmDlion of Car$on Crnib - All Drcc..ds lom rhe srle ofcabd tmission orcdib sholl 6. exempr fton dt dd all Lxesr od Tu Credit on Dmeslic C4ihl Equipndr dd Sewi6 - A d mdir equivaltt io ote hundred Decnr (100/") ofth. labe ofilE vaT md cu$on dut.s tht would have bd paid on rhe RE hNhin.ry, cquipmeng mrsials md pad, nod lll6e irens b..n impoded 3hall b. BiveD to d R! opsaring 6nta.t hotl€r who pNhasd l@hin.ry, equipmtrq nobrhls. md Frt fion a dmdiio nsul@er for pDAM set fotii in rhe Ad esbblished and lhe efrectiviq ofthe

ix. x

ldsl mdnf&hrs, fabricotoB Dd snpplid ofle.lly-ptoduoed RE equipnenl shrll rgist r uith the DOE, duNsh the Rddable Entg/ MoasEnmr Bw$ GIEMB). Upon r€gistuion, a cenifidion shall be issued to ach RD da.lot r sd lodl nmutrctur, f.bricabr ed sutplier ofleaUy produced rcnwab,e end$/ equipnenl L sd. 6 rhe bsis ofthoir e'tirlemflt to the in@ntivd loviden lor in rhe Ad AI conificarios Equir.d 10 quali& RE developd to ovail ollhe irc.rt es govid.d for under tne Acr shtll b. i$ued by rhe DoE lbrcu8l lhe REMB, RE dcrel@eB md

32. Ehcnic Porer

Indorky R.fom ,{cr (EPIR-A)

After emerging non lhe cdppling powd crisis rhd ocored in lhc esly 199G. the lhiliFpinc Govemenr dhdk d ar m i'd6ty privatiztid md rutactuing Prq@ envisio!.d to suE lh. (lequb supply of eleclricily h delgiz it d*elopi4 Mnony This retuluting schemeisendi€d inRANo.9116,dFEPIM Appiovtdon,u. 8,2001..heEPIRAseeksro ssft qnility, r.liable, sure od rffodabL .letrio power supPly; dcouaE fr& sd fan onpelitionr d$ooe rhe i'flo* ofpnlat. sriul; ud broadm rh. omdhip b6e ofDows een€mlion, tusdission md disLibulron.

poblds of dE power s*ror. Ine hug! iw.stnelt Fquiment fdr nes Soemtion capacE sd dpssion ofrh. nsesd tunissim ud disdbrtion neNoik vd eslimr€d ar m mEl oreBg€ of the n.ed for sEftr $l.o billion, Civen tu oM n$d coNronls, rhe Govemdl '@gIizd priv*e sator pdiciparid re privde sebr involvesonl in dE po*s seloi. Even liough sotu succe$tuIly irrodmed alier beN.m lh. Nrc od p te inv.sioN, tiis time. the Covcnnenr is envisioniq addre$iq th. p@r s4ror inefficid.i.s md rhe nonopoly in the gpnmiion busines EPIRA ndd e! $e Mnll Mhcoritg of6e Phil ippine .l.olric Pows ind6lrv dd The

cov.m.nl viwed Etuctuiig dd Efom 6 a long-llm $luiion

lo tne

r|IIillflililfim]l

-73call€d for lh€ priv,riztion ofN?C. Ihe reslruturing ofde eleoticiry indufy calb forlh. snpon.nts of lhe lorer sdor. rmely: 8lnmtiod, ltmnhsim, sepmrion of the dtutibuliol sdsuppt O! rhe otns hrd, rhe priv.tialion of lhe Nrc iwolv6 tne sb of de

ditr*

srare{Med powq fmt 8lndtion dd rdsmission 6sd (e.9. pove plob dtd lmNni$io aiDed ar encoDFgi4 Srals conpetirion facilitiB) b privare inv.sh. flEse two Ffoms p.v6 nore privrb setu iNetudts in th. indusfy, dd atFa0lirg

e

A n@ emp.tilive power idudy will in delilery of eleticiry supply ro dd-usen.

tu

resuh in lowd

po{s rdd 6d

c

moE €ficienr

Spoifi.ouy, lhe EPIRA h6 the foUowing obj€riv6:

Achiw. lrsspaMoy rilh ihe ubDdlins ofrh. iain snpon.nts of eleai.'ty srGs, whioh Nill tE refl-ten in lhe cmumd eletioity ralesr Openins up ofrhe eleclricily n$td lo ompdirion d the vholeale Gdchljon) lcv.l to inpov. efiicieroy i. the openrim of po*e. pltua dd rcdound 10 lows el*ticiq pies; Enhmce 6ndEr inflow of pinre cipiial dd boodd oue6hip b6e i Senebnon, bmmissio distibution. dd suDply of eleolrtc powr: Eslablish a slrong md i'dependenr regularory body th.l will boldoo lhe inlqsr of both 65e invsroB by psmorins cmpdirid dmuAn cMio. ofa lerel playing 6eld dd trctlcl$. electicity dd{se6 ftm ey n.rkcl power abuss Dd d.isnp.tiliv. b.hovioFj atd Acoolem& sd dsG rhe bbl eledifidion oflh. .owl.y.

u9! a.

Certiircd

Emi$io'

RedudioDs

Pmhe ASsmml

or*i

inro a cdifi.d Enisid Reduclions P@hae agrem.nl on teuary 3l, 201 I, MGI rh lndesi C.rbono S.r. CEndesa") ofM!d'id. SDain. Und.rlh. ERPA, MGI shall sell 100% oflhc Cenified Emission Reducrim ( CERS") goeBbd by rhe MdbMt cdrbemll Pwer Pmjed (ihe '"djor') in f.vot of E de 6on the slal ofits comnercial oDdrions in oclob.r 2013 uril 2020. This will Drcvid. MGI sith o srrM apart 6om ele.ri.it sle. It should b. norci lha! uds rhe RE Act of2003, !u prcens 6on rhe sale of @bo mGsion cFnit shall be erdpt Aon orry

{ ER?A")

sd es

Pojed h6 udsgone F8isbarjm pree$ rcquiEd uds rhe UN Clm DolelopDenr MechdisD (cDM) Tr s inoludes th€ prepadion ofrh. Ptojei Detr Dsudt (PDD), Mlidalion cmducted by a D6igared Opdrional Edily CDoE" or'vdida!oa'), applioolton *ith lhc Dcigmbn Nadonil Aurhorily (Depafinert of Envitment dd Nfitml R6olll€ ror rhe lhnippin.t, dd r.sislEtion or r@pb@ oflh. Projol 6 a CDM Pbjdl Acliviq by lh. cDM Exeolive Bo'rd ("EB) nc PDD which wG pEpGd by End.e peDE infomdion on the esenlial Ebnial md orypidionl ap€cb ollbe PDj4r divi9 md iJ a key inpur in the validaliorl, Egieffiion md ve.inc id ofth. Projeot MGI ontr&t.d lne Spdish A$@iahon for Shdddiz.lid md C.tifisdon ('AENOR') s ihe vslidrror ro perfom m independent evah.tion ofde pDjd aclivity lgtist lhe EquiEnmG of tho CDM ondreb6is ofthe PDD. Tre ssEtridt oflhe uritei Nltio6 fmdoik conventon on climrL chse€ (LNFccc) h6 €nim.d thd tne MGPI hs ben Fsisr€rd etr*ri!.

Tho

|milm:mmlll

Upon connercisl opsarioN. MGI .hall collect md mhile all Ele!flr d.b nec.sary fot slolaring sEen hou$ g6 (GHG) dissior rcnudioG, *hich will rhd t€ subjeted lo Deriddic indepddent

GHG €mission

vrificdion.

T[e

lB *ill thd

hsu. ih. CERj equl to rhe veified

Rnudioa.

enditim fo @bon credit s*sely afGcied Ends4 nfesibriDg it closN dd evdo.l liquidolion. For lnis lson, eft*iile tue 23, 2013,

The sloNdoM in sorld Darker

MGI dd End.sa decided

10

Dunrlly

himte

the

IRPA.

On JDly 3l, 2011. MGI eni.red irb o m.ndmdun af rgrnenr (MOA) Bilh En l Tnde domiciled in Rone, Itdy, {ith rhe iniertion of S.P.A Gnel), a Cout Egisr€Ei

'rddi$ssid, ncgoljotion, od @psarion of a mlo.lly dloblishing m almgemot fo. i\e beneficial CER purchde !3Femmr. To ddq MGI hd nor yet closed a CER Puchae

aC€monlvilhEnel.llleMOAisvtlidforoneysftonthed.l€of ibsisni4 Hov.vd, MGI has nor closed r cER puchGo agrmenl witn Enel bd .he MoA vhich is valid for one y.d fi.n the drte of irs signing thB dpired in 2014.

MGI hd nor mdergon. rh. validation pree$, besuse ofrhe poi n&kd condilron for dbon cndits, md MCI only do so mce rhe sme ftbounds.

'ould b. Electicity Suttly Aerencnr

l, MGI entercd inlo o Eletisity SupDly AseDed (Ml ESA) wilh T'm Asi' Oil ed E qS/ Delelopoent CoAonridn (TtusAsio) in {hicn the lans oflsed b ptrcha. oll ofrhe 20 Mw facili9k nsl ou9ur In 201

staid on F.bn ry 3, 2014 md pmudl b lh. Ml ESA, 8il or 01delilery poi't in rcudd€ sitr lhc elect!i.,9 delivsy Dt@d|B Asi, rhmush th. eLctlicily f@s rhe pri€ aseei utoi ud subjeotto on lhc se.ord conhd y€&, for chdges @ forcig' exohmge ud infldion

The conmerci,l opsdidn

MGI

3

net

{@ sld

c.leiry to

Tts

adjutuent shidg

fl

sale of el*hiciry hder lhc Ml ESA moubd ro tl6.53 billion or milliondd$16 96niUiondPT?2.01 niuion in2016 &d2015,Esp*rively

Rwerue nom P?34.61

ln May 2016. MGI dl@d irto oorhs Electicity SDpply Agtem.nr (M2 €SA) wirh Tlns Asio, lhG tine mvdn8 lne net oulplt ollhc I2 Mw *pmsim. The cm ud @nditions of d.M2ESAftsihildrolh of rheMl EsA.

Operotiry

he dmituab - lM

Gout (s siglee of PCEC) mrded itio a 25 ys opedins l€e agrmdt with Luisib lnd6tidl Pdk CorpoElid. Th. lse is EDew.ble by muntal 4renent of borh pdis smerally uds lhc sme r€ms dd conditions, wjrh es.lhtion claGe of 3% .lery On Jue

34.

22, 2015. rhe

wid Emrs s€rvia Co.hcl

(wf,Sc)

Eke6t Seniee Contmt (WESC) No. 2A09-01002 on Novoher 4, 2013, D.velopnenl Bu! ofihe Phnippin s (DBP) gtrred 10 P.howitd !

F2.3 billid lM lor $e prcjed pr'€ble in 15 y.m. Following thii Pehowind signed kev @nstldion od supply cdtu6 .ov.rite lhe sibhysrd dd bdsnission line *il[ C.ndalt Witul

|LilI||tililrl

-80Ensinedng, civil wdIG d the vind fm inoludiDg intsn r Dads, lubin folndotions, *ind .!rbin. supply, iNblldion, md conhol iom blildings widr EEI Colporarian, n.inrenscddoDadion lh Gdes. !.li€'ldof S.L Unipesonal Spain.

sd

fd (36 MW) slaftd in De@bs 2013 vith EEI pej€t &c.s iood 3! enlry poinr fton rhe Pbvincial higitoy. Tie a@$ coomencinS rh rhe bads rere onplet d by 2nd quorter ol2Ql4, while rhe inlenal rco& for t\e fisl eight UTC (Wind Tlrbi.e Centu ) bvm w* emple@d ty 3rd quan€r ofrhe ys. On DeMb& 19, 2014, Pehwind .lso obbincd hvo (2) key approvals ton Eneigr Rcgllalory CoDsnsion GRC). rRC approled P€tawind\ rppli€tion lor a two-monfi lsling ud sals of sdedcd po*er ofthe n6t eth (3) wTcs. P.towind also eeived rhe appavil 1o d.velop, o'n, od ope@ a dedicihd poinl-to-poinr tusission facility @nn.cling lho Nab4 wind Fan b the NCCPT Nobs4aricld 69 kV ove ead bsmission line, Constructid oftie th6e I ofthe {ind

lini half of 2015 w6 dcvoled lo oompletior of rhe @nshclion ofdE *idd fan in Niba, Aklan. On Mmi 2.4, 2015 PWEI sftce$fully ensgiad !d disparched po*t non .ighr (3) wTCs (WTGk l -3) lo the Visryd grid. Or April I 7, 2015. the Deplnnfr oalndgy (DOE) issu.d is Nonirution for FIT Eligibilit'" ofNsba3-l . fte DOE also rel*ed on Apnl 30, 2015, ib cefrificare of EndoMenl olNab6'I whioh is oe ofrhe ts4uiienmll fd oe ERc ro pftes twErs c.nilico& otco'pli,ne (coc) ror lhe pova fooilily md fd FIT eltibility By Jue 2015, all eigbbn (13) WTC'S b..omc op.raiio'al. On ,De 16, 2015, lh. Depafrenr or Energ (DOE) Ele6ed the Cdifidre of Edoddent (COr) for FIT EliSibility dd6inA the ofiioial sMofcommercislopdlidb b.Jud.l0,2015 Tne ErErsy Reglltrory Commission GRc) also €hplet d ltc siG visil for DOEt CO! IlI valnb on on tue 24-25, 2Q15.

The

Au!6r l?. 2015. rhe ERC atpoved PwEl\ Cdifiqie of Conplidc. (COC) fq Phde I Thh confim llle @mmeEid opmtion daE ofrhe vind fam to be JDe 10, 2015. o'r SepteDbfl 3, 2015, IWEI rsiled lh. Philippine Eldiciq M'ke. Corporaliant (PEMC) &*no{ledg.mm1 olP\rrEI s pdisipari@ in rhe wlol.srl. Elelioity spor Makd (wEslvt).

Upo' Elia6ly ope.atin8 nU .ighr6 il3) WIOS od @onplishing cdolidalion of cpp@ed pmchlisb dd o.her pm4uisitc deMcntrio'i PWEI eepi.d lh. wind F@ Tborc. c.rtificole fFn Gmesa on Decmber t2. 2015.

On

o @Nultur, Mddeh lnsgy (MDM), windfm lm.gmhl t?t.ins to. to do siE audtasn.n! conducr Mdog.me psxom.l, PWEI tshnidl md evalu& Gm6at n@rhly Epqts for the fi61 )€a oflhe O&M. Thesit. luditedtEinincss conduci.d E MEMlastMay 10 l?,2016.

To

ssis. duftg thc initial sLge ofrhe o&M, PWEI ha sSrged

MdrlMc Sedi6

The

Prvdtive

dd

S{itching StdioD, including

Fo. the

(!MS) ofrhe Windfm EleoE al Flciliries (i e , Sut€iatio Swnchgs) !.rc sucestully conductd @nn^y 2l ' 22,2016

(O&nO ofrhe wind toibines, G@* had adpl.t.d ils on July 05, 2016, its 3-Monrh (3M) Mainkndc. rclivitiq on

Osblim sd Mrinl€n4e

lz-Mdlh ( l2M) Mortemce 12, 2016, rd vill slin vith $? l3-nont! pEvmrive ndnb{c on Octobd 03, 2016. prcgrm for the l3-nonlh minldm@ works is fd on. (1) \rIIC pE da] fd 3 hos o'er m Th€

Aw6t

lhe B.ld& of Ploi (BgP), including .l4ticsl feeder €bles, substrtion, suboftebr - Aimtgy od Renwible hc. _ irom done by Aug6t03 12, 2016, inirial E$ rsulE of shich plsqn Gdda s ovoluation

Mainrdm€ *o.kr foi erc.,

Ni.

Gms's

tI[ilruillnlHI[|

slop. in

poleiid

Auge

works have been inplemenred thsugholr 2016, .von duiDg rhe tFhoon seaon 2016, to shich mnhclor GS! w6 abl. lo 6sss lho i'tegnty of rhe snplekn

rd delsine

ds

*db,

ior tunhd voda.

{s

sht-doM duing rhe otrldeft ofT}ThM M,M' on Noldbei 25, 2016 du b grid failurcs rldu lh. I l3-tv Nabr-Pmib line sd the 69-kv Nabalcdiclu li'e. OHit, the seid tTh@D 6ued ninor soil edid. nito d.nog. ot the @e$ od canal dd obtucled cms dnim (esp*ially rhos. hor'inB 10 wTcs 9, 1.4 md 16) bur rhe e$ oflb. sile remainci udd nmal operotirg conditiors. Sib cleding opdtions along th. dni.age cMls sd r.ad reslrfacing works wse conducred non Novmb.r 26-29, 2016.

Tne NWPP

As ior rhe varioble R€nwable EHsy (vR!) T6b aill NGcr, PWEI ir slill owriting ofthe linrl Auihdity to C.md ftm NCCP'S Rerenm ed Resulab.y Af.in Crcup olfi€ in Manilr, which is cxp*ted io b. issuen in Febflary 201?.

issmce (RMC)

Fld Jdud! for the

35.

0l lo D.cmb.r 3I, 2016, rhe lobl me€/ expotud ro thc grd is 101195.76 Mwh Prciedt Pl6e l, wirh rdenue ofPbP 765.3 MM bs.d on lhe FiT prie of P7 40 ps

Conrnd r.dAgruD.trb

Rdol

Moniionne svsten

sd T*hniml a&iso*

sdi4

A@m.nt

agEnmr vilh Fuji El4tir co. Ltd. ro conducr rhe op€mlion md Ddtrnm€ ofdE M.ibdd povr plml. Tiis will include rhe Bdildin3 of rhe poBer tlsl op.ntiars Emolely from Tobo, Jipd deu8n r mote nonitori'g sysbm b be esiablished by rhe Fuji El4tic. Fudha, Fuji Elecric slull povide lire r*hniul sewices to MGI d insbces wh*in the powr plrr momrd ldhni..l poblos Eqninng o') Auast

19, 201 I,

McI ent*d

inro m

Foi rh. mdc noniionrg sedi6, n\e fee modb 1o *3 nillid. Forthe @hni€l advis.ry p€r hou md pd day. Ttis agenmr sh.ll b. for a senjees, lhe fee is b6ed on a psiod of tne EPC conhd pdiod of one (l ) ,€& comd.ing on tie *piry ofrhe ye6 lh@ns npoD alEmd! of both for tie constlot'on of pows plst', tu*.ble prnies. This *d rme*ed in 2015 md .rlended urrtil Otube 2016

(*in tu

.sy

*ddty

on oclober 19, 2016, MGI Dd luii execur.d $. Twhnial seryics A!@ent duly Eplacins the IMS-TAS. Urdr lhc ncw ogrnenr, Fuj i rhall disprt h one Teoh' ical Field Adviloi one .vry sii monds ro @'dd a resnld field insp€clion oftie plels opdtion ud Egul,ry mss MGI'S qDe.ies thnugl phono colls or enail cortsp.ndenG. Should the sitodion ell fd i! IDji auld dispotcn ib pr5@el *ilhin 43 hou6 iD otds ro adde$ dglnl

!&E!!!s!!e!4sr!!r4

r

Inremmeclion ASement (ICA) with MEMLCO for lhe phtsical intrcmeljm of !h. Blrc.tior sd clDdion fa.ililid of MCI} 20 MW pNd pldt 1o MlRAtaOt di$ibdion sFh. ft. Dovd liDiliq being coM.i.d in BrS/. So Rrlicl, MGI sig€d

uil!ntilmil[

Sro.

Tom, Bat$ga will

be

com..l!d

10

MERALCOT .xisling I l5 kv line in Calmbo,

TrdsAdo lnd MERALQ s*r.d a Memomdun ofAgFm€nl vhioh efi*tively wailed tho palDenr for the *h€ling oh'ges momling to $96,1t4 (?4.r0 nillim) ps mo,'ih.

On .ruly 7, 20 14, MGI,

c.

Mc, sd FUn silled m D€camber 21, 2015 de cmt?ct for the DdufactuE ud supplv of the l2Mw $rbine, eEneabr md olh.r main equipnen. fot tho Mdbmr 2 {M2) *p$ion proj6i Ille plFst of rhe l0% doM pslDmr mounting to 11,055,600 00 v6 nade on

{ill Deuftu rhe .quiPDenr withh l5 monrhs and deliver io Mcl dClRMdilaonFet'uary20,2017. Installarion of th..guiptnert shdl be sup.flised

by Fuji imluding the mhntusioting olrhe M2 pow* pbtf lo the 8id Undd the @nbacr. FUI

Thc lolloNing mnhcb h.vo be.' enhed 50MW Tdlac Sol& Power Prdjer (ISPP):

Iran*or* Amd.nr

for ihe Ownd

s

ifio lor tne codtldion md d*elopmdt of

me

Eneind seeEs

€fud inb th. Ftm ort AgEmot for O*nth lnginea sjrt sB sol! Inbmttional AC ($ntsr) Unds rhiJ asi.sen!

On tunc 25, 2015. IedoCGn Senices ror rhc TSPP

engrneen-s.enid colennC *e f.r proF I phtue\ frm con'eF SlnFgt, smilpm\ide 'iih d;\ el;DmmL Pv sskm Ensinedns P\ Posd Planr D6elopnsr &d Pv Po s lldr Proier Execulion. Tobl mllaot pnce mornld lo $l,t00.000 Olfshde Suoplv conhcl

P€lmc€d .nltld in1o D Ofishc SuPply Conhcl widr Cders/ Asi! & (Consg/) for the supPly ofall inpoded sold poua plmt equipnenl which s ME PTE LTD r€qDiEd for the orelruotion of rhe TSPI. Total @tu1pti6 moutd b $46,735'500 €rclaive of valDe Added Td (VAT), oli Jde

10. 2015.

agls.rt requns lhe pdlin8 of a patmflr bond 6 secuitv for lh. obligation b pav nE 90% bd{e of the ofishm Conbd P.ice On Julv 0,2015, t.tocEen sd8n.dthn

The

strpply conracl lo Petosold. Followi'8 rhis EquiFd bond froD M,liyd Inslmc Gmup, Inc

ofthoE

ssigtmot, Ptusols

obbined rhe

OnsboF CoNtucrion Cohtad

Petd6jg enreEj inb d Onsl'oE costutiot ConbDr vith PhGm' Ino. {h*in Ph.s shall insbll the inlode! sol[ pover plor equipn n! Penbm ft. eldicrl tud noisicsl ro*3, po@ locsl platt Dobrials, md t.rfom comissioni'g sedis. Tobl mnhct pri@ Douien b P247,950,000 Th. conhd wa 4r3nd b on tlne :lo. 2015.

PtuSold

d.

on

lulv 9. 2015.

CNrdiMlion A@emdl On

Jue

30, 2015,

!tuGrcen

s,Ered a

Cdditoiion Ag€nenl wirh

Phcscq Ins md

liltmtililillNI

INDf, Pf, NDENT AUDITOR'S REPORT ON SUPPLf, MENTARY sCHf, DULIS

Thc Board of DirecroB

dd Stocknolkn

PetoEnerg/ R*ourc.s CorpoBnon 7th fioor, JMT Building, ADB AEnue

aodrce

wi.h Philiptile Sland?rds on AuditinS, the consolidated We hale audired in sbtements of PetoEneq/ Resou4es Corrontion and is Subsidisis as ar Deenber I

fin&ci.l | ,

2016

md

2015edhaveissucdourEponfteftondar.dFebMry23.201? Outiudis{eEmadeforlhe purpos offoming an opinion on the basic fimciil sbrcmdts blen 6 a vhole The schedules lilred in rhe Index o Consolidared Fimcial Sbremeis and Supplenenrdt Scheduls &e rhe respoNibiliq ofthe Conpanlt matu8cmst. These $hedules e pr.snted lor purtoses olcomplying * h Ssurfties Rcgulalion Code Rule 63, As Amended (201I ) and e not pon ofrhe bdic finecial shteDenb These$hedul.s have been subj*ted rd lhe auditing prccedufts applicd in the audn oflh. basic finan.ial slalemenb m4 in out opinion, finly nat, in all naErial rcspeds. rhe infmation rcquned to be sd fonh $eEin in rclarion b rhe b6ic finscial sraremenb blen a a $hole.

SYCIP GORRES

VELAYO& CO.

ola t rua

SEC Aocred ihtion No. 07 31-A R-2 (Goup A), Mi, l, 2015, volid until Apil 30, 2013 Tax Idertilioation No. 901-617-005 BlRAccredib.ionNo. 03-001993 ?6-2015.

February27,2015, wlid until F.bruary ?6,2013 PTRNo 5903?75, January3, 2017. Makari Ciry

ilililillllullllllllllilll

PETROENtrRCYRf,SOURCf,SCOR?OMTION ANDSUBSTDIARIES INDf,X TO CONSOLIDATtrD FIN ANI} SUPPLf, Mf, NTARY SCIEDULES

CONSOLIDATED FINANCIALSTATf, MENTS ibilny ror consoli&r.i F nmod Sbemmb

Reponollnd.p.ndenlAudlo6'Rep.n

con\olid!.d sracmenb of Finmclal Po:irioi 6 cmsoli&red Shtments or comprehensi!.

Decmber I I, 20 r 6, 2015 sd 2014 conelidared

Dedb.r

sb&h.is

Ii.oh.

31, 2016, 2015 md

ro Cdnrolidated

De.mbd I l, for rh.

or Chsces in Etruiry ror rhe

Finscisl

yaN

yea

2016 and 2015

ended

endsd

l0l1 yds oded

con$lidared sdenenb ol c^h Flows lor rtc Dcnbq I l, 2016, ?0 r 5 hd 20r,1

Nors

at

sdmeft

SUPPLf, Mf, NTARY SCHEI'ULf, S

B. anou6

Rs.ivabl. from Didots, officm, Enploy.a. R.lftd Pdi6,

Pnrcipd sbckhorden (oo's rhm ReraEd

C. Anoo* Re.ivlbl. nm

c.nsoliddion of Fimcial

R.ld.d Pdi6

sbtmo$

Pdiet

which aE

Elininatd dring rhr

sd

PETROENERGYRESOT]RCES CORPORATTON ANDSI]BSIDIARIES SUPPLEMENTARY INFORMATION AND DISCLOSURES RXQUIRED ON SRC RULE 68 AS AMENDED

Sauitis od ExchdgE Comissim (SEC) isud lhe moded Sarities Regulation ruls dd labeled in rh. mddnelt Code Rule SRC Rule 63 ahich consolid.lG ihe t'o ple.ib.d It also rhe .ddilional i.fondion sd schedule '?d1 I" Pod Bp@rively.

Philippire

dd

6

srmt

r',

Rquienenb for issus ofsecuitie b lh. tublic

Belowetnod\cirionalinfom.lionod$hcdulerceuiFdbySRCRDle63,6Ane.d(201I)lhal m Elevmt io the Gsxp. Illis irfomrtion G pmenred for pures offiling lhtheSECodisnot r.quircd ps otthe b6ic fimcial scimb.

Schedde A. Fi.mcial A$ets Th. Cronp is not EquiEd b disclose lhe fod.ill 6*ts i, eqnity seffitis 6 the rod nmcid 6$b d fair vrlue rtftq! profil dd lN secuitiE mourins ro $162,445 do nd coNtnft 5% or nore oflh. btal curent 6s6 ofrhe stuut a d Dember I I, 2016.

6on Dilss. otrrccn. Imolovees. Relaled Pdiff (olhd lhd Rdaled Psnis] od Pri'cibal Sts*noldfls moub Meivibl€ fion dii*16, ofiiooln emPloy*, relaed As of DeMber 31, 2016 lheE de 'o pani6 ud pircipsl dc*ldde6 thil iSgFStt s .oh io moE lfim FI00.000 or l% 6fbbl ascts schedule B. Amounts R@iva6l€

C.nsolid

ion of

Firuotrl slllmenb

It.

followirg is lhe s.h.dule of €eiwhls fim Fl.t d ,!rti.s, whioi @ elininabd in the conslidded n.acial shmb a a! D.cemb€r 31. 20161

o

0)

s2:o

Tmetions with olher Ehbd pdi6 ouaide lhe Grcup.

Ple6e Eftr b Nd 26 of thc Cl)Mlid.t'd FiMcial Shtnenb.

p Inhsible Asd The G6up hs d insierifi$t mout Schedule

$1.01

nillion. Bulk of lne inbgible

Sdldd! E-l!4:!rr!o&!!

of

'gr

inhsible sets 4 of Demb.r I l, 2016 moun.ing ro teis to llc lard righ eqnisition 6f Ptusolr.

Ptede pler to tJa CMahdde.t Aulrit d FiMcial

stat.wnt,

ot?

l6Jor debitt olthe

loN

|mil$t|ll|ilmil

Schedule F.

bd.blednd b Reldd Pdies lhnq Tq!]

Th. crcup h6 no ofttuding Schedule G.

longrm indebtldn.s

Cl.Mlees ofseuiries ofother

Th. 6rcup does nor haw

gu,fure

lnN &m

lo Elale!

lJsuen of surilie of o$et

Rclated

Conmied

pdi6 a ofD€.dbd

ismd 6 ofDe€db.r

3

I, 2016.

31, 2016.

Schedde E. Cariial Sl@t

edd6cbyt]dedoft(sod

e10t9,r6 r,B,ae

3a.7r?9I

rmmrmililill

PETROENERGYRISOURCES COR}ORA'I'ION AND SUBSIDIAR]ES

siTueortr or rurelcteL souND\Ess r\DIcAToRs AS OF DECEMBER 31, 2016 rbd 20ls

iir*

!'.

'r.

i*d.t *,t* t" * *rdd

colmr rrio (undtrpas.3r,

(rD

b ne GDup

roral.uror

tor rhe

r'

'nded

Ddnbs

I r, 20 16

dd

20r 5:

s*

d od profit + d.prcciation hsh ++dim lBbllirie\

Ana

Tdl

sbcknoke/s equrv

Earug! b.roE

"t@,ry; baE d{-t tBA d.P

,

th.

inffi,nd 66 (EBo)

.o$dd'atu'Ptoser ad

t.",

""'t'

PPr

rNilutmml[tl

PETROENERGY R-ESOURCES CORPORATION RECONCILIATION OF' RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION DECEMBER 31, 2016

Unapproprialed Relaitred Eernings. Beginning Prior year adj ustmenls: Unrealized foreign exchange gain Unrealized Unreslized MTM gain on UDappropriated RetaiDed E.mitrgs,

actuarialgains FVPL

s3 adiusted

Januarv

$13,847,986

net

1.20t6

Net income bosed on the face ofaudited tiDrncial ststements

(247,943\ (5,779) (75.498) 13,518,766 1 ,1 40,71s)

(t

Less:

Non-aotuavuDrgalized incom€ net oftax Equity in net income of an associate/Jv Unrealized foreign exchange gain - net (except those attributable to cash and cash equivalents) Uffealized actuarial gain Fair valu€ adjustrnent (marked-to-market gdins) Fair value adjustment of investment properties resulting to gain Adjustment due to deviation from PFRS/CAAP - gain Other unrealized gains or adjustments to the retained earnings as a result of certain transactions accounted for under PFRS Add: Non-actuayunrealized losses net oftax Depreciation on revaluation increment Adjustrnent due to deviation from PFRS/CAAP - loss Loss on fair value adjushnent ofinvestment properties Movement in defened tax assets

Net income actuel/r€alized Less: Dividend declarations during the year Appropriations during the year Tot|l Parent Company Unappropriated Retrined EarniDgs Avaihbl€ For Dividend DlstributioL December 31.2016

(235,600) (16,404)

(t1,992,719\

$1,525,987

illiltililtffi m|ilililil]]ililil]til

PETROENERCY RXSOURCESCORIORATION AND SUBSIDIARMS SCHEDULE OF ALL THE EFNECII!'E STANDARDS AND INTERPRETATIONS UNDER PFRS AS OF DECEMBf,R 3T, 2OT5 Below ir dE lii oflu etrdive Philippine Filmcial Reponing Sbd&& (?FrS) lhilippine Accouling Shdsrds (PAS) dd Philippin Incerdalim oilntcmitiond Finmial Repoaing lnreDdrions Commifte (FRIC) 6 ofDecember I l, 2016:

conc.pMl Fmwork Phe A:

objd

Fjn'.'rn.Addp'rmofPl'jlippb.rjhecjdRepdij'g Ihvstunr

in a subsidbry, Joi.dy contolled Enriry or

Arcndned

ro PFRS I:

Ad,titimil Erdtions

for

Fnr

RdodorFixedD"tfolrid.timAdoph

AnddlMtbPFRS,:vdn'scmdi'ioBmd Anodm4r b

PFRS 2: Goup

Cah-sl.d Shft-bsd

anerdmcnb h PAs 3t ,rd PFRS

Non-cllm!

A$4 ll.ld fd

4,

S,l. bd

Fiio.i,l Cu,mre

Dituinu.d

riM.ll rnllw.dB DiqlsuB arendned

ro PAs 19

!d

PFRS 7:

Rel6rifi.otidn of

An.ndm4b b PAs 39 sd Plts 7: R.chsmcrbotr of Fhmcial A$eb - Efidriv. Dd. hd Tffirion

An!'dno! b PFRS 7: Inprcvi,s

Di$losGs

ibdr

PFRS 7: Disdo.us . ofrdinc Fi.scial Assd ud Finh.iil Li,biliri.s

anend'Hr b

Anmdn* b PrRs ?: Ma&ldy Efldive PFRS 9 md

Trsiiior

hddnEtr b PFRS 9: Lrddlrory Neq H!ng!

Dat of

Disdosues

ElT6riv. Dd.

of

A(mdis R.{dirn*

Pl.6s@jdnofFiffi(iilsBanmh PAS l: hrbblc Fil'tri'l PAs 32 'nd Aftinc oi Liquidation ad oblisiim

An4dned h

Intuent

Ac.ouiins Polici.q cho36

an idhdr

ro PAs l2 -

itr

A@utinc Esrimts

D€f.d.d

rd: tu4vdy ol

anendomb b PAs

19: D.6ned

Atrouting fd cov.mn

dr

Bs?h Plds -

Gmb hd Dislosu. or

AlMdnm'NdInvfuduir@ignop.d'on

a(dutncdd

R.ponbsby Rdlmeor B.oeft

MendbmB b

PAS 2?:

rnEtud

Pl4

Ennns

FiimblRaoniqgjnHy?eliDnatui4E4imbs

r,Btuenr rd obliglrid3 atuins d uquid.rion M.ndnrd b PAS r: Clasificdon of tushb r$G anendnrd

ro FAS 32:

Ofi.ejns Finbcial

Asd ad

Am.ndnetu ro PAs 36: Irpaimdr oras* .

RsovdrbL Arod Di!.los'ffi for NoD Firocial

P'lMimr, comi4<d Li,bil ri.!

rnd

condrydtAs.E

Fi@ial hlDmdE Rocliim and MdKmat An.ndn* b PAS 39 T,mitioD and hidal Rapirim olFituci.l ad hd Fimcial Lirbilnies

AnmdnenbbP S l9: c,sh Flo* FoF6t InhsFuP T''Ndic

Heds!

A@Dtins or

^nmdm4bbPAsr9:Thera'vilu.oDtion hedd'mb b PAs 39 ,nd PFRS 4: Fimcial G'l,mb Anendnmt b P Anendtunr

Fitu.ial

S

3c 8nd PFRS 7:

Rel6i6.arioo or

ud PFRS 7' klNindion of Eftcriw Dit od Tmsirim

ro PAS 39

Ass

AnendneDb ro Phlippitu

ldr.rp*don

IFPJC 9

dd

PAs l9: Inb€dded Deri6tiv6

Ahddn n6 ro PAS 39: Fiio.hl I'tumb: Rsog''jiionandM.sd.ndl

chmss

in Exi.tids

De'llmissiooing, R.$@nd md

Mmbd sbft incGopdtjv.Enriti6a sinild Detmhiry tush6 ro

whethq M

Intu

lnmsmd cad.i^t o t .de nd D.misionins;

'nbg R.b.bilidio FBd. R*@rio fld ENnomMl Liab ities ei'inE jnn Pdiituhs i, a s4lft ^t&4 w6t Eh.hcd ad Ettu,b Eqripmd ,tpplti.z th. R.tuent,1warch sd- Pls 29 Fiwcid Rqtuns h Hwlrltaio@ Eq@ia R6esmd!

Ancndnetr

ot rmbedd.d

LlridiYes

Pbilippi*

ld.lptuiM

ro

I\tnr Ftnn td R.pune PFRS 2 - Croup ,nd

dd Inpam.tu

TlBury shd.

rmdiG

sefricec.rc*ioAnesenms

cdob* r,Fry

Pq@B

Ljnn 0h 3 D.fi.d 8m.fi. A!3.!

R.quii.md6 ud l}cn In6&!o 'Irle

IFFIC

t ind

anendm* b

PhilippiG

ln6ad6dN

IFUC -

14,

rrep.)mnb or! Minibm Fuod'ig tu'ruhment He!s$ or

3

Ndbl/lfus'

Fiffii,l

Eni4unhing stippinc

cd

c6oL,driotr

in dre

.

ina Fonlgr

opsdim

Lirbilines wi$ F4ury

P:odu..id Pbc or. surfde

sFi'r

Pxlpo( Endties

Am.ndfr.dbs|c.|2s@P.ofslcL2 Jodly codMu.i En

nies -

In6tuTues R.6vsr In6ne Tds - O6g.s

NoFMdebr) c.nEibdr@

of R.!rlu.d NoD-DepsDble in 6e

Eriluring d. Slbsde

Td sbtu ord hr'ry

orTm*id3

s

livolvins rbe

sflid

cobBdm Arnnsmmb oi*lolue!

R€du. 'Btu TllrlrdG Involvins Advdisirs inbg,bk as.ts . w.j sik Co$

rmdions

s'Not

alplicable" n've been .dolted by de croDp but have no foi thc yee e.ded Dsbd 3l, 2016

st ndlds bgled

stnificul covs€d

6 ofDecemb€r etr*ri!. rhen lhee bdoDe dd hterpFlalro6 Gmup *iU rdotl tle Sbd'rds The Stud,lds

b$td s Nol

odopbd"

m tudaids

issuc! bm not yd cf|erivc

31, 2016.

E]

I

ti --r lql Lil lll Ll1ZI ------ri fl 5

_ Ii'ETE

:

ead

E:iJA

E i! 5 ;, EZa z z a2 e

r

|

t.t IFL

lFl

t]

-_TJ t-l l;

I

l€l Igl

l€l

Ei tr

t1 'i :

z

x E! :

6d

PETROENERGY RESOURCES CORPORATION RXPORT ON SRO PROCEEDS December

3l'

2016

(SRO) The StO ri/as On December 05, 2014, the BOD approved a 2: l Stock Rights Offering o"aert"t"o a*ing tft" period Iraay i i to t5, 2015. The proceeds ofthe SRO amounted to Php 599 68 million or US$12.36 million.

As disclosed in the Prospectus the Company expoots to raise gross proceeds of approximately to the PhP599.68 million or U3$tz.ge .lttion *a nftur deducting listing, registration fees related

offer ofPhP592.46 million or US$ 12.26 million. and The proceeds from the SRO will be used to partially fund the exPansion, construction (Maibarara 2) MG-PP Phase 2 ofthe to Mw projects: th€ energy deveiopment ofPnRC's renewable Africa West in Cabon, Projeot th€ Etame and Solar Power Projec! as well as the expansion of

were The table below sho{s the Sross and nst proceeds; each exPenditure item where the proceeds used,

Precccds frcE the Stock Righr6 O ffc.ing P1p599,075p43 5972,677

Les: Listing aad Registiation Fes

PhP594,602,366

m16

2015

Totel

lst, 2nd &

3rd Qualtcr Lcss;

ExFndrires

A. Et me Expanslon - Dri ing

ofw€Is

B. Maib.!@ GeotlEm.l Ploiect well Cost Fluid Colcction & Rcinj<don

15,740'937

157,943,406

164,890

96,881,836

9904,959

39172,422

Pbase 2

96J16,946 29,567A63 System 470,065

IGu.nc G&A and Odrer Costs Fi''3trilA Costs

C.

742,202,469

Tel,c Sola! Pow€r Pbiccr varios Plwiously RcPorted ExPser

Tot.l Exoe$cs Allocatcd to Procccdg

472'954

943919 7AAOJ14

r'48O,774

5,165,AA2

1579913

6,A44,495

I17,000

175,500

133.459.610 r233a,AI6

145,794,446

58,500

114,67

t74,673,326

3)26

4EO,335,425

Remiaing proc.cds et of D.ccdbct 3L zrt6 R.mainina pece€& a! of D€ccDbe' 3t 2016 i! USD

2a,O79,753

41a,$5,n4 PbP116,187,188

t2J36,830

COVER SHEET

A S O 9 4 - 0 8 8 8 0 SEC Registration Number

P E T R O E N E R G Y A N D

R E S O U R C E S

C O R P O R A T I O N

S U B S I D I A R I E S

(Company’s Full Name)

7 T H

F L O O R

A D B

A V E N U E

P A S I G

J M T

B U I L D I N G

O R T I G A S

C E N T E R

C I T Y (Business Address: No. Street City/Town/Province)

Carlota R. Viray

637-2917

(Contact Person)

(Company Telephone Number)

First Quarter

1 2

3 1

Month

Day

1

7

-

Q

0 7

2 6

Month

(Fiscal Year)

Day

(Annual Meeting)

(Secondary License Type, If Applicable)

Dept. Requiring this Doc.

Amended Articles Number/Section Total Amount of Borrowings

Total No. of Stockholders

Domestic

Foreign

To be accomplished by SEC Personnel concerned

File Number

LCU

Document ID

Cashier

STAMPS Remarks: Please use BLACK ink for scanning purposes.

-zSECTJRITIES AND EXCHANGE CO SECFORM I7-Q

@;

QUARTERLY REPORT PURSUANT TO SECTION OF THE SECURITIES REGULATION CODE (SR AND SRC RULE l7(a)-l(b) (2) THEREUNDER

l.

5.

DL

tY.

3l March

2017 For the quarterly period ended SEC ldentification Number

,'|

rI

lcl a-l

ASO94-08880 3. BIRTax

Identification No. 004-471-419-000

PetroEnergy Besources Corporation Exact name ofregistrant as specified in its charter

6.

Manil4 Philippines Province. country or other j urisdiction

(SEC Use Only) Industry Classifi cation Code:

or mcorporauon 7.

Address ofprincipal 8.

632\

office

Postal Code

637 -2917

Registrant's telephone number, including area code o

Not Annlicahle Former name, former address and former fiscal year, ifchanged since last report

10.

Securities registered pursuant to Sections 8 and 12 ofthe Code, or Section 4 and 8 ofthe RSA

Title of Each Class

Number ofShares ofCommon Stock Outstanding

Common (par value ofPl.0O/share)

410,'736,330

Amount of Debt Outstanding = $135.03 Million

ll. t2.

Are any or all ofthe securities listed on the Philippine Stock Exchange?

All issued and outstanding common shares are listed in the Philippine Stock Exchange. lndicate by check mark whether the registrant:

a.

has filed

all

reports required

to be filed by Section

ll of the Securities Regulation

Code(SRC) and SRC Rule ll(a)-l thereunder and Sections 26 and 141 of the Corporation Code of the Philippines, during the preceding 12 months (or for such shorter period the registrant was required to file such reports)

yes [4

b.

has been subject to such

Yes [/ ]

filing requirements for the past 90 days

-3TABLE OF CONTENTS Page no.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements 1. Consolidated Statements of Financial Position As of March 31, 2017, March 31, 2016 and December 31, 2016 2. Consolidated Statements of Income For the quarter ended March 31, 2017 and March 31, 2016 3. Consolidated Statements of Comprehensive Income For the quarter ended March 31, 2017 and March 31, 2016 4. Consolidated Statement of Changes in Equity As of March 31, 2017, March 31, 2016 and December 31, 2016 5. Consolidated Statement of Cash flows As of March 31, 2017, March 31, 2016 and December 31, 2016 6. Notes to Financial Statements

4 5 6 7 8 9 - 57

Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations 1. Financial Condition – March 31, 2017 and March 31, 2016 2. Results of Operations – For the quarter ended Mar 31, 2017 and Mar 31, 2016 3. Financial Condition – March 31, 2017 and March 31, 2016 4. Key performance indicators 5. Discussion of Indicators of the Company’s Level of Performance 6. Disclosure in view of the current global financial crisis.

7. Operations review and business outlook

PART II OTHER INFORMATION Supplementary Information and disclosures required on SRC Rule 68 Schedule of Financial Soundness Indicators Reconciliation of Retained Earnings Available for Dividend Declaration Report on Stock Rights Offering Map of relationships of companies within the group

SIGNATURES

58 - 60 61 - 63 64 – 66 66 67 68 69 - 73

74 - 75 76 77 78

79

-4PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In U.S. Dollars)

ASSETS Current Assets Cash and cash equivalents Financial assets at fair value through profit and loss (FVPL) Receivables Advances, prepaid expenses and other current assets Total Current Assets Noncurrent Assets Property and equipment-net Deferred oil exploration cost Investment in Associate Deferred tax assets-net Investment properties-net Other non-current assets Total Noncurrent Assets

LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses Loans payable - Current Income tax payable Deposit for future stock subscription Total Current Liabilities Noncurrent Liabilities Loans payable - Non Current Accrued retirement liability Asset retirement obligation Derivative liability Deferred tax liability-net Other Non-Current Liability Total Noncurrent Liabilities Total Liabilities Equity Attributable to equity holders of the Parent Company Capital stock Additional paid- in capital Remeasurement loss on define benefit obligation Retained earnings Appropriated Unappropriated Parent's other equity reserve Cumulative translation adjustment Noncontrolling interest - BS Total Equity

Unaudited

Unaudited

Audited

31-Mar-17

31-Mar-16

31-Dec-16

$ 12,885,523 171,512 7,903,167 9,485,220 30,445,422

$ 11,740,079 175,008 3,722,448 11,140,625 26,778,160

$ 12,914,588 162,445 7,860,439 6,766,450 27,703,922

147,076,858 10,410,180 27,954,440 308,128 31,417 11,784,168 197,565,191 $ 228,010,613

145,619,679 16,569,495 28,797,590 306,909 31,417 10,216,070 201,541,160 $ 228,319,320

138,870,569 10,134,234 26,843,396 308,168 31,417 10,408,066 186,595,850 $ 214,299,772

$ 6,606,511 18,458,693 128,350 4,256,343 29,449,897

$ 7,328,896 14,430,419 37,798 6,698,136 28,495,249

$ 4,619,107 15,982,090 45,532 1,781,640 22,428,369

102,477,647 51,197 1,376,196 1,524,098 151,254 105,580,392 135,030,289

101,280,158 67,438 1,149,050 11,089,271 1,659,404 72,404 115,317,725 143,812,974

99,505,183 51,651 1,366,511 1,537,586 131,497 102,592,428 125,020,797

9,391,311 35,620,588 (17,136)

9,391,311 35,620,588 (36,227)

9,391,311 35,620,588 (17,136)

3,149,555 23,530,726 1,859,173 (5,873,213) 67,661,004 25,319,320 92,980,324 $ 228,010,613

3,149,555 19,417,744 1,859,173 (1,705,088) 67,697,056 16,809,290 84,506,346 $ 228,319,320

3,149,555 20,672,714 1,859,173 (5,399,308) 65,276,897 24,002,078 89,278,975 $ 214,299,772

-5PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In U.S. Dollars) Unaudited For the 1st Quarter ending 31-Mar-17 REVENUES Electricity sales Oil revenues COST OF SALES Cost of sales - Electricity Cost of sales - Oil revenues Oil production operating expenses Depletion

GROSS INCOME GENERAL AND ADMINISTRATIVE EXPENSES OTHER INCOME (CHARGES) Interest income Net unrealized foreign exchange gain (loss) Net unrealized gain on fair value changes on financial assets at FVPL Interest expense Accretion expense Miscellaneous income Share in net income of an Associate

31-Mar-16

$ 7,582,721 1,719,589 9,302,310

$ 5,356,156 1,053,659 6,409,815

2,831,327

2,557,504

853,718 441,539 1,295,257 4,126,584

814,860 636,822 1,451,682 4,009,186

5,175,726

2,400,629

581,641

619,625

7,395 47,156

52,971 (52,453)

11,508 (1,641,546) (13,070) 44,837 1,336,610 (207,110)

15,437 (1,807,938) (35,679) 47,863 1,046,823 (732,976)

INCOME BEFORE INCOME TAX PROVISION FOR INCOME TAX NET INCOME

4,386,975 81,391 $ 4,305,584

1,048,028 39,340 $ 1,008,688

NET INCOME ATTRIBUTATBLE TO: Equity Holders of the Parent Company Noncontrolling interest - IS NET INCOME

2,858,012 1,447,572 $ 4,305,584

517,871 490,817 $ 1,008,688

EARNINGS PER SHARE FO R NET INCO ME ATTRIBUTABLE TO THE EQ UITY HO LDERS O F

THE PARENT COMPANY- BASIC AND DILUTED

0.0070

0.0013

-6PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In U.S. Dollars) Unaudited For the 1st Quarter ending 31-Mar-17 NET INCOME

31-Mar-16

$4,305,584

$1,008,688

(473,905) $3,831,679

(2,284,665) ($1,275,977)

2,514,437 1,317,242 $3,831,679

(2,664,686) 1,388,709 ($1,275,977)

OTHER COMPREHENSIVE INCOME Item to be reclassified to profit or loss in subsequent periods Movements in cumulative translation adjustment TOTAL COMPREHENSIVE INCOME COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Equity holders of the Parent Company Noncontrolling interest

-7PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In U.S. Dollars) Unaudited

Unaudited

Audited

31-Mar-17

31-Mar-16

31-Dec-16

$9,391,311 -

$9,391,311 -

$9,391,311 -

9,391,311

9,391,311

9,391,311

35,620,588

35,620,588

35,620,588

3,149,555

3,149,555

3,149,555

20,672,714 2,858,012

18,899,873 517,871

18,899,873 1,772,841

23,530,726

19,417,744

20,672,714

(5,399,308) (473,905)

(2,548,828) 843,740

(2,548,828) (2,850,480)

(5,873,213)

(1,705,088)

(5,399,308)

(17,136) -

(36,227) -

(36,227) 19,091

(17,136)

(36,227)

(17,136)

1,859,173

1,859,173

1,859,173

TOTAL EQUITY ATTRIBUTED TO EQUITY HOLDERS OF PARENT

67,661,004

67,697,056

65,276,897

NONCONTROLLING INTEREST Balance at beginning of year Net income Increase in non-controlling interests - stock issuances Movement in cumulative translation adjustment

24,002,078 1,447,572 (130,330)

16,042,125 490,817 39,484 236,864

16,042,125 4,085,391 4,464,263 (589,701)

25,319,320

16,809,290

24,002,078

$92,980,324

$84,506,346

$89,278,975

CAPITAL STOCK Authorized capital Increase in capital on June 2015 Total authorized capital Issued and outstanding Balance beginning of year Issuance during the period Total issued and outstanding

330,000,000 370,000,000 700,000,000 410,736,330 410,736,330

ADDITIONAL PAID-IN CAPITAL APPROPRIATED RETAINED EARNINGS

UNAPPROPRIATED RETAINED EARNINGS Balance at beginning of year Net Income CUMULATIVE TRANSLATION ADJUSTMENT Balance at beginning of year Movement of cumulative translation adjustment

REMEASUREMENT OF NET ACCRUED RETIREMENT LIABILITY Balance at beginning of year Remeasurement gain on accrued retirement liability

PARENT'S OTHER EQUITY RESERVES

TOTAL EQUITY

-8PETROENERGY RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF CASHFLOWS (In U.S Dollars) Unaudited 31-Mar-17

Unaudited 31-Mar-16

Audited 31-Dec-16

$ 4,386,975

$ 1,048,028

$ 6,075,863

1,641,546

1,246,382

9,076,674

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Interest expense Impairment loss on Gabon assets Depletion, depreciation and amortization Accretion expense Write-off of deferred exploration cost Gain on disposal of investment Loss (gain) on derivatives Share in net loss (income) of joint venture Interest income Net unrealized foreign exchange loss (gain) Net loss (gain) on fair value changes on financial assets at fair value through profit or loss Gain on sale of equipment Dividend income Operating income before working capital changes

-

-

8,831,689

1,860,375

1,804,604

8,374,260

13,070

35,679

156,955

-

-

(391)

-

-

-

32,980 (10,760,704)

(1,336,610)

(1,046,823)

(1,129,923)

(7,395)

(52,971)

(284,127)

(47,156)

52,453

(40,457)

(11,508)

(15,437)

(16,404)

6,498,906

-

(7,354) (2,131)

3,071,915

20,307,321

(83,949)

(4,310,186)

(4,726,932)

(352,757)

Decrease (increase) in: Receivables Prepaid expenses and other current assets

1,854 (2,718,770)

Increase (decrease) in: Accrued retirement liability Accounts payable and accrued expenses Cash generated from (used in) operations Interest received Income taxes paid Net cash provided by (used in) operating activities

(454)

-

-

531,549

(12,107,686)

(12,897,954)

4,313,085

(13,846,652)

2,746,424

8,944

6,345

325,747

-

(170,110)

4,322,029

(13,840,307)

2,902,061

CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment Dividends received Acquisitions of property, plant and equipment Additional deferred oil exploration costs Decrease (increase) in other noncurrent assets Net cash used in investing activities

1,412 -

-

120,553 2,131

(11,109,222)

(3,652,339)

(14,064,208)

(275,946)

(649,656)

(1,239,641)

(1,379,864)

66,753

(760,862)

(12,763,620)

(4,235,242)

(15,942,027)

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from availment of long-term debt Increase in other noncurrent liabilities Proceeds from issuance of stocks Proceeds from deposit for future stock subscriptions Payment of loans Interest paid Dividends paid Net cash provided by (used in) financing activities NET EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF QUARTER/YEAR

6,479,266 19,757 2,474,703 (210,097) -

23,998 1,341,850 -

55,711,987 83,091 -

(3,506,913)

(55,773,732)

(605,353)

(9,877,644)

(168)

(176)

(2,746,586)

(9,856,474)

(351,103)

25,609

3,274,423

(29,065)

(20,796,526)

(19,622,017)

12,914,588 $ 12,885,523

32,536,605 $ 11,740,079

32,536,605 $ 12,914,588

8,763,629

-9-

PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information a. Organization PetroEnergy Resources Corporation (“PERC”, “PetroEnergy” or the “Group”), formerly Petrotech Consultants, Inc., was organized on September 29, 1994 to provide specialized technical services to its parent company, Petrofields Corporation, and to companies exploring for oil in the Philippines.

The registered office and principal place of business of the Parent Company is 7/F JMT Building, ADB Avenue, Ortigas Center, Pasig City.

In 1997, the Group’s name was formally changed into “PetroEnergy Resources Corporation”, simultaneous with the change in its primary purpose from rendering technical services to oil exploration and development and mining activities.

On June 25, 1999, the Department of Energy (DOE) authorized the assumption by the Group of Philippine oil exploration contracts. The Ministry of Energy of Gabon, West Africa had also been duly notified of the transfer to PERC of Petrofields’ Production Sharing Contract covering the Etame discovery block in the Atlantic shelf.

On May 23, 2003, the Securities and Exchange Commission (SEC) approved the Group’s application for a decrease in authorized Capital from One Billion (1,000,000,000) common shares at a par value of One Peso (P =1.00) per share to Three Hundred Thirty Million (330,000,000) shares at a par value of One Peso (P =1.00) per share.

On July 28, 2004, the Philippine Stock Exchange, Inc. (PSE) approved the Listing by Way of Introduction of the entire issued capital of the Group.

On August 4, 2004, the SEC issued to the Group the certificate of permit to offer securities for sale. This certifies that the shares of the Group have been registered and licensed for Listing by Way of Introduction and by then be sold or offered for sale in the Philippines.

On August 11, 2004, the Group’s shares were listed at the PSE. On July 22, 2009, the Board of Directors (BOD) approved the amendment of the articles of incorporation of PERC to include the business of generating power from conventional sources such as coal, fossil fuel, natural gas, nuclear and other traditional sources of power, and from renewable sources such as, but not limited to, biomass, hydro, solar, wind, geothermal, ocean and such other renewable sources of power. The amendment was approved by the Philippine Securities and Exchange Commission (SEC) on September 23, 2009.

On February 23, 2010, the BOD Approved a 1:1 Stock Rights Offering (SRO). Under the SRO, the shares were offered at P =5.00 per share, giving a net proceeds of P =683.436 million, which was used for the 20MW Phase 1 of the Maibarara power Project (MGPP). The SRO was undertaken during the period June 28, 2010 to July 5, 2010.

On December 5, 2014 the BOD approved a 2:1 SRO. The SRO was undertaken during the period May 11 to 15, 2015. The proceeds of the SRO amounted to P =599.675 million and will

- 10 be used to partially finance the expansion, construction and development of renewable energy projects, such as the MGPP (Phase 2) and Solar Power Project, as well as the expansion of the Etame Project in Gabon, West Africa.

On June 03, 2015, SEC approved the Group’s application for an increase in Authorized Capital from Three Hundred Thirty Million (330,000,000) shares at par value of One Peso (P =1.00) to Seven Hundred Million (700,000,000) shares at par value of One Peso.

In order to insulate PetroEnergy’s core oil business from its renewable energy ventures, PetroEnergy, with the approval of the Board on February 23, 2010, created a wholly owned subsidiary called PetroGreen Energy Corporation (PetroGreen). PetroGreen shall carry-out the renewable energy projects of PetroEnergy. The SEC approved the incorporation of PetroGreen on March 31, 2010.

On May 19, 2010, PetroGreen signed a Joint Venture Agreement (JVA) with Trans-Asia Oil and Energy Development Corporation (“Trans-Asia”), now PHINMA Energy Corporation and PNOC Renewables Corporation (“PNOC-RC”) (collectively the “JV Partners”), whereby the JV Partners agreed to pool their resources together and enter into a joint venture to develop and operate the Maibarara Geothermal Field through the formation of a joint venture named Maibarara Geothermal, Inc. (MGI). On August 11, 2010, the SEC approved the incorporation of MGI, whose principal business is to develop and operate geothermal steam fields and power plants. Pursuant to the JVA, PetroGreen holds a 65% interest in MGI, while Tran-Asia and PNOC-RC hold 25% and 10%, respectively. On January 5, 2011, the DOE approved the transfer of the Maibarara GRESC from PetroEnergy to MGI. In January 2013, through a Special Meeting of the Board of Directors, PetroGreen created a subsidiary, PetroWind Energy, Inc. (PetroWind) that will undertake the Nabas Wind Power Project (NWPP). PetroWind was incorporated on March 6, 2013 wherein PetroGreen initially held 100% interest. On July 15, 2013, EEI Power Corporation (EEIPC) subscribed to a 20% equity share in PetroWind. EEIPC formally became a stockholder of PetroWind upon the SEC’s approval of PetroWind’s increase in authorized capital stock on August 23, 2013.

Effectively as of December 31, 2013, PetroGreen held 80% equity share in PetroWind.

On November 21, 2013, PetroGreen and CapAsia Asean Wind Holdings Cooperatief U.A. (CapAsia) entered into a Share Purchase Agreement (SPA) which sets out the parties’ mutual agreement as to the sale of 2,375,000 shares in PetroWind held by PetroGreen, which is equivalent to 40% of the total issued and outstanding shares of PetroWind. The purchase price for the sale of shares, as set out in Section 3 of the SPA, shall be $5,337,079 upfront payment and a premium of $2,600,000 which will be paid on a staggered basis.

Simultaneously on November 21, 2013, PetroGreen, CapAsia and EEIPC entered into a Shareholders’ Agreement (SHA) that will govern their relationship as shareholders and state their respective rights and obligations in relation to PetroWind. Further, the SHA contains provisions regarding voting requirements for relevant activities that require a higher degree of approval than that under existing corporate laws. PetroGreen, CapAsia and EEIPC agree that their equity ownership ratios in PetroWind are at 40%, 40% and 20%, respectively.

Although the SPA and the SHA were executed on November 21, 2013, these did not result to PetroGreen’s loss of control over PetroWind in 2013. The loss of control did not happen until February 14, 2014, the Closing Date.

On February 14, 2014, the Closing Date, the payment has been received from sale of the shares as executed in the Deed of Assignment covering the transfer of shares from PetroGreen to CapAsia and all the conditions precedent have been satisfactorily completed. As such, PetroGreen lost its control over PetroWind while CapAsia was given full voting and

- 11 economic rights as a 40% shareholder. The transaction made PetroWind a joint venture between PetroGreen, CapAsia and EEIPC by virtue of the SHA signed between the three parties governing the manner of managing PetroWind.

As of December 31, 2014, MGI is effectively a subsidiary of PetroEnergy through PetroGreen, which is wholly owned by PetroEnergy. PetroGreen owned majority of the voting power of MGI. On June 09, 2015, EEIPC acquired 10% of PetroEnergy’s share in PetroGreen, leaving PetroEnergy with 90% share in PetroGreen.

On March 19, 2015, PetroGreen was awarded by the DOE with the Solar Energy Service Contract (SESC) No. 2015-03-115 giving it the right and obligation to explore, develop and utilize the solar energy resource within the service contract area located in Tarlac City. By virtue of the Tarlac SESC, PetroGreen commenced the pre-development activities for the 50 MW Tarlac Solar Power Project (TSPP) to be constructed within a 55 hectare property in Cenral Technopark, San Miguel, Tarlac City.

On June 17, 2015, PetroSolar Corporation (“PetroSolar”) was incorporated. PetroGreen has 56% shareholdings in PetroSolar, while EEIPC owns the remaining 44%.

On June 19, 2015, by virtue of the Deed of Assignment and Assumption, PetroGreen transferred its interest in the SESC to PetroSolar. The assignment was approved by the DOE on September 15, 2015.

As of March 31, 2017 and December 31, 2016, MGI and PetroSolar are effectively indirect subsidiaries of PetroEnergy through PetroGreen, which is 90% owned by PetroEnergy.

PetroGreen owned majority of the voting power of MGI and PetroSolar. PetroEnergy, PetroGreen, MGI and PetroSolar are collectively referred to as the Group. b. Nature of Operations The Group’s four (4) main energy businesses are petroleum, wind, geothermal and solar.

Petroleum Petroleum production is on-going in the Etame (Gabon) concession, while the other petroleum concessions in the Philippines (Northwest Palawan, Offshore Mindoro, Eastern Visayas) are still in the advanced exploration stages or pre-development stages.

Geothermal Energy The geothermal projects are the 20-MW Maibarara Geothermal Power Project (MGPP) in Sto. Tomas, Batangas and its 12MW expansion that is expected to be completed by the fourth quarter of 2017.

Wind Energy The wind energy project is the 36-megawatt (MW) NWPP in Nabas, Aklan, where PetroWind has a wind farm.

Solar Energy The Solar power project is the 50MW Tarlac Solar Power Plant (TSPP) in Tarlac City, Tarlac. c.

Approval of Consolidated Financial Statements The accompanying unaudited interim financial statements were approved and authorized for issue by the BOD.

- 12 2. Basis of Preparation The accompanying consolidated financial statements have been prepared under the historical cost convention method, except for financial assets carried at fair value through profit or loss (FVPL) and derivative liability that have been measured at net realizable value. Figures are presented in United States (US) Dollar ($), the Parent Company’s functional currency. All amounts are rounded to the nearest dollar unless otherwise indicated.

Statement of Compliance The accompanying consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Basis of Consolidation The consolidated financial statements comprise the financial statements of the Group as at March 31, 2017 and December 31, 2016. The financial statements of the subsidiaries are prepared for the same reporting year as the Group, using consistent accounting policies.

Below are the Group’s subsidiaries with its respective percentage ownership as of March 31, 2017 and December 31, 2016:

PetroGreen Percentage share of PetroGreen in its subsidiaries: MGI PetroSolar Navy Road Development Corporation (NRDC)

90%1 65% 56% 100%

As a result of the sale of 10% stake in PGEC, consolidated PERC’s ultimate share in MGI and PetroSolar’s retained earnings and income is reduced by 10% as of March 31, 2017 and December 31, 2016.

1

PetroGreen has control over PetroSolar, since PetroGreen is largely involved in the key decisions concerning the financial and operating policies, activities and provision of technological support and technical know-how to PetroSolar.

Subsidiaries are consolidated when control is transferred to the Group and cease to be consolidated when control is transferred out of the Group. Specifically, the Group controls a subsidiary if and only if the Group has: a) Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) b) Exposure, or rights, to variable returns from its involvement with the investee, and c) The ability to use its power over the investee to affect its returns When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: a) The contractual arrangement with the other vote holders of the investee b) Rights arising from other contractual arrangements c) The Group’s voting rights and potential voting rights The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

- 13 The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All interGroup balances and transactions, interGroup profits and expenses and gains and losses are eliminated during consolidation. All interGroup balances, transactions, income and expenses and profit and losses are eliminated in full.

Noncontrolling interests are presented separately from the Parent Company’s equity. The portion of profit or loss and net assets in subsidiaries not wholly owned are presented separately in the consolidated statement of comprehensive income, consolidated statement of comprehensive income and consolidated statement of changes in equity, and within equity in the consolidated statement of financial position.

Losses within a subsidiary are attributed to the noncontrolling interests even if that results in a deficit balance.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction, as transactions with the owners in their capacity as owners. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

If the Group loses control over a subsidiary, it:   

Derecognizes the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any noncontrolling interest and the cumulative translation differences recorded in equity.

Recognizes the fair value of the consideration received, the fair value of any investment retained and any surplus or deficit in the consolidated statement of comprehensive income.

Reclassifies the parent’s share of components previously recognized in OCI to the consolidated statement of comprehensive income or retained earnings, as appropriate.

This policy is in accordance with PFRS 10, Consolidated Financial Statements.

3. Changes in Accounting Policies The accounting policies adopted are consistent with those of the previous calendar year, except that the Group has adopted the following new accounting pronouncements starting January 1, 2017. Adoption of these pronouncements did not have any significant impact on the Group’s financial position or performance unless otherwise indicated.

Amendment to PFRS 12, Clarification of the Scope of the Standard (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle) The amendments clarify that the disclosure requirements in PFRS 12, other than those relating to summarized financial information, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale.

The amendments do not have any impact on the Group’s financial position and results of operation. The Group will include the required disclosures in its 2017 consolidated financial statements.

Amendments to PAS 7, Statement of Cash Flows, Disclosure Initiative The amendments to PAS 7 require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both

- 14 changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses).

On initial application of the amendments, entities are not required to provide comparative information for preceding periods. Early application of the amendments is permitted.

Application of amendments will result in additional disclosures in the 2017 consolidated financial statements of the Group.

Amendments to PAS 12, Income Taxes, Recognition of Deferred Tax Assets for Unrealized Losses The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity.

Entities applying this relief must disclose that fact. Early application of the amendments is permitted.

4. Summary of Significant Accounting Policies Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured regardless of when the payment is being made.

Revenue is measured at the fair value of the considerations received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group has concluded that it is acting as principal in all of its revenue arrangements since it is the primary obligor in all the revenue arrangements , has pricing latitude and is also exposed to inventory and credit risks. The specific recognition criteria described below must also be met before revenue is recognized.

Oil Revenue Revenue from oil wells is recognized as income at the time of production. Revenue is measured at the fair value of the consideration received.

Electricity Sales Sale of electricity using renewable energy is consummated whenever the electricity generated by the Group is transmitted through the transmission line designated by the buyer, for a consideration.

Interest Income Interest income is recognized as the interest accrues taking into account the effective yield on the asset.

Miscellaneous Income Miscellaneous income includes time writing charges, dividend income, rental income and gain on sale of transportation equipment. Revenue is recognized when the Group’s right to receive the payment is established.

- 15 Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three (3) months or less from the dates of acquisition and that are subject to an insignificant risk of change in value.

Financial Instruments Date of recognition The Group recognizes a financial asset or a financial liability in the consolidated statement of financial position when it becomes a party to the contractual provisions of the instrument.

Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date.

Initial Recognition and Measurement Financial assets within the scope of PAS 39 are classified as either financial assets at FVPL, loans and receivables, held to maturity (HTM) investments or available-for-sale (AFS) financial assets, as appropriate. Financial liabilities are classified as either financial liabilities at FVPL or other financial liabilities. The classification depends on the purpose for which the investments are acquired and the Group determines the classification of the financial instruments at initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end.

All financial assets are initially recognized at fair value plus, in the case of financial assets not at FVPL, directly attributable transaction costs. All financial liabilities are initially recognized at fair value, less, in the case of financial liabilities not at FVPL, directly attributable transaction costs.

The Group’s financial assets include financial assets at FVPL and loans and receivables and its financial liabilities are of the nature of other financial liabilities.

Subsequent Measurement The subsequent measurement bases for financial assets depend on the classification. Financial assets that are classified as loans and receivables are measured at amortized cost using the effective interest rate (EIR) method. Amortized cost is calculated by taking into account any discount, premium and transaction costs on acquisition, over the period to maturity. Amortization of discounts, premiums and transaction costs are taken directly to the consolidated statement of comprehensive income.

Determination of Fair Value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:  In the principal market for the asset or liability, or  In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

- 16 All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:   

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

‘Day 1’ Difference Where the transaction price in a non-active market is different to the fair value from other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Group recognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in the consolidated statement of comprehensive income unless it qualifies for recognition as some other type of asset or liability.

In cases where variables used is made of data which is not observable, the difference between the transaction price and model value is only recognized in the consolidated statement of comprehensive income when the inputs become observable or when the instrument is derecognized. For each transaction, the Group determines the appropriate method of recognizing the Day 1 difference amount.

Loans and Receivables Loans and receivables are financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or financial assets at FVPL. After initial measurement, loans and receivables are subsequently measured at amortized cost using the EIR method, less allowance for impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR. Classified under this category are the Group’s cash and cash equivalents, receivables and restricted cash.

Financial Assets and Financial Liabilities at FVPL Financial assets and financial liabilities at FVPL include financial assets and financial liabilities held for trading purposes, derivative instruments, or those designated by management upon initial recognition as at FVPL, subject to any of the following criteria:   

the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis; or the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance are evaluated on a fair value basis, in accordance with a documented risk management or investment strategy; or the financial instrument contains an embedded derivative, unless the embedded derivative does not significantly modify the cash flows or it is clear, with little or no analysis, that it would not be separately recorded.

- 17 Financial assets and financial liabilities at FVPL are recorded in the consolidated statement of financial position at fair value. Changes in fair value are reflected in the consolidated statement of comprehensive income. Interest earned or incurred is recorded in interest income or expense, respectively.

Dividend income is recognized according to the terms of the contract, or when the right of the payment has been established.

Classified as financial assets at FVPL are the Group’s marketable equity securities held for trading purposes and investment in golf club shares.

Derivative Financial Instruments Derivative financial instruments (including bifurcated embedded derivatives), if any, are initially recognized at fair value on the date at which the derivative contract is entered into and is subsequently remeasured at fair value. Any gains or losses arising from changes in fair value of the derivative (except those accounted for as accounting hedges) is taken directly to the consolidated statement of comprehensive income under “Other income”. The derivative is carried as asset when the fair value is positive and as liability when the fair value is negative.

Other Financial Liabilities All financial liabilities are initially recognized at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, other financial liabilities are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the consolidated statement of comprehensive income when the liabilities are derecognized or impaired, as well as through the amortization process.

Classified under this category are the Group’s accounts payable and accrued expenses and loans payable.

Impairment of Financial Assets The Group assesses at each reporting date whether a financial or group of financial assets is impaired.

A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Loans and Receivables The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant or collectively for financial assets that are not individually significant. If there is an objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original EIR (i.e., the EIR computed at initial recognition).

If it is determined that no objective evidence of impairment exists for an individually assessed financial asset loan or receivable, whether significant or not, the asset is included in a group of

- 18 financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment.

The carrying amount of the asset is reduced through the use of an allowance for impairment loss account. The amount of the loss shall be recognized in the consolidated statement of comprehensive income.

If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the consolidated statement of comprehensive income, to the extent that the carrying value of the asset does not exceed what would have been the amortized cost at the reversal date had there been no impairment recognized.

AFS Financial Assets If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortization) and its current fair value, less any impairment loss previously recognized in consolidated statement of comprehensive income, is transferred from the consolidated statement of changes in equity to statement of comprehensive income. Impairment reversals in respect of equity instruments classified as AFS financial assets are not recognized in the consolidated statement of comprehensive income. Reversals of impairment losses on debt instruments are reversed through the consolidated statement of comprehensive income, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognized in consolidated statement of comprehensive income. The amount of reversal is limited to the amount that brings the carrying value of the debt instrument to what it could have been had there been no impairment in the first place.

Derecognition of Financial Assets and Liabilities A financial asset (or where applicable, a part of a group of financial assets) is derecognized when:  

the rights to receive cash flows from the assets have expired; or the Group has transferred substantially all the risks and rewards of the asset, or has assumed an obligation to pay them in full without material delay to a third-party under a “passthrough” arrangement and neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred the rights to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Financial Liabilities Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the consolidated statement of comprehensive income.

Offsetting Financial Instruments Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if, and only if, there is a currently enforceable legal right to offset

- 19 the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets pertain to resources controlled by the Group as a result of past events and from which future economic benefits are expected to flow to the Group.

Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depletion, depreciation and amortization and any accumulated impairment losses. The initial cost of the property, plant and equipment consists of its purchase price, including any import duties, taxes and any directly attributable costs of bringing the assets to its working condition and location for its intended use and abandonment costs.

Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance, are normally charged to the statement of comprehensive income in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of property, plant and equipment.

Depreciation of an item of property, plant and equipment begins when it becomes available for use, i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Depreciation ceases at the earlier of the date that the item is classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, and the date the asset is derecognized.

Wells, platforms and other facilities are depleted using the units-of-production method computed based on estimates of proved reserves. The depletion base includes the exploration and development cost of the producing oilfields.

Power plant, fuel collection and reinjection system (FCRS) and production wells in the geothermal plant are depreciated using the straight-line method over the useful lives of the assets.

The useful life of these assets shall be determined once in the condition necessary for these assets to be capable of operating in the manner intended by management.

Land improvements consist of betterments, site preparation and site improvements that ready land for its intended use. These include excavation, non-infrastructure utility installation, driveways, sidewalks, parking lots, and fences. Land improvements are depreciated over 5 years.

Other property, plant and equipment are depreciated and amortized using the straight-line method over the estimated useful lives of the assets as follows:

Power plant, FCRS and production wells Transportation equipment Office condominium units Land improvements Office improvements Office furniture and other equipment

Number of Years 25 4 15 5 3 2-3

Wells in progress pertain to those development costs relating to the Service Contract (SC) where oil in commercial quantities are discovered and are subsequently reclassified to “Wells, platforms

- 20 and other facilities” shown under “Property, plant and equipment” account in the consolidated statement of financial position upon commercial production. Depletion of wells in progress commences upon transfer to property, plant and equipment and related main assets are in the condition necessary for it to be capable of operating in the manner intended by management.

Construction in progress represents property, plant and equipment under construction and is stated at cost. This includes the cost of construction to include materials, labor, professional fees, borrowing costs and other directly attributable costs. Construction in progress is not depreciated until such time the construction is completed.

The useful lives and depletion, depreciation and amortization methods are reviewed periodically to ensure that the period and method of depletion, depreciation and amortization are consistent with the expected pattern of economic benefits from items of property, plant and equipment.

When the assets are retired or otherwise disposed of, the cost and the related accumulated depletion, depreciation and amortization and any accumulated impairment losses are removed from the accounts and any resulting gain or loss is reflected in the consolidated statement of comprehensive income.

Deferred Oil Exploration Costs The Group follows the full cost method of accounting for exploration costs determined on the basis of each SC area. Under this method, all exploration costs relating to each SC are tentatively deferred pending determination of whether the area contains oil reserves in commercial quantities.

The exploration costs relating to the SC where oil in commercial quantities are discovered are subsequently reclassified to “Wells, platforms and other facilities” shown under “Property, plant and equipment” in the consolidated statement of financial position upon substantial completion of the development stage. On the other hand, all costs relating to an abandoned SC are written off in the year the area is permanently abandoned. SCs are considered permanently abandoned if the SCs have expired and/or there are no definite plans for further exploration and/or development.

Deferred Development Costs – Geothermal included in Other Noncurrent Assets All costs incurred in the geological and geophysical activities such as costs of topographical, geological and geophysical studies, rights of access to properties to conduct those studies, salaries and other expenses of geologists, geophysical crews, or others conducting those studies are charged to profit or loss in the year such costs are incurred.

If the results of initial geological and geophysical activities reveal the presence of geothermal resource that will require further exploration and drilling, subsequent exploration and drilling costs are accumulated and deferred under the “Deferred geothermal costs” account in the consolidated statement of financial position.

These costs include the following:   

Costs associated with the construction of temporary facilities; Costs of drilling exploratory and exploratory type stratigraphic test wells, pending determination of whether the wells can produce proved reserves; and Costs of local administration, finance, general and security services, surface facilities and other local costs in preparing for and supporting the drill activities, etc. incurred during the drilling of exploratory wells.

If tests conducted on the drilled exploratory wells reveal that these wells cannot produce proved reserves, the capitalized costs are charged to expense except when management decides to use the unproductive wells for recycling or waste disposal.

Once the project’s technical feasibility and commercial viability to produce proved reserves are established, the exploration and evaluation assets shall be reclassified to property, plant and

- 21 equipment and depreciated accordingly.

Deferred Development Costs - Solar Power Project included in Other Noncurrent Assets These are costs incurred in the development of the Solar Project. This include costs incurred for the construction of the asset and other directly attributable expenses during the construction of the solar farm.

Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

The amortization expense on intangible assets with finite lives is recognized in the statement of comprehensive income in the expense category consistent with the function of the intangible assets.

Amortization is computed using the straight-line method over the estimated useful lives (EUL) of one (1) to two (2) years.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the CGU level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statement of profit or loss when the asset is derecognized.

Investment Properties Investment properties consist of land held for capital appreciation or rental to others. Land is stated at cost less any impairment in value.

The initial cost of the investment properties comprises of purchase price and any directly attributable costs of bringing the asset to its working condition. Expenditures incurred after the investment properties has been put into operation, such as repairs and maintenance, are normally charged to expense in the year when costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of investment properties beyond its originally assessed standard of performance, the expenditures are capitalized as an additional cost of investment properties.

Investment property is derecognized when either it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of investment properties are recognized in the consolidated statement of comprehensive income in the year of retirement or disposal.

- 22 Transfers are made to investment properties when, and only when, there is a change in use, evidenced by the end of owner-occupation, commencement of an operating lease to another party or by the end of construction or development. Transfers are made from investment properties when, and only when, there is a change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sell.

Interest in Joint Operations A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group recognized in relation to its interest in a joint operation its:  assets, including its share of any assets held jointly  liabilities, including its share of any liabilities incurred jointly  revenue from the sale of its share of the output arising from the joint operation  share of the revenue from the sale of the output by the joint operation  expenses, including its share of any expenses incurred jointly The Group accounts for the assets it controls and the liabilities it incurs, the expenses it incurs and the share of income that it earns from the sale of crude oil by the joint operations.

Investment in a Joint Venture A joint venture (JV) is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Investment in a JV is accounted for under the equity method of accounting.

As discussed in Note 2, the Group lost its control over PetroWind. Prior to becoming a joint venture in 2014, PetroWind was accounted for as a subsidiary in previous years. In accordance with PFRS, the Group measures and recognizes any retained investment at its fair value when there is loss of control over a subsidiary. Any difference between the carrying amount of the subsidiary upon loss of control and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss as unrealized gain on remeasurement of investment (Note 12).

Impairment of Nonfinancial Assets The Group assesses at each reporting date whether there is an indication that an asset (e.g., property, plant and equipment, investment properties, deferred costs, and intangible assets) may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

- 23 An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depletion, depreciation and amortization had no impairment loss been recognized for the asset in prior years.

Such reversal is recognized in the consolidated statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.

Equity The Group records common stock at par value and additional paid-in capital in excess of the total contributions received over the aggregate par values of the equity shares. When the Group issues more than one class of stock, a separate account is maintained for each class of stock and the number of shares issued. Incremental costs incurred directly attributable to the issuance of new shares are shown in equity as a deduction from proceeds, net of tax. When any member of the Group purchases the Group’s capital stock (treasury shares), the consideration paid, including any attributable incremental costs, is deducted from equity attributable to the Group’s equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects is included in equity.

Retained earnings represent accumulated earnings of the entities within the Group less dividends declared and with consideration of any changes in accounting policies and errors applied retroactively. The retained earnings of the Group and its subsidiaries are available for dividends only upon approval and declaration of each of their respective BOD. Equity Reserve Equity reserve is made up of equity transactions other than equity contributions such as gain or loss resulting from increase or decrease of ownership without loss of control.

Deposits for Future Stock Subscriptions Deposits for future stock subscriptions is recorded based on the redeemable amounts received and is presented under liabilities unless the following items were met for classification as part of equity: a. The unissued authorized capital stock of the entity is insufficient to cover the amount of shares indicated in the contract; b. There is BOD approval on the proposed increase in authorized capital stock (for which a deposit was received by the Group); c. There is stockholders’ approval of said proposed increase; and d. The application for the approval of the proposed increase has been filed with the Securities and Exchange Commission (SEC).

Deposits represent subscription payments received from prospective investors for the Group’s common shares which are yet to be issued upon approval by the SEC of the application for increase in the authorized capital stock. This will be reclassified to ‘Capital stock’ upon issuance of the subscribed shares.

Income Taxes Current Tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amounts are those that are enacted or substantively enacted at the reporting date.

- 24 Deferred Tax Deferred tax is provided using the balance sheet liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences except to the extent that the deferred tax liabilities arise from the: a) initial recognition of goodwill; or b) the initial recognition of an asset or liability in a transaction which is not: i) a business combination; and ii) at the time of the transaction, affects neither accounting profit nor taxable profit or loss.

Deferred tax assets are recognized for all deductible temporary differences with certain exceptions, and carryforward benefits of unused tax credits from excess minimum corporate income tax (MCIT) over RCIT and unused net operating loss carryover (NOLCO), to the extent that it is probable that sufficient taxable income will be available against which the deductible temporary differences and carryforward benefits of unused tax credits from excess MCIT and unused NOLCO can be utilized. Deferred tax assets, however, are not recognized when it arises from the: a) initial recognition of an asset or liability in a transaction that is not a business combination; and b) at the time of transaction, affects neither the accounting income nor taxable profit or loss.

The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date, and are recognized to the extent that it has become probable that future taxable income will allow the deferred tax assets to be recovered. The Group does not recognize deferred tax assets and deferred tax liabilities that will reverse during the income tax holiday.

Deferred tax assets and liabilities are measured at the tax rates that are applicable to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as of the reporting date.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.

Deferred tax items are recognized in correlation to the underlying transaction either in profit or loss or other comprehensive income.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Pension Cost The net defined benefit liability or asset is the aggregate of the present value of the defined benefit obligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using the projected unit credit method.

Defined benefit costs comprise the following:  Service cost  Net interest on the net defined benefit liability or asset  Remeasurements of net defined benefit liability or asset

- 25 Service costs which include current service costs, past service costs and gains or losses on nonroutine settlements are recognized as expense in the consolidated statement of comprehensive income. Past service costs are recognized when plan amendment or curtailment occurs. These amounts are calculated periodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net defined benefit liability or asset that arises from the passage of time which is determined by applying the discount rate based on government bonds to the net defined benefit liability or asset.

Net interest on the net defined benefit liability or asset is recognized as expense or income in the consolidated statement of comprehensive income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized immediately in OCI in the period in which they arise. Remeasurements are not reclassified to consolidated statement of comprehensive income in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to the creditors of the Group nor can they be paid directly to the Group. Fair value of plan assets is based on market price information. When no market price is available, the fair value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the related obligations). If the fair value of the plan assets is higher than the present value of the defined benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value of economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognized as a separate asset at fair value when and only when reimbursement is virtually certain.

Costs and Expenses Oil production operating expenses are costs incurred to produce and sell crude oil inventory, including transportation, storage and loading, among others.

Costs of electricity sales pertain to direct costs in generating electricity power which includes operating and maintenance costs (O&M) for power plant and fluid collection and reinjection system (FCRS), depreciation and other costs directly attributed to producing electricity.

General and administrative expenses constitute costs of administering the business. Costs and expenses are recognized as incurred.

Asset Retirement Obligation (ARO) Provision for asset retirement obligation is recognized when the recognition criteria for a provision are met. The Group recognizes the present value of these costs as ARO assets (included under “Property, plant and equipment”) and ARO liability.

For the renewable energy, the Group depreciates ARO assets on a straight-line basis over the estimated useful life (EUL) of the related asset or the service contract term, whichever is shorter, or written off as a results of impairment of the related asset.

For the oil operation, the Group depreciates ARO assets based on unit of production method.

The Group amortizes ARO liability using the effective interest method and recognizes accretion expense over the service contract term.

- 26 The Group regularly assesses the provision for ARO and adjusts the related liability.

Leases The determination of whether an arrangement is, or contains a lease, is based on the substance of the arrangement at inception date, and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets, and the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one (1) of the following applies: a. there is a change in contractual terms, other than a renewal or extension of the arrangement; a renewal option is exercised or an extension granted, unless that term of the renewal or extension was initially included in the lease term; b. there is a change in the determination of whether fulfillment is dependent on a specified asset; or c. there is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for any of the scenarios above, and at the date of renewal or extension period for the second scenario.

Group as a Lessee Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the consolidated statement of comprehensive income on a straight-line basis over the lease term.

Minimum lease payments are recognized on a straight-line basis while the variable rent is recognized as an expense based on the terms of the leased contract.

Research and Development Costs Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an intangible asset when the Group can demonstrate all of the following:     

the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete and its ability to use or sell the asset; how the asset will generate future economic benefits; the availability of resources to complete the asset; and the ability to measure reliably the expenditure during development.

Borrowing Costs Interest and other related financing charges on borrowed funds used to finance the acquisition and construction of a qualifying asset (included under property, plant and equipment) are capitalized to the appropriate asset accounts. Capitalization of borrowing costs commences when the expenditures and borrowing costs are being incurred during the construction and related activities necessary to prepare the asset for its intended use are in progress. It is suspended during extended periods in which active development is interrupted and ceases when substantially all the activities necessary to prepare the asset for its intended use are complete. The capitalization is based on the weighted average borrowing cost.

The borrowing costs capitalized as part of property, plant and equipment are amortized using the straight-line method over the estimated useful lives of the assets.

Interest expense on loans and borrowings is recognized using the EIR method over the term of the loans and borrowings.

- 27 Foreign Currency-denominated Transactions and Translation The consolidated financial statements are presented in US Dollars, which is the Group’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the consolidated financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate at the reporting date.

All differences are taken to the consolidated statement of comprehensive income with the exception of differences on foreign currency borrowings that provide, if any, a hedge against a net investment in a foreign entity. These are taken directly to equity until disposal of the net investment, at which time they are recognized in the consolidated statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rates as at the dates of initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currency of the Group’s immediate subsidiary, PetroGreen and its subsidiaries, namely MGI and PetroSolar, is the Philippine Peso. As at reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of the Group (the US Dollars) at the exchange rate at the reporting date and the consolidated statement of comprehensive income accounts are translated at weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to “Cumulative translation adjustment” account in the equity section of the consolidated statement of financial position. Upon disposal of a subsidiary, the deferred cumulative translation adjustment amount recognized in equity relating to that particular subsidiary is recognized in the consolidated statement of comprehensive income.

Earnings (Loss) Per Share Basic earnings (loss) per share are computed on the basis of the weighted average number of shares outstanding during the year after giving retroactive effect for any stock dividends declared in the current year.

Diluted earnings per share are computed on the basis of the weighted average number of shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Operating Segment The Group’s operating businesses are organized and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and services and serves different markets. Financial information on business segments is presented in Note 28 to the consolidated financial statements.

Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

- 28 Events After the Reporting Period Post year-end events that provide additional information about the Group’s situation at the reporting date (adjusting events) are reflected in the financial statements, if any. Post year-end events that are not adjusting events are disclosed in the notes to financial statements when material.

5. Significant Accounting Judgments, Estimates and Assumptions The preparation of the consolidated financial statements in compliance with PFRS requires the Group to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and contingent liabilities.

Future events may occur which will cause the assumptions used in arriving at the estimates to change. The effects of any change in judgments, estimates and assumptions are reflected in the consolidated financial statements, as they become reasonably determinable.

Judgments, estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognized in the consolidated financial statements: Determination of Functional Currency The entities within the Group determine the functional currency based on economic substance of underlying circumstances relevant to each entity within the Group. The Parent Company’s functional currency is the US Dollar. The functional currency of PetroGreen and MGI is the Philippine Peso.

As of March 31, 2017 and December 31, 2016, the Group’s cumulative translation adjustment amounted to $5.87 million and $5.40 million, respectively.

Impairment and Write-off of Deferred Oil Exploration Costs The Group assesses impairment on deferred oil exploration costs when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount. Until the Group has sufficient data to determine technical feasibility and commercial viability, deferred oil exploration costs need not be assessed for impairment.

Facts and circumstances that would require an impairment assessment as set forth in PFRS 6, Exploration for and Evaluation of Mineral Resources, are as follows:    

The period for which the Group has the right to explore in the specific area has expired or will expire in the near future, and is not expected to be renewed; Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned; Exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area; and Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

In 2016, the DOE approved the withdrawal of the SC 47 (Offshore Mindoro and Panay) after the

- 29 consortium agreed to relinquish the SC 47 block. This decision was based on the existing high geological risk of the current prospect and lead inventory, lack of interest from farminees, and given the DOE requirement of drilling one well for SubPhase 3. Consequently, the Group wroteoff the deferred exploration costs pertaining to this service contract amounting to $32,980 on December 2016.

As of March 31, 2017 and December 31, 2016, the carrying value of deferred oil exploration costs amounted to $10.41 million and $10.13 million, respectively.

Classification of Joint Arrangements Judgment is required to determine when the Group has joint control over an arrangement, which requires an assessment of the relevant activities and when the decisions in relation to those activities require unanimous consent. Judgment is required to classify a joint arrangement.

Classifying the arrangement requires the Group to assess their rights and obligations arising from the arrangement. Specifically, the Group considers:  The structure of the joint arrangement - whether it is structured through a separate vehicle  When the arrangement is structured through a separate vehicle, the Group also considers the rights and obligations arising from:  The legal form of the separate vehicle  The terms of the contractual arrangement  Other facts and circumstances, considered on a case by case basis This assessment often requires significant judgment. A different conclusion about both joint control and whether the arrangement is a joint operation or a joint venture, may materially impact the accounting.

The Group’s investment in a joint venture is structured in a separate incorporated entity. The Group and the parties to the agreement only have the right to the net assets of the joint venture through the terms of the contractual arrangement. Accordingly, the joint arrangement is classified as a joint venture.

Capitalization of Development Costs Development costs are capitalized in accordance with the accounting policy discussed in Note 4.

Initial capitalization of costs is based on management’s judgment that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. If the requirements for capitalization of development costs are not met, such costs are expensed.

Estimates and Assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Estimating Impairment of Receivables The Group reviews its receivables to assess impairment at least on an annual basis. In determining whether an impairment loss should be recorded in the consolidated statements of income, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from its receivables. This evidence normally includes direct information about the financial condition and historical payments of the borrower.

As of March 31, 2017 and December 31, 2016, the carrying value of receivables amounted to $7.90 million and $7.86 million, respectively. Accumulated impairment losses amounted to $0.05 million as of March 31, 2017 and December 31, 2016.

- 30 Valuation for Derivatives The Group carries certain derivative financial instruments at fair value, which requires use of accounting estimates and judgments. Fair value determinations for derivatives are based generally on current forward exchange rates for contracts with similar maturity profiles. If prices are not readily determinable or if liquidating the positions is reasonably expected to affect market prices, fair value is based on either internal valuation models or management’s estimate of amounts that could be realized under current market conditions, assuming an orderly liquidation over a reasonable period of time.

As of March 31, 2017 and December 31, 2016, the Group has no derivative liability.

Estimating Geothermal Field Reserves MGI performed volumetric reserve estimation and numerical modeling to determine the reserves of the Maibarara geothermal field. As a requirement for project financing, MGI engaged at its own cost the New Zealand firm Sinclair Knight Merz (SKM) in 2011 to undertake a comprehensive third-party technical review of the Maibarara geothermal field. This review included analysis of the resource assessment performed in-house by MGI as well as a separate SKM reserve estimation and numerical modeling of the Maibarara reserves.

As the economic assumptions used may change and as additional geological information is obtained during the operation of a field, estimates of recoverable reserves may change. Such changes may impact the Group’s reported financial position and results, which include:  The carrying value of exploration and evaluation asset; and property, plant and equipment;  Provisions for decommissioning may change - where changes to the reserve estimates affect expectations about when such activities will occur and the associated cost of these activities; and  The recognition and carrying value of deferred tax assets may change due to changes in the judgments regarding the existence of such assets and in estimates of the likely recovery of such assets.

Estimating Proved Oil Reserves Proved oil reserves are estimates of the amounts of oil that can be economically and legally extracted from the Group’s oil properties. The Group estimates its commercial reserves based on the technical assumptions and is calculated in accordance with accepted volumetric methods, specifically the probabilistic method of estimation. Probabilistic method uses known geological, engineering and economic data to generate a range of estimates and their associated probabilities.

Estimating Useful Lives of Property, Plant and Equipment The Group reviews on an annual basis the estimated useful lives of property, plant and equipment based on expected asset utilization as anchored on business plans and strategies that also consider expected future technological developments and market behavior.

It is possible that future results of operations could be materially affected by changes in these estimates brought about by changes in the factors mentioned. A reduction in the estimated useful lives of property, plant and equipment would increase the recorded depletion, depreciation and amortization expense and decrease noncurrent assets.

As of March 31, 2017 and December 31, 2016, the Group’s depreciable property, plant and equipment amounted to $128.311 million and $130.77 million, respectively.

Estimating Impairment of Nonfinancial Assets The Group assesses impairment on its nonfinancial assets (e.g., property, plant and equipment, investment properties and intangible assets) whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

- 31 For property, plant and equipment and investment properties, an impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

In determining the present value of estimated future cash flows expected to be generated from the continued use of property, plant and equipment and investment properties, the Group is required to make estimates and assumptions that can materially affect the consolidated financial statements.

Production activities in the West Linapacan Oilfield (WLO) remained on suspension mode for the last seventeen (17) years. The investment in WLO included in “Wells, Platforms and Other Facilities” account under property, plant and equipment in the consolidated statements of financial position amounted to $6.66 million as of March 31, 2017 and December 31, 2016. Management assessed that the said investment is fully recoverable as SC 14-C has not yet expired, with the 15year extension of the SC as approved by the Department of Energy (DOE), from December 18, 2010 to December 18, 2025 and in the view of the existing redevelopment activities led by Pitkin Petroleum Ltd. (Pitkin) of the United States of America. Based on oil prices existing at March 31, 2017 and December 31, 2016, the prices have not gone below the breakeven level for the Company in so far as its WLO investment is concerned. Thus, no impairment was recognized for 2017 and 2016.

On December 31, 2016, the Company recorded an impairment loss amounting to $8.83 million pertaining to the assets in Gabon, Africa used for oil production. The Group believes that the low oil prices in the global market is an indicator that the assets might be impaired and thus prompted the Company to perform impairment testing.

The related balances of the Group’s nonfinancial assets follow:

Property and equipment Intangible assets Investment properties

31-Mar-2017 $147,076,858 2,963,971 31,417 $150,072,246

31-Dec-2016 $138,870,569 3,017,049 31,417 $141,919,035

Estimating Asset Retirement Obligations The Group has various legal obligation to decommission or dismantle its assets related to the oil production, geothermal energy project and solar power project at the end of each respective service contract. In determining the amount of provisions for restoration costs, assumptions and estimates are required in relation to the expected costs to restore sites and infrastructure when such obligation exists. The Group recognizes the present value of the obligation to dismantle and capitalizes the present value of this cost as part of the balance of the related property, plant and equipment, which are being depreciated and amortized on a straight-line basis over the useful life of the related assets (for the renewable energy) and based on unit of production (for the oil operations).

- 32 The related balances of the Group’s asset retirement obligation follow:

PetroEnergy - Oil production MGI - Geothermal energy project PetroSolar - Solar power project

31-Mar-2017 $992,637 241,894 141,665 $1,376,196

31-Dec-2016 $981,283 244,035 141,193 $1,366,511

Deferred Tax Assets The Group reviews the carrying amounts of deferred tax assets at each reporting date and reduces them to the extent that it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax assets to be utilized. The Group believes that it will generate sufficient future taxable profit to allow all of the deferred tax assets to be utilized.

As of March 31, 2017 and December 31, 2016, the Group did not recognize deferred tax assets on certain NOLCO and MCIT as the Group believes that it may not be probable that sufficient taxable income will be available in the near foreseeable future against which the tax benefits can be realized.

6. Cash and Cash Equivalents

Cash on hand Cash in banks Cash equivalents

Unaudited 31-Mar-2017 $4,305 4,987,112 7,894,106 $12,885,523

Audited 31-Dec 2016 $4,745 4,523,451 8,386,392 $12,914,588

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are made for varying periods of up to three months depending on the immediate cash requirements of the Group, and earn interest at the prevailing short-term deposit rates. The Group has no short-term investments with periods of more than three months but less than one year as of March 31, 2017 and December 31, 2016.

Interest income earned on cash in banks and short-term investments amounted to $0.002 million and $0.150 million as of March 31, 2017 and December 31, 2016, respectively.

7. Financial Assets at Fair Value Through Profit or Loss

Marketable equity securities Investment in golf club shares

Unaudited 31-Mar-2017 $157,118 14,394 $171,512

Audited 31-Dec 2016 $146,958 15,487 $162,445

Net gain on fair value changes on financial assets at FVPL included in the consolidated statements of comprehensive income amounted to $11,508 and $16,404 as of March 31, 2017 and December 31, 2016.

- 33 8. Receivables

Accounts receivable from: Feed-in-Tariff (FiT) revenue from TransCo Electricity sales to PHINMA Consortium operator Electricity sales to WESM Affiliate Others Interest receivable Less allowance for impairment losses

Unaudited 31-Mar-2017

Audited 31-Dec-2016

$5,825,622 1,573,797 545,437 7,363 – 3,937 488 7,956,644 53,477 $7,903,167

$5,343,506 1,575,173 980,694 7,428 1,854 3,697 2,037 7,914,389 53,950 $7,860,439

The Group’s receivables are mainly due from FiT sales to National Transmission Corporation (TransCo), sale of electricity to PHINMA Energy Corporation and consortium operator. These are due within one year. The carrying values as of March 31, 2017 and December 31, 2016 approximate their fair values.

The receivable from affiliate represents advances made by the Group to PetroWind. This is unsecured and noninterest bearing and collectible within one year.

The table below shows the disclosure of reconciliation of allowance for impairment losses on receivables from a consortium operator:

Balance at beginning of year Effect of foreign currency translation Balance at end of year

Unaudited 31-Mar-2017 $53,950 (473) $53,477

Audited 31-Dec-2016 $57,000 (3,050) $53,950

Unaudited 31-Mar-2017 $4,627,916 1,979,573 1,625,243 217,006 256,631 778,851 $9,485,220

Audited 31-Dec-2016 $2,472,521 2,351,879 862,314 210,811 194,544 674,381 $6,766,450

9. Prepaid Expenses and Other Current Assets

Restricted cash Advances to contractors Prepaid expenses Prepaid taxes Crude oil inventory Others

Restricted cash mainly pertains to the amount of fund that the Group is required to comply with the Debt Service Payment Account (DSPA) and Debt Service Reserve Account (DSRA) of MGI and PetroSolar, respectively. The restricted cash is used to pay for the forthcoming debt service scheduled in April and October of every year until the loan is fully paid off. As of December 31, 2016, this also includes unused portion of the Stock Rights proceeds held under escrow account which were fully utilized on March 31, 2017.

- 34 Advances to contractors pertain to advances made to various contractors for the construction of power plants such as the MGPP and Solar Power Project. The downpayments will be applied against future billings in the course of construction. The current portions are estimated to be applied against progress billings within one year from reporting date and are classified under “Prepaid expenses and other current assets”. There were no downpayments to contractors that are related parties as of March 31, 2017 and December 31, 2016, respectively.

Prepaid expenses include prepaid insurance and prepaid rent.

Prepaid taxes pertains creditable withholding taxes and prior year’s income tax credit.

Others pertain to supplies and undrawn deferred financing costs.

- 35 10. Property, Plant and Equipment

Cost Balances at beginning of year Additions Disposal Balances at end of year Accumulated depletion and depreciation Balances at beginning of year Depletion and depreciation Disposals Balances at end of year Cumulative translation adjustments Net book values

31-Mar-2017 (Unaudited) Office Land and condominium land units and Transportation improvements improvements equipment

Power plants

FCRS and production wells geothermal

Wells, platforms and other facilities

$102,554,735 838 ‒ 102,555,573

$21,411,544 1,722 ‒ 21,413,266

$32,374,412 5,843 ‒ 32,380,255

$1,678,489 44,079 ‒ 1,722,568

$797,183 31,876 ‒ 829,059

$983,834 90,864 ‒ 1,074,698

$1,725,504 245,205 (1,412) 1,969,297

$8,187,929 10,688,795 ‒ 18,876,724

$169,713,630 11,109,222 (1,412) 180,821,440

7,165,916 1,025,703 ‒ 8,191,619 (834,384) $93,529,570

1,937,870 187,982 ‒ 2,125,852 (170,252) $19,117,162

19,200,604 441,539 ‒ 19,642,143 ‒ $12,738,112

199,695 26,035 ‒ 225,730 (12,892) $1,483,946

793,134 1,714 ‒ 794,848 5 $34,216

501,182 35,690 ‒ 536,872 (2,296) $535,530

1,044,660 86,501 (607) 1,130,554 (5,321) $833,422

‒ ‒ ‒ ‒ (71,824) $18,804,900

30,843,061 1,805,164 (607) 32,647,618 (1,096,964) $147,076,858

Office furniture and other equipment

Construction in progress

Total

- 36 -

Cost Balances at beginning of year Additions Change in ARO estimate (Note 18) Transfers from deferred exploration costs (Note 11) Transfers from development cost (Note 14) Reclassification/adjustments Disposal Balances at end of year Accumulated depletion and depreciation Balances at beginning of year Depletion and depreciation Disposals Reclassification/Adjustments Balances at end of year Cumulative translation adjustments Impairment of Gabon assets Net book values

31-Dec-2016 (Audited) Office condominium units and Transportation improvements equipment

Power plants

FCRS and production wells geothermal

Wells, platforms and other facilities

Land and land improvements

$45,627,676 4,470,907 135,301

$19,884,969 212,788 ‒

$33,755,627 464,680 (6,472)

$1,681,732 140,555 ‒

$796,456 727 ‒

‒

‒

6,992,266

‒

‒

435,710 54,409,086 ‒ 105,078,680

‒ 2,377,624 ‒ 22,475,381

‒ ‒ ‒ 41,206,101

‒ ‒ (53,826) 1,768,461

‒ ‒ ‒ 797,183

‒ ‒ (66,727) 1,006,693

‒ ‒ ‒ 1,793,339

‒ (56,786,710) ‒ 11,314,639

435,710 ‒ (120,553) 185,440,477

3,458,045 4,076,815 ‒ ‒ 7,534,860 (2,072,119) ‒ $95,471,701

1,243,027 797,318 ‒ ‒ 2,040,345 (961,363) ‒ $19,473,673

16,405,246 2,795,358 ‒ ‒ 19,200,604 ‒ (8,831,689) $13,173,808

158,649 108,242 (53,826) ‒ 213,065 (76,601) ‒ $1,478,795

790,352 10,372 ‒ (7,590) 793,134 ‒ ‒ $4,049

419,503 124,393 (30,152) ‒ 513,744 (10,297) ‒ $482,652

740,998 338,477 ‒ 7,590 1,087,065 (21,653) ‒ $684,621

‒ ‒ ‒ ‒ ‒ (3,213,369) ‒ $8,101,270

23,215,820 8,250,975 (83,978) ‒ 31,382,817 (6,355,402) (8,831,689) $138,870,569

Office furniture and other equipment

Construction in progress

Total

$727,663 345,757 ‒

$1,449,811 343,528 ‒

$60,016,083 8,085,266 ‒

$163,940,017 14,064,208 128,829

‒

‒

‒

6,992,266

- 37 Power Plant includes MGI’s geothermal power plant which were completed in 2013 and PetroSolar’s photovoltaic plant which were completed in February 2016.

The Construction in progress pertains to the construction of Maibarara Phase-2.

Change in ARO estimate and transfers from deferred exploration costs and development cost are considered as noncash investing activities.

Depletion of wells, platforms and other facilities is part of oil production under cost of sales in the consolidated statement of comprehensive income.

Depletion and depreciation expense charged to profit or loss follows:

Cost of electricity sales Depletion General and administrative expenses

Unaudited 31-Mar-2017 $1,208,251 441,539 155,374 $1,805,164

Audited 31-Dec-2016 $5,231,844 2,795,358 223,773 $8,250,975

Unaudited 31-Mar-2017 $10,134,234 275,946 – – $10,410,180

Audited 31-Dec-2016 $15,919,839 1,239,641 (32,980) (6,992,266) $10,134,234

11. Deferred Oil Exploration Costs

Balance at beginning of year Additions Write-off Transfers to wells and platforms Balance at end of year

Under the SCs entered into with the DOE covering certain petroleum contract areas in various locations in the Philippines, the participating oil companies (collectively known as Contractors) are obliged to provide, at their sole risk, the services, technology and financing necessary in the performance of their obligations under these contracts. The Contractors are also obliged to spend specified amounts indicated in the contract in direct proportion to their work obligations.

However, if the Contractors fail to comply with their work obligations, they shall pay to the government the amount they should have spent but did not in direct proportion to their work obligations. The participating companies have Operating Agreements among themselves which govern their rights and obligations under these contracts.

Additions pertain to development costs incurred for Etame expansion.

The full recovery of these deferred costs is dependent upon the discovery of oil in commercial quantities from any of the petroleum concessions and the success of future development thereof.

- 38 12. Investment in a Joint Venture The investment in a joint venture represents PetroGreen’s 40% interest in PetroWind.

PetroWind was incorporated in the Philippines on March 6, 2013 as a wholly owned subsidiary of PetroGreen, primarily to carry on the general business of generating, transmitting and/or distributing power derived from renewable energy sources.

On July 15, 2013, EEIPC subscribed to a 20% equity share in PetroWind.

As discussed in Note 1, on November 21, 2013, PetroGreen and CapAsia entered into a Share Purchase Agreement (SPA) as to the sale of PetroGreen’s 40% equity share in PetroWind.

As of December 31, 2013, PetroGreen still holds 80% equity share in PetroWind and accounted as a subsidiary in the 2013 consolidated financial statements.

On February 14, 2014, PetroGreen received the payment from sale of the shares, and the Deed of Assignment, covering the transfer of shares from PetroGreen to CapAsia, was executed upon satisfactory completion of all the conditions precedent under the SPA. PetroGreen lost its control in PetroWind after the consummation of the SPA. Accordingly, PetroWind ceased as a subsidiary of PetroGreen.

Thereafter, PetroWind became a joint venture between PetroGreen, CapAsia and EEIPC by virtue of the SA signed between the three parties governing the manner of managing PetroWind.

The Group recognized unrealized gain on remeasurement of investment amounting to $17.22 million, gain on sale of investment amounting to $2.67 million and share in deconsolidated retained earnings amounting to $1.17 million. Total gain on disposal of investment amounted to $21.05 million. The Group’s net proceeds as a result of the disposal of investment amounted to $7.87 million.

The movements in the carrying value of the Group’s investment in joint venture in PetroWind in 2016 and 2015 follows:

Balance at beginning of year Share in net income of a joint venture Translation adjustment Balance at end of year

Unaudited 31-Mar-2017 $26,843,396 1,336,610 (225,566) $27,954,440

Audited 31-Dec-2016 $27,166,952 1,129,923 (1,453,479) $26,843,396

Selected financial information of PetroWind as of March 31, 2017 and December 31, 2016 follows: Audited Unaudited 31-Dec-2016 31-Mar-2017 Current assets $20,974,460 $17,964,393 Noncurrent assets 81,399,683 79,819,153 Current liabilities (20,098,892) (15,287,370) Noncurrent liabilities (55,022,479) (52,151,110) Equity $27,252,772 $30,345,066 Summary of statement of comprehensive income of PetroWind for the 1st quarter ended March 31, 2017 and year ended December 31, 2016 follows:

- 39 -

Revenue Cost and expenses Income before tax Tax benefit Net income Group’s share of the net income

Unaudited 31-Mar-2017 $6,324,186 (2,982,660) 3,341,526 – $3,341,526 $1,336,610

Audited 31-Dec-2016 $16,447,112 (13,631,166) 2,815,946 8,862 $2,824,808 $1,129,923

13. Investment Properties As of March 31, 2017 and December 31, 2016, this account consists of land and parking lot space (located in Tektite) with total carrying value of $31,417.

The fair value of the investment properties of the Group amounted to $40,278 as of March 31, 2017 and December 31, 2016. The Group did not obtain the services of an appraiser and determined the fair values of the Group’s investment properties on the basis of recent sales of similar properties in the same areas as the investment properties and taking into account the economic conditions prevailing at the time the valuations were made.

As of December 31, 2016 and 2015, the fair value of the investment properties is classified under the Level 2 category.

Except for insignificant amounts of real property taxes on the investment properties, no other expenses were incurred, and no income was earned in relation to the investment properties as of March 31, 2017 and December 31, 2016.

14. Other Noncurrent Assets

Intangible assets Input VAT Prepaid rent - noncurrent portion Deferred development costs Restricted cash Others

Unaudited 31-Mar-2017 $2,963,971 4,118,627 1,940,525 1,854,024 703,086 203,935 $11,784,168

Audited 31-Dec-2016 $3,017,049 3,011,676 1,958,412 1,553,351 703,086 164,492 $10,408,066

Intangible assets Bulk of this account as of March 31, 2017 and December 31, 2016 pertains to the acquired easement of right of way by PetroSolar amounting to $2.89 million and $2.95 million, respectively. This also includes software used for the geological modeling of MGI field. Details follow:

- 40 31-Mar-2017 Unaudited Land Rights Software Cost Balances at beginning of year Additions Balances at end of the period Accumulated amortization Balances at beginning of year Amortization Balances at end of the period Cumulative translation adjustment Net book values

$3,234,887 – 3,234,887

$264,834 7,332 272,166

$117,576 30,443 148,019 (193,423) $2,893,445

$195,985 3,762 199,747 (1,893) 70,526

31-Dec-2016 Audited Land Rights Software Cost Balances at beginning of year Additions Balances at end of year Accumulated amortization Balances at beginning of year Amortization Balances at end of year Cumulative translation adjustment Net book values

$3,232,673 2,214 3,234,887 – 117,576 117,576 (167,640) $2,949,671

$240,889 23,945 264,834 190,276 5,709 195,985 (1,471) $67,378

Total

$3,499,721 7,332 3,507,053 $313,561 34,205 347,766 (195,316) 2,963,971

Total $3,473,562 26,159 3,499,721 190,276 123,285 313,561 (169,111) $3,017,049

Land rights refers to grant of easement of right of way entered by PetroSolar to construct, operate, maintain, repair, replace and remove poles, wire, cables, apparatus, and equipment and such other apparatus and structures needed for the transmission line.

Amortization expense charged to profit or loss follows:

General and administrative expenses Cost of electricity sales

Unaudited 31-Mar-2017 $3,762 30,443 $34,205

Audited 31-Dec-2016 $5,709 117,576 $123,285

Input VAT The input VAT refers to the Group’s cumulative input VAT carryovers which will be utilized in future periods. Majority of the input VAT pertains to MGI. MGI is undergoing a VAT refund process covering the years 2011, 2012 and 2013 with a total amount of $2.25 million or P =112.03 million. Most of these claims have now been elevated to the Court of tax Appeals.

Prepaid rent - noncurrent portion On April 23, 2012, MGI entered into a Land Lease Agreement (LLA or the Agreement) with the National Power Corporation (NPC) and the Power Sector Assets and Liabilities Management Corporation (PSALM) over the MGPP’s steamfield lot in Sto. Tomas, Batangas.

Under the LLA, MGI will lease the steamfield lot for a period of 25 years, extendable for another 25 years upon mutual agreement of the parties. Prepaid rent-noncurrent portion pertains to the advance rental payment paid for the lease agreement. The current portion due in one year is

- 41 shown as part of “Prepaid expenses and other current assets” in the consolidated statements of financial position.

Deferred development costs Deferred development costs pertain to the costs incurred for the 10MW Phase 2 project of MGI amounting $1.74 million and $1.44 million in March 31, 2017 and December 31, 2016, respectively. This also includes costs incurred for the Phase 2 expansion project of PetroSolar amounting to $0.11 million as of March 31, 2017 and December 31, 2016.

Restricted cash Restricted cash pertains to the Parent Company’s share in the escrow fund for the abandonment of the Gabon assets. This also includes escrow to secure payment and discharge of the Group’s obligations and liabilities under the Floating Production Storage and Offloading (FPSO) contract.

The amount for the share in escrow of the Parent Company’s obligation for the FPSO was deducted from the share on lifting proceeds during the first lifting made by Etame in November 2002 and will be paid back to the Group at the end of the contract which is in 2020.

As of March 31, 2017 and December 31, 2016, the Parent Company contributed its share in the abandonment of the Etame Marine Permit to the escrow fund amounting to $0.70 million.

Others This consists of prepaid expenses and security deposit.

15. Accounts Payable and Accrued Expenses

Accounts payable Accrued interest payable Accrued expenses Dividends payable Withholding taxes and VAT payable Others

Unaudited 31-Mar-2017 $3,272,200 2,487,582 450,446 207,204 141,451 47,628 $6,606,511

Audited 31-Dec-2016 $2,422,775 1,036,687 611,175 209,152 283,895 55,423 $4,619,107

Accounts payable consists of payable to suppliers and contractors that are currently involved in the development, construction and operations of energy projects.

Accrued interest payable pertains to accrual of interest on loans.

Accrued expenses are as follows:

Sick/vacation leaves Professional fees Government share Utilities Due to HI(Note 26) Others

Unaudited 31-Mar-2017 $205,129 80,293 77,609 53,468 13,116 20,831 $450,446

Audited 31-Dec-2016 $228,117 155,420 38,140 134,423 8,166 46,909 $611,175

- 42 Dividends payable pertain to unclaimed checks as of March 31, 2017 and December 31, 2016.

Other payables mainly pertain to accrued security services, utilities and condominium dues.

The Group’s accounts payable and accrued expenses are due within one year. Carrying values approximate their fair values as of March 31, 2016 and December 31, 2016.

16. Short-term and Long-term Loans Payable The Group’s loans payable pertains to loans availed by the Group. Below are the details of the loans entered: Current loans payable

Short-term loans payable Current portion of long-term loans payable Unamortized deferred financing cost

Unaudited 31-Mar-2017 $11,551,037 6,917,138 (9,482) $18,458,693

Audited 31-Dec-2016 $3,419,147 12,575,697 (12,754) $15,982,090

Unaudited 31-Mar-2017 $104,165,760 (1,688,113) $102,477,647

Audited 31-Dec-2016 $101,165,618 (1,660,435) $99,505,183

Non-current loans payable

Loans payable Unamortized deferred financing cost

PetroEnergy’s short-term and long-term loans payable PetroEnergy entered into unsecured loan agreements with various lenders specifically to finance equity infusion to PetroWind.

On April 27, 2015, PetroEnergy entered into an Omnibus Credit Line Agreement with the Development bank of the Philippines which provides a credit facility in the principal amount not exceeding $9.30 million (P =420 million). On May 12, 2015, PetroEnergy availed the first drawdown amounting to $1.30 million (P =60 million) with an interest rate of 5.15% per annum subject to repricing every quarter payable. The loan is payable within one year which matured and paid on May 6, 2016.

On July 20, 2015, PetroEnergy entered into an additional loan amounting to $2.50 million loan with various lenders with an interest rate of 3.9647% per annum subject to repricing every quarter.

The loan is payable in two (2) years with maturity on July 19, 2017.

On October 15, 2015, additional $1.91 million (P =90 million) was drawn from the DBP’s credit facility with an interest rate of 5.00% per annum payable within one year which matured and paid on October 7, 2016.

On November 23, 2015, PetroEnergy entered into additional loan amounting to P =154 million ($3.30 million) with various lenders with an interest rate of 5.25% per annum. Interest rate on the note shall be calculated on a 30/360 day count basis and will be paid every 3 months in arrears in the last day of each three-month period. The tenor of the loan is 2 years and the maturity is on November 23, 2017.

- 43 On October 14, 2016, additional $3.42 million (P =170 million) was drawn from the DBP’s credit facility with an interest rate of 4.50% per annum subject to repricing every quarter payable within one year with maturity on October 9, 2017.

PetroGreen’s short-term and long-term loans payable In November 2015, PetroGreen entered into a 5-year credit line facility with Chinabank in the amount of $10.62 million (P =500 million) with an annual interest rate of 5.24% subject to repricing payable every May and November. As of December 31, 2015, $8.50 million (P =400 million) out of the total facility were granted. On November 2016, PetroGreen availed additional $0.60 million (P = 30 million) loan with the same interest and principal maturity date as the first drawdown. The principal is payable semi-annually starting November 2017 after a 2-year grace period from the original drawdown. Principal due within one year amounting to $.09 million (P =4.3 million) were duly classified as current portion of the long term loan.

MGI’s long-term loans payable On September 26, 2011, MGI together with PNOC Renewables Corporation and Trans-Asia entered into a P =2.4 billion (or $54 million) Omnibus Loan and Security Agreement with RCBC and BPI specifically to partially finance the design, development, procurement, construction, operation and maintenance of its geothermal power plant project.

In 2016, the MGI pre-terminated its loan and paid the entire remaining outstanding principal resulting to recognition of finance cost on extinguishment of loan amounting to P =58.40 million.

Outstanding drawdowns pertaining to this loan facility as of March 31, 2017 and December 31, 2016 amounts to $2,011 (or P =100 thousand).

On June 2, 2016 and October 10, 2016, MGI, together with PNOC RC and PHINMA Energy Corporation, entered into a P =1.40 billion and P =2.10 billion Project Loan Facility Agreement with RCBC specifically to partially finance the design, development, procurement and construction of its 12MW geothermal power plant expansion project, and to consolidate the outstanding term loans under 2011 Omnibus Agreement and incidental costs in connection with the consolidation, and to finance the working capital requirements and other general corporate purposes of the borrower, respectively.

The new M1 Loan amounting to P =2.10 billion has a term of ten (10) years from the Drawdown Date of October 10, 2016. Interest is payable semi-annually and principal is payable in twenty (20) semi-annual payments starting April 12, 2017.

Interest rate is fixed for the first five (5) years from Drawdown Date, based on the sum of the prevailing 5-Year Fixed Benchmark Rate on the Pricing date and the margin of 1.75% (the “Initial Interest Rate”). On the Repricing Date, the interest for the remaining five (5)-year term of the Loan will be the higher of (i) the sum of then prevailing 5-Year Fixed Benchmark Rate plus the margin of 1.75%, or (ii) the Initial Interest Rate.

The M2 Expansion Loan amounting to P =1.40 billion has a term of twelve (12) years including thirty-six (36) months grace period from Initial Drawdown Date of June 2, 2016. Interest is payable semi-annually, and principal is payable in eighteen (18) semi-annual payments within twelve (12) years from and after the Initial Drawdown Date.

Interest rate is fixed for the first seven (7) years from the Initial Drawdown Date based on the sum of the prevailing 7-Year Fixed Benchmark Rate on the Pricing Date and the applicable margin of (1) 1.25% per annum prior to Commercial Operations Date, or (ii) 1.75% per annum from and after the Commercial Operations Date (the “Initial Interest Rate”). For subsequent Drawdowns, interest rate will be the three (3) –day simple average interpolated rate based on the remaining tenor and computed using the straight-line method. On the Repricing Date, the interest for the remaining five (5)-year term of the Loan will be the higher of (i) the sum of the then prevailing 5-

- 44 Year Fixed Benchmark Rate plus the applicable margin, or (ii) the weighted average interest rate during the first seven (7) years of the Loan.

As of March 31, 2017 and December 31, 2016, the MGI has total outstanding drawdowns of $55.22 million (P =2.77 billion) and $51.69 million (P =2.57 billion), respectively.

The loan covenants covering the outstanding debt of MGI include, among others, maintenance of debt-to-equity and debt-service coverage ratios. As of March 31, 2017 and December 31, 2016, MGI is in compliance with the said loan covenants.

PetroSolar’s long-term loans payable On November 12, 2015, the PetroSolar, together with PGEC and EEIPC, as third party mortgagors and pledgors, entered into a P =2.6 billion (or $55.25 million) Omnibus Loan and Security Agreement (OLSA) with PNB and DBP specifically to partially finance the design, development, procurement, construction, operation and maintenance of its Tarlac solar power project.

As of March 31, 2017 and December 31, 2016, PetroSolar drawdown a total of P =2.49 billion (or $52.91 million).

PSC shall fully pay the Loan for the pro-rata account of each lender within twelve (12) years from and after the date of the initial drawdown immediately following the Loan Signing date, the payments to be made in every twenty-two (22) semi-annual principal installments commencing on the date the first anniversary of the initial drawdown ( the "Principal Amortization Date"), inclusive, for the avoidance of doubt, of a grace period of twelve (12) months from the initial drawdown Date. Thus the corresponding amount on the first semi-annual payment is duly classified as current portion of the long-term loan.

PSC pledged all of its property and equipment as collateral in connection with the loan.

Deferred financing costs Deferred financing costs are incidental costs incurred in obtaining the loan which includes documentary stamp tax, transfer tax, chattel mortgage, real estate mortgage, professional fees, arranger’s fee and other costs directly attributable in obtaining the loan. As of March 31, 2017 and December 31, 2016, the portion pertaining to the drawn amount of the loan amounting to $1.70 million and $1.67 million is presented as deduction from the loans payable account and is amortized over the life of the loan using the effective interest rate method. Amortization of deferred costs will be capitalized until all activities necessary to prepare the power plant for its intended use are substantially complete. Details of the Groups’ unamortized deferred financing costs follows:

Balance at beginning of year Deferred financing costs on loan drawn during the year Less amortization during the year Balance at end of year

Unaudited 31-Mar-2017 $1,673,189

Audited 31-Dec-2016 $2,141,574

111,675 1,784,864 87,270 $1,697,594

596,815 2,738,389 1,065,200 $1,673,189

- 45 17. Deposits for Future Stock Subscriptions Deposits for future stock subscriptions pertain to total consideration received from the noncontrolling interests in excess of the authorized capital of the entities within the Group, with the purpose of applying the same as payment for future issuance of shares. Details follow: March 31, 2017 (Unaudited) Subscription No. of shares amount

PetroGreen EEIPC MGI Trans-Asia PNOC-RC PetroSolar EEIPC

December 31, 2016 (Audited) Subscription No. of shares amount

45,148,148

$900,083

25,583,147

$514,544

1,202,500 481,000

2,397,329 958,931

450,000 180,000

905,069 362,027

– 46,831,648

– $4,256,343

– 26,213,147

– $1,781,640

On July 12, 2016, SEC approved PetroSolar’s application for increase in authorized capital stock.

After completion of all the requirements, the group reclassified deposits for future stock subscription from liability account to equity account under non-controlling interest.

As of March 31, 2017 and December 31, 2016, the application for the increase in authorized capital of PetroGreen and MGI is still in process, thus, the balance of deposits was not classified as equity, in accordance with Philippine SEC Financial Reporting Bulletin No. 006 issued in January 2013.

18. Asset Retirement Obligation The Group has recognized its share in the abandonment costs associated with the Etame, Avouma and Ebouri oilfields located in Gabon, West Africa, Geothermal field located in Sto. Tomas Batangas, and photovoltaic (PV) solar power facility in Tarlac.

Movements in this account follow:

Balance at beginning of year Accretion expense Additions or change in estimates Translation adjustment Balance at end of year

Unaudited 31-Mar-2017 $1,366,511 13,070 – (3,385) $1,376,196

Audited 31-Dec-2016 $1,094,672 156,955 128,829 (13,945) $1,366,511

Unaudited 31-Mar-2017 $992,636 241,894 141,666 $1,376,196

Audited 31-Dec-2016 $981,283 244,035 141,193 $1,366,511

Breakdown of the ARO per field: PetroEnergy – Oil fields in Gabon MGI – Geothermal field PetroSolar – PV solar power facility

- 46 The addition in 2016 pertains to provision for the present value of the future estimated costs of legal and constructive obligations to restore the site upon dismantling and removing the operating facilities of the Tarlac solar power plant.

19. Derivative Liability On November 21, 2013, PetroGreen and CapAsia ASEAN Wind Holdings Cooperatief U.A. (CapAsia) entered into a Share Purchase Agreement (SPA) which sets out the parties’ mutual agreement as to the sale of 2,375,000 shares in PetroWind held by PetroGreen, which is equivalent to 40% of the total issued and outstanding shares of PetroWind.

Simultaneously on November 21, 2013, PetroGreen, EEIPC and CapAsia entered into a Shareholders’ Agreement (SA). The SA will govern their relationship as the shareholders of PetroWind as well as containing their respective rights and obligations in relation to PetroWind.

Further, the SA contains provisions regarding voting requirements for relevant activities that require unanimous consent of all the parties.

CapAsia was given full voting and economic rights as a 40% shareholder. On February 14, 2014, the closing date, PetroGreen lost its control on PetroWind as a result of its sale of the half of its interest of 80% on PetroWind.

The SA further provides for call and put options: CapAsia Investor’s Put Option In the absence of a Liquidity Event by the sixth anniversary of the Closing Date, CapAsia Investor may at any point thereafter, by written notice (the “Put Notice”), requires PetroGreen or its designee to purchase all of its shares in PetroWind at a value that shall ensure CapAsia Investor an IRR of fifteen percent (15%) for its investment.

PetroGreen’s Call Option In the absence of a Liquidity Event by the seventh anniversary of the Closing Date, PetroGreen may at any point thereafter, by written notice (the “Call Notice”), call upon CapAsia Investor to sell all of its common shares in PetroWind to PetroGreen or its designee at a value that shall ensure CapAsia Investor an IRR of twenty percent (20%) for its investment.

Payoff Structure Upon exit of CapAsia Investor through a Liquidity Event, CapAsia Investor shall share the profit of the Investment with PetroGreen following the schedule below: (a) After CapAsia Investor has received an IRR of twenty percent (20%) on its Investment, PetroGreen shall receive twenty five percent (25%) of the profits from the Investment over an IRR of twenty percent (20%) and up to an IRR to CapAsia Investor of twenty five percent (25%). (b) After CapAsia Investor has received an IRR of twenty-five percent (25%) on its Investment, PGEC shall receive fifty percent (50%) of the profits from the Investment over an IRR of twenty-five percent (25%) and up to an IRR to CapAsia Investor of thirty percent (30%). (c) After CapAsia Investor has received equity IRR of thirty percent (30%) on its Investment, PGEC shall receive seventy-five percent (75%) of the profits from the Investment over an IRR of thirty percent (30%).

Liquidity Event shall mean any of the following: (a) A sale of all of PetroWind’s capital stock to a third party;

- 47 (b) Transfer of shares by the Company to a proposed transferee which gives rise to the tag along rights of CapAsia investor; (c) An initial public offering of the shares of PetroWind on the Philippine Stock Exchange (PSE); or (d) Any other process or transaction of a similar nature as the above listing that enables CapAsia investor to divest of its share in PetroWind.

In 2016, CapAsia’s mother company, CAIFIII PTE Ltd. (CAIF III) negotiated for a proposed sale to a third party of its 99.99% membership interest in CapAsia which owns 40% interest in PetroWind. In relation to this, it was agreed that the SA entered previously by PetroGreen, EEIPC and CapAsia shall cease to have effect. Moreover on a Letter Agreement entered into by the parties, they acknowledged and confirmed that CapAsia Investor’s Put Option and PetroGreen’s Call Option shall cease to have any effect on the date of the closing of the sale which happened in the first quarter of 2017.

As the parties acknowledged and confirmed that the call and put option shall cease upon signing of the new SA, PetroGreen derecognized the derivative liability as at December 31, 2016.

Gain on derivative write-off amounting to $10.76 million in were recognized in December 31, 2016.

20. Equity Under the existing laws of the Republic of the Philippines, at least 60% of PERC’s issued capital stock should be owned by citizens of the Philippines for the Company to own and hold any mining, petroleum or renewable energy contract area. As of March 31, 2017 and December 31, 2017, the total issued and subscribed capital stock of the Parent Company is 99.64% Filipino and 0.36% non-Filipino as compared to December 31, 2015 wherein the total issued and subscribed capital stock of the Group is 99.76% Filipino and 0.24% non-Filipino.

On June 3, 2015, Securities and Exchange Commission approved the increase in authorized capital from 330,000,000 shares to 700,000,000 shares at P =1 par value per share. Out of the entire increase in the authorized capital stock, 136,912,110 common shares have been subscribed through the SRO on May 11 to 15, 2015. The subscription of 136,912,110 common shares amounted to $13.44 million, out of which additional paid-in capital amounted to $10.38 million.

As of March 31, 2017 and December 31, 2016, the Parent Company’s capital stock consists of 700,000,000 authorized and 410,736,330 issued and outstanding common shares with par value of =1 ($0.0201) per share. Total capital stock and additional paid-in capital amounted to $9.39 P million and $35.62 million, respectively.

Capital Stock

Balances at beginning of year Stock rights offering Balances at end of year

Number of shares 31-Mar-2017 31-Dec-16 410,736,330 410,736,330 − − 410,736,330 410,736,330

Amount 31-Mar-2017 $9,391,311 − $9,391,311

31-Dec-2016 $9,391,311 − $9,391,311

- 48 Additional Paid-in Capital Balances at beginning of year Stock rights offering Balances at end of year

31-Mar-2017 $35,620,588 − $35,620,588

31-Dec-2016 $35,620,588 − $35,620,588

2015 $25,244,737 10,375,851 $35,620,588

The Group’s track record of capital stock follows:

Listing by way of introduction August 11, 2004 Add (deduct): 25% stock dividend 30% stock dividend 1:1 stock rights offering December 31, 2010 Deduct: Movement December 31, 2011 Deduct: Movement December 31, 2012 Deduct: Movement December 31, 2013 Deduct: Movement December 31, 2014 Add (Deduct): 2:1 stock rights offering December 31, 2015 Deduct: Movement December 31, 2016 Deduct: Movement March 31, 2017

Number of shares registered

Issue/offer price

Date of SEC approval

84,253,606

=3/share P

August 4, 2004

21,063,402 31,595,102 136,912,110 273,824,220 − 273,824,220 − 273,824,220 − 273,824,220

P1/share = =1/share P =5/share P

September 6, 2005 September 8, 2006 May 26, 2010 2,149 (26) 2,123 (10) 2,113 (41) 2,072 (29) 2,043

273,824,220 136,912,110 410,736,330 − 410,736,330

Number of holders as of year-end

=4.38/share P

June 3, 2015

(15) 2,028 (1) 2,027 (6) 2,021

Dividends There were no declaration of cash dividends for the period ended March 31, 2017 and December 31, 2016.

Appropriated Retained Earnings On January 15, 2008, the BOD approved the appropriation of $0.49 million for the development of the Ebouri oil field in Gabon, in addition to the $0.56 million originally appropriated amount. Participation in the development of the Ebouri field by the Group has been approved by the BOD on the same date.

On July 24, 2008, the BOD approved additional appropriation of retained earnings amounting to $1.0 million for the development of the Ebouri oil field in Gabon, West Africa.

On February 19, 2013, the BOD approved additional appropriated retained earnings amounting to $1.09 million to cover for the Group’s share in the cost of the committed wells in the Etame oilfield in Gabon, West Africa.

Total appropriations for the development of the oilfields in Gabon, West Africa as of March 31, 2017 and December 31, 2016 amounted to $3.15 million. Further expansion of the said oilfield is on-going.

Equity Reserve As discussed in Note 1, on June 9, 2015, PetroEnergy sold its 10% interest in PetroGreen to

- 49 EEIPC, bringing its ownership in PetroGreen from 100% to 90%. The transaction was accounted as an equity transaction since there was no change in control.

The effect of change in the ownership interest in PetroGreen on the equity attributable to owners of PetroEnergy during the year is summarized as follows: Consideration received from non-controlling interest Carrying amount of non-controlling interest sold, net of related cost Excess of consideration received recognized in equity

$4,669,613 2,810,440 $1,859,173

At PetroEnergy’s separate financial statements, the gain from sale recognized in the statement of comprehensive income amounted to $2.12 million in 2015.

Capital Management The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholders’ value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may increase its debt from creditors, adjust the dividend payment to shareholders or issue new shares.

As of March 31, 2017 and December 31, 2016, the Group monitors capital using a debt-to-equity ratio, which is total liabilities divided by total equity.

As of March 31, 2017 and December 31, 2016, the Group’s sources of capital are as follows:

Loans payable Capital stock Additional paid-in capital Retained earnings Equity reserve

Unaudited 31-Mar-2017 $120,936,340 9,391,311 35,620,588 26,680,281 1,859,173 $194,487,693

Audited 31-Dec-2016 $115,487,273 9,391,311 35,620,588 23,822,269 1,859,173 $186,180,614

The table below demonstrates the debt-to-equity ratio of the Group as of March 31, 2017 and December 31, 2016:

Total debt Loans payable Accounts payable and accrued expenses Income tax payable Deposit for future stock subscription Asset retirement obligation Deferred tax liabilities Other noncurrent liability Total equity Debt-to-equity ratio

Unaudited 31-Mar-2017

Audited 31-Dec-2016

$120,936,340 6,606,511 128,350 4,256,343 1,376,196 1,524,098 202,451 $135,030,289 $92,980,324 1.45:1

$115,487,273 4,619,107 45,532 1,781,640 1,366,511 1,537,586 183,148 $125,020,797 $89,278,975 1.40:1

Based on the Group’s assessment, the capital management objectives were met as of March 31,

- 50 2017 and December 31, 2016.

21. Related Party Transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party in making financial and operating decisions or the parties are subject to common control or common significant influence (referred to as ‘Affiliates’). Related parties may be individuals or corporate entities.

Significant transactions with related parties are as follows:

Related Party/Nature Stockholder HI Internal audit services Joint Venture PetroWind Due from PetroWind Interest income Management income Advances

Transactions for the Years Ended December 31 31-Dec-2016 31-Mar-2017

(3,360) (3,360)

$− − 40,192 19,879 $1,137,485

(20,052) (20,052)

$828,293 49,657 169,376 90,159 $1,137,485

Outstanding Balance Receivables (Payables) 31-Dec-2016 31-Mar-2017

(13,116) (13,116) $− − − − $−

Terms and Conditions

(8,166) (8,166)

Note a

$− − − 1,854 $1,854

Note b Note b Note c Note d

a. PetroEnergy has engaged HI to perform internal audit services on PetroEnergy. HI charges retainer fee of P =56,000 ($1,120) per month. Also, on 2016, PetroEnergy engaged HI for IT General Controls and System Implementation Review. b. On March 2015, PWEI availed of a P =20 million (or $0.42 million) loan from PGEC at 5.6% annual interest payable in June 2016. This was rolled-over and paid on December 29, 2016.

On May 4, 2015, PWEI availed of an additional loan from PERC amounting P =20 million (or $0.42 million) payable in May 2016 at annual interest rate of 6.104%. This was rolled over and paid on December 29, 2016. c. Management income refers to timewriting charges, management fees for accounting, legal, management and other support services rendered by PetroEnergy and PetroGreen to PetroWind. d. Advances are minimal reimbursement of costs and expenses.

Terms and conditions of transactions with related parties Outstanding balances at year-end are unsecured, interest-free and settlement occurs in cash.

There have been no guarantees provided or received for any related party receivables or payables.

The Group has not recognized any impairment on amounts due from affiliated companies for the years ended December 31, 2016 and 2015. This assessment is undertaken each financial year through a review of the financial position of the related party and the market in which the related party operates.

Compensation of Key Management Personnel The Group has a profit-sharing plan for directors, officers, managers and employees as indicated in its by-laws. The amount, the manner and occasion of distribution is at the discretion of the

- 51 BOD, provided that profit share shall not exceed 5% of the audited income before income tax and profit share.

22. Financial Instruments The Group’s principal financial instruments include cash and cash equivalents, short term investments, trading and investment securities (financial assets at FVPL), receivables, restricted cash, loans payable, accounts payable, accrued expenses and dividends payable. The main purpose of these financial instruments is to fund the Group’s working capital requirements.

Categories and Fair Values of Financial Instruments As of March 31, 2017 and December 31, 2016, the carrying amounts of the Group’s financial assets and financial liabilities approximate their fair values except for loans payable. The fair value of the loans payable as of March 31, 2017 and December 31, 2016 amounted to $120.94 million and $120.71 million compared to their carrying value of $120.94 million and $115.49 million, respectively.

The methods and assumptions used by the Group in estimating the fair value of financial instruments are: Cash and cash equivalents and Receivables

Due to the short-term nature of the instruments, carrying amounts approximate fair values as of the reporting date.

Equity securities

Fair values are based on published quoted prices.

Golf club shares

Fair values are based on quoted market prices as at reporting date.

Accounts payable and accrued expenses

Due to the short-term nature of the instruments, carrying amounts approximate fair values as at reporting date.

Loans payable

Fair values are based on the discounted value of expected future cash flows using the applicable interest rate for similar type of instruments. The fair value for March 31, 2017 and December 2016 for the 5 year tenor loans is derived using the projected T-Bond coupon rate of 3.868% and 4.519%, respectively, plus 3.202% credit spread for the first five years and 4.303% for the second five years. The fair value of the 22 year tenor loan is derived using the projected TBond coupon rate of 4.640% plus 2.250 credit spread.

For the two loans with 2-year tenor, March 31, 2017 and December 2016 fair value is derived using the treasury rate of 5.964% and 3.892% plus a credit spreads of nil and 0.073%, respectively.

Derivative liability

Fair value is estimated using a modified binomial options pricing model which consists of two parts: the price tree and the backwards induction tree.

The following tables show financial instruments recognized at fair value as of March 31, 2017 and December 31, 2016. The fair value is based on the source of valuation as outlined below: 

quoted prices in active markets for identical assets or liabilities (Level 1);

- 52  

those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly (Level 2); and those with inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

Level 1 Financial assets at FVPL Marketable equity securities Investment in golf club shares

$157,118 14,394 171,512

Level 1 Financial assets at FVPL Marketable equity securities Investment in golf club shares

$146,958 15,487 $162,445

31-Mar-2017 (Unaudited) Level 2 Level 3 Fair Value $− − −

$− − −

$157,118 14,394 171,512

31-Dec-2016 (Audited) Level 2 Level 3 Fair Value $− − −

$− − −

$146,958 15,487 $162,445

As of March 31, 2017 and December 31, 2016, there were no transfers of financial instruments among all levels.

Derivative Financial Instruments The combined fair value of the options is estimated using a modified binomial options pricing model which consists of two parts: the price tree and the backwards induction tree. Under a riskneutral assumption, the price tree is used to predict the potential upward and downward movements of the company value as of valuation date. The backwards induction tree is used to compute the value of the options given the predicted values in the price tree. The backwards induction tree is modified to incorporate several assumptions that are based on management's judgment and expectations.

These assumptions are as follows: (a) The projected offer price is the book value of PetroWind at 5th year (2020). (b) PetroWind share price volatility is assumed at 10%. (c) There will be no dividend declaration for the 7-year projection. (d) 99% probability of liquidity event.

As of March 31, 2017 and December 31, 2016, the Group has already derecognized its derivative liability.

Financial Risk Management Objectives and Policies The Group manages and maintains its own portfolio of financial instruments in order to fund its own operations and capital expenditures. Inherent in using these financial instruments are the following risks on liquidity, market and credit.

Financial Risks The main financial risks arising from the Group’s financial instruments are liquidity risk, market risk and credit risk.

Liquidity Risk Liquidity risk is the risk that the Group is unable to meet its financial obligations when due. The Group monitors its cash flow position and overall liquidity position in assessing its exposure to liquidity risk. The Group maintains a level of cash and cash equivalents deemed sufficient to finance its operations and to mitigate the effects of fluctuation in cash flows. To cover its short-

- 53 term and long-term funding requirements, the Group intends to use internally generated funds as well as to obtain loan from financial institutions.

The tables below summarize the maturity profile of the Group’s financial assets and financial liabilities as of March 31, 2017 and December 31, 2016 based on contractual payments:

On demand Financial Assets Financial assets at FVPL Loans and receivables: Cash and cash equivalents Accounts receivable Interest receivable Restricted cash Financial Liabilities Loans payable** Accounts payable and accrued expenses* Net financial assets (liabilities)

31-Mar-2017 Unaudited Less than 6 months to More than 6 months 12 months 12 months

Total

$171,512

$−

$−

$−

$171,512

4,991,417 7,849,202 488 − $13,012,619

7,894,106 − − 4,627,916 $12,522,022

− − − − $−

− 53,477 − 703,086 $756,563

12,885,523 7,902,679 488 5,331,002 $26,291,204

$−

$18,458,693

$−

$102,477,647

$120,936,340

3,722,646 $3,722,646

2,742,414 $21,201,107

− $−

− $102,477,647

6,465,060 $127,401,400

$9,289,973

($8,679,085)

$−

($101,721,084)

($101,110,196)

*Excluding statutory payables **Includes future interest payments

On demand Financial Assets Financial assets at FVPL Loans and receivables: Cash and cash equivalents Accounts receivable Interest receivable Restricted cash Financial Liabilities Loans payable** Accounts payable and accrued expenses* Net financial assets (liabilities)

Dec-31-2016 Audited Less than 6 months to 6 months 12 months

More than 12 months

Total

$162,445

$−

$−

$−

$162,445

4,528,196 7,804,452 2,037 − $12,497,130

8,386,392 − − 2,472,521 $10,858,913

− − − − $−

− 53,950 − 703,086 $757,036

12,914,588 7,858,402 2,037 3,175,607 $24,113,079

$−

$25,988,539

$−

$130,684,937

$156,673,476

2,971,245 $2,971,245

1,363,967 $27,352,506

− $−

− $130,684,937

4,335,212 $161,008,688

$9,525,885

($16,493,593)

$−

($129,927,901)

($136,895,609)

*Excluding statutory payables **Includes future interest payments

b. Market Risk Market risk is the risk of loss on future earnings, on fair values or on future cash flows that may result from changes in market prices. The value of a financial instrument may change as a result of changes in equity prices, foreign currency exchanges rates, interest rates and other market changes.

Equity Price Risk The Group closely monitors the prices of its securities on a daily basis, as well as macroeconomic and entity-specific factors which could directly or indirectly affect the prices of these instruments. In case of an expected decline in its portfolio of equity securities, the Group readily disposes or trades the securities for replacement with more viable and less risky investments.

Such investment securities are subject to price risk due to changes in market values of instruments arising either from factors specific to individual instruments or their issuers, or factors affecting all instruments traded in the market.

- 54 -

Foreign Exchange Risk Exposure to currency risk arises from general and administrative expenses, assets and liabilities in currencies other than the Group’s functional currency which is very minimal since the Group’s oil revenues and costs and expenses are denominated in US Dollar. Currency risk is monitored and analyzed systematically and is managed by the Group.

Interest Rate Risk The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s loans payable and derivative liability. Interest rate of loans payable is fixed for the first five (5) years and will be repriced thereafter. c. Credit Risk There are significant concentrations of credit risk within the Group since most of its financial assets are with consortium operator, although credit risk is immaterial. The gross maximum exposure of the Group’s credit risk is equal to the carrying amounts of the financial assets.

The Group has a well-defined credit policy and established credit procedures. In addition, receivable balances are being monitored on a regular basis to ensure timely execution of necessary intervention efforts.

The Group determines the credit quality by class for loan-related consolidated statements of financial position lines based on the following: Cash in banks and short-term investments - based on the nature of the counterparties and the reputation of the financial institution.

Receivables - based on the payment behavior of the counterparty. High grade pertains to receivables from consortium operator and interest receivable from short-term investments and standard grade pertains to other receivables. Both are neither past due nor impaired.

The tables below show the credit quality by class of asset for loan-related consolidated statements of financial position lines, based on the Group’s credit rating system as of March 31, 2017 and December 31, 2016: 31-Mar-2017 Unaudited Neither past due nor impaired Past due High grade Standard grade and impaired Cash and cash equivalents* Accounts receivable Interest receivable Restricted cash

$12,881,218 7,849,202 488 5,331,002 $26,061,910

$− − − − $−

Total

$− 53,477 − − $53,477

$12,881,218 7,902,679 488 5,331,002 $26,115,387

Dec-31-2016 Audited Neither past due nor impaired Past due High grade Standard grade and impaired

Total

*excluding cash on hand

Cash and cash equivalents* Accounts receivable Interest receivable Restricted cash *excluding cash on hand

$12,909,843 7,804,452 2,037 3,175,607 $23,891,939

$− − − $−

$− 53,950 − − $53,950

$12,909,843 7,858,402 2,037 3,175,607 $23,945,889

- 55 23. Segment Information For management purposes, the Group is organized into business units based on their products and has five reportable segments as follows:   

 

The oil production segment is engaged in the oil and mineral exploration, development and production.

The geothermal energy segment develops and operates geothermal steamfields and power plants.

The wind energy segment carries out the general business of generating, transmitting, and/or distributing power derived from wind energy sources. Starting 2015, this was not presented as operating segment as this became a joint venture in 2014. The Group take up its share in net earnings of PetroWind and presents it the consolidated statements of income under “Share in net income (loss) of a joint venture”.

The solar energy segment carries out solar energy operations of the Group.

Other activities pertain to research and investment activities.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the consolidated financial statements

Segment revenue Net income (loss) Other comprehensive income (loss) Other Information: Segment assets except deferred tax assets Deferred tax assets - net Segment liabilities except deferred tax liabilities Deferred tax liabilities - net Provision for income tax Capital expenditures Deferred oil exploration costs Depletion, depreciation and amortization

Oil Geothermal Production Energy $1,719,589 $4,181,006 118,450 1,676,148 (473,905) –

Elimination Consolidated ($56,645) $9,302,310 1,428,036 4,305,584 – (473,905)

$63,072,745 $301,045

$99,748,226 $–

$70,311,355 $7,083

$40,971,558 $–

($46,401,400) $227,702,485 $– $308,128

$13,003,810

$68,956,830

($14,199,133) $133,506,191

$49,552,071

$16,192,612

$– $8,662 $112,578 $10,410,180

$– $90 $10,813,250 $–

$– $71,519 $128,730 $–

$1,524,098 $1,119 $54,664 $–

$– $– $– $–

$1,524,098 $81,391 $11,109,222 $10,410,180

$466,857

$725,437

$607,183

$5,687

$–

$1,805,164

Geothermal Oil Production Energy Segment revenue $5,339,338 $16,526,183 Net income (loss) (11,740,775) 2,967,696 Other comprehensive income (loss) 19,091 – Other Information: Segment assets except deferred tax assets $60,627,169 $87,607,326 Deferred tax assets - net $301,045 $– Segment liabilities except deferred tax liabilities $10,676,684 $58,229,273 Deferred tax liabilities - net Provision for income tax Capital expenditures

31-Mar-2017 (Unaudited) Other Solar Energy Activities $3,401,716 $56,645 1,264,625 (181,674) – –

$– $10,270 $718,079

$– ($8,059) $9,856,968

31-Dec-2016 (Audited) Other Solar Energy Activities $11,764,139 $241,247 3,511,919 10,001,755 – –

Elimination ($241,247) 1,117,637 –

Consolidated $33,629,660 5,858,232 19,091

$68,662,752 $7,123

$52,870,028 $–

($55,467,503) $214,299,772 $– $308,168

$48,991,668

$13,850,803

($8,265,217) $123,483,211

$– $210,638 $3,524,822

$1,537,586 $4,782 $8,363

$– $– ($44,023)

$1,537,586 $217,631 $14,064,209

- 56 Deferred oil exploration costs Depletion, depreciation and amortization

$10,134,234

$–

$–

$–

$2,892,911

$3,046,230

$2,422,612

$12,807

$– ($300)

$10,134,234 $8,374,260

InterGroup investments, revenues and expenses are eliminated during consolidation.

24. Basic/Diluted Earnings Per Share The computation of the Group’s earnings per share follows:

Net income attributable to equity holders of the Parent Company Weighted average number of shares Basic/diluted earnings per share

Unaudited 31-Mar-2017

Unaudited 31-Mar-2016

$2,858,012 410,736,330 $0.0070

$517,871 410,736,330 $0.0013

Audited 31-Dec-2016 $1,772,841 410,736,330 $0.0043

Earnings per share are calculated using the net income attributable to equity holders of the Parent Company divided by the weighted average number of shares.

25. Noncontrolling Interests As of March 31, 2017 and December 31, 2016, noncontrolling interests (NCI) pertain to the 10% shareholdings of EEI-PC in PetroGreen, 35% shareholdings of Trans-Asia and PNOC in MGI and 44% shareholdings of EEI-PC in PetroSolar.

MGI, PetroSolar and PetroWind are entities incorporated and operating in the Philippines.

As of March 31, 2017 and December 31, 2016, the accumulated balances of and net loss attributable to noncontrolling interests are as follows: Unaudited 31-Mar-2017

Accumulated balances of noncontrolling interests: MGI PetroGreen PetroSolar Net income (loss) attributable to noncontrolling interests: MGI PetroGreen PetroSolar

Audited 31-Dec-2016

$10,996,245 5,117,995 9,205,080 $25,319,320

$10,475,492 8,713,076 4,813,510 $24,002,078

$586,652 304,485 556,435 $1,447,572

$1,038,694 1,501,453 1,545,244 $4,085,391

The summarized financial information of these subsidiaries is provided below in Philippine Peso which is the subsidiaries’ functional currency. This information is based on amounts before intercompany eliminations.

The increase in noncontrolling interests from stock issuances follows:

- 57   

As of December 31, 2016, PetroSolar converted its deposit for future stock subscription into capital stock which increased the noncontrolling interest by $4.49 million.

As of December 31, 2015, PetroSolar issued 3,300,000 common shares with $2.04 par value.

The issuances increased the noncontrolling interest by $3.05 million, PetroGreen also issued 55,250,000 shares which increased the noncontrolling interest by P =0.11 million.

As of December 31, 2014, MGI issued 748,880 common shares with 100 par value. Such stock issuances increased the noncontrolling interests by $0.18 million.

The increase in noncontrolling interest from stock issuances does not result to the dilution of the Parent Company’s effective interest in the subsidiaries.

26. Others a. The Interim Financial Report (March 31, 2017) is in compliance with generally accepted accounting principles. b. The same policies and methods of computation were followed in the preparation of the interim financial report compared to the December 31, 2016 Consolidated Audited Financial Statements. c. No unusual item or items affected the assets, liabilities, equity and cash flows of the March 31, 2017 Financial Statements. d. Earnings per share is presented in the face of the unaudited statements of income for the period ended March 31, 2017 and December 31, 2016. e. No significant events happened during the quarter that will affect the March 31, 2017 Unaudited Financial Statements. f.

There are no seasonal aspects that had a material effect on the financial condition or results of operation of the Company.

g. There is no foreseeable event that will trigger direct or contingent financial obligation that is material to the Company, including any default of accelerated obligation. h. There are no material off-balance sheet transactions, arrangements, obligations and other relationships of the Company with other entities or persons that were created during the period. i.

There are no changes in estimates of amounts reported in prior periods of the current financial year or changes in estimates of amounts reported in prior financial years that could have material effect in the current period.

j.

Our Company has no contingent liabilities or assets during the period.

- 58 Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 1.

Consolidated Financial Condition (March 31, 2017 and March 31, 2016) As of March 31 (Unaudited) % Change

% to Total Assets

2017

2016

$12,885,523

$11,740,079

9.76%

5.65%

171,512 7,903,167

175,008 3,722,448

-2.00% 112.31%

0.08% 3.47%

9,485,220 147,076,858 10,410,180 27,954,440 31,417 308,128 11,784,168

11,140,625 145,619,679 16,569,495 28,797,590 31,417 306,909 10,216,070

-14.86% 1.00% -37.17% -2.93% 0.00% 0.40% 15.35%

4.16% 64.50% 4.57% 12.26% 0.01% 0.14% 5.17%

TOTAl ASSETS LIABILITIES AND EQUITY

$228,010,613

$228,319,320

-0.14%

100.00%

Accounts payable and accrued expenses Current portion of loans payable Income tax payable Deposit for future stock subscription Loans payable - net of current portion Asset retirement obligation Derivative liability Accrued retirement liability Deferred tax liabilities Other noncurrent liability TOTAL LIABILITIES

6,606,511 18,458,693 128,350 4,256,343 102,477,647 1,376,196 51,197 1,524,098 151,254 135,030,289

7,328,896 14,430,419 37,798 6,698,136 101,280,158 1,149,050 11,089,271 67,438 1,659,404 72,404 143,812,974

-9.86% 27.92% 239.57% -36.45% 1.18% 19.77% -100.00% -24.08% -8.15% 108.90% -6.11%

2.90% 8.10% 0.06% 1.87% 44.94% 0.60% 0.00% 0.02% 0.67% 0.07% 59.22%

67,661,004 25,319,320

67,697,056 16,809,290

-0.05% 50.63%

29.67% 11.10%

$92,980,324 $228,010,613

$84,506,346 $228,319,320

10.03% -0.14%

40.78% 100.00%

ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss (FVPL) Receivables Prepaid expenses and other current assets Property,plant and equipment Deferred oil exploration costs Investment in a joint venture Investment properties Deferred tax assets-net Other noncurrent assets

EQUITY Attributable to equity holders of the Parent Company Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY

Note: Differences in amounts are due to rounding off.

Total assets amounted to $228.011 million and $228.319 million as of March 31, 2017 and March 31, 2016, respectively.

Cash and cash equivalents consist of cash on hand, cash in banks and money market placements with original maturities of not more than three months. The 9.76% net increase from US$11.740 million as of March 31, 2016 to US$12.886 million as of March 31, 2017 is mainly due to proceeds from sale of crude oil and electricity sales and proceeds from additional loan of MGI for MGPP Phase 2. This was reduced by capital and operating expenses incurred during the period.

Financial assets at fair value through profit and loss (FVPL) amounted to US$0.172 million and US$0.175 million as of March 31, 2017 and 2016, respectively. The 2.00% net decrease in this account is due to the negative changes in the market prices of the Company’s investments in stocks.

- 59 The receivables account amounted to US$7.903 million and $3.722 million as of March 31, 2017 and March 31, 2016, respectively. The 112.31% net increase is mainly due to higher outstanding receivables from electricity sales.

Prepaid expenses and other current assets consist of advances to contractor, deferred financing costs, prepaid insurance, supplies inventory, crude oil inventory, refundable deposits, restricted cash and other prepayments. This account amounted to US$9.485 million and US$11.141 million as of March 31, 2017 and 2016, respectively. The bulk of the 14.86% net decrease is mainly due decrease in restricted cash as a result of full withdrawal from escrow account of SRO proceeds and lower MGI debt service requirements during the period.

Property, plant and equipment (PPE) is up by 1.00% from US$145.620 million as of March 31, 2016 to US$147.077 million as of March 31, 2017 mainly due to the development of MGPP Phase 2 and transfer from deferred oil exploration cost. This is offset by the impairment on Gabon assets on December 31, 2016.

Deferred oil exploration cost amounted to US$10.410 million and US$16.569 million as of March 31, 2017 and 2016, respectively. The 37.17% decrease is due to transfer of deferred cost to PPE. Investment in a joint venture refers to the remaining 40% shareholdings in PWEI, the company that develops the Nabas Wind Power Project (NWPP). This account amounted to US$27.954 million and $28.798 million as of March 31, 2017 and March 31, 2016, respectively. The 2.93% net decrease accounts for the share in net income and translation adjustment from Peso to USD. Investment properties remained unchanged as of March 31, 2017.

Deferred tax assets (liability) (DTA/L) occurs due to timing differences in recognizing temporary deductible expenses and temporary taxable revenues such as accrued profit share, accretion expenses, accrued retirement liability, provision for probable losses, unrealized gains or losses and change in crude oil inventory.

The Group has a DTA of US$0.308 million and US$0.307 million as of March 31, 2017 and March 31, 2016, respectively. The bulk of the 0.40% increase is relative to the movements of the accretion expense and crude oil inventory.

The group also recorded a $1.524 million and $1.659 million DTL as of March 31, 2017 and March 31, 2016, respectively, relative to unrealized gain on re-measurement of PetroGreen’s investment in PWEI. The 8.15% net decrease is due to cumulative translation adjustment of this account.

Other non-current assets amounted to US$11.784 million and $10.216 million as of March 31, 2017 and March 31, 2016, respectively. This account consists of the non-current portion of advance rent, input vat carry overs, and restricted cash. The 15.35% increase is mainly due to the additional input taxes within the period and development costs for the Phase 2 of MGI and PetroSolar.

Accounts payable and accrued expenses amounted to US$6.607 million and US$7.329 million as of March 31, 2017 and 2016, respectively. The bulk of the 9.86% decrease mainly pertains to payment of outstanding payables to contractors during the period.

Majority of the current portion of loans payable as of March 31, 2017 and March 31, 2016 refers to loans payable with maturity of not more than one (1) year; and the reclassification of non-current loans payable that are due within 1 year to current portion. The 27.92% net increase mainly pertains to the reclassification of current portion of long term debt.

The group’s income tax payable as of March 31, 2017 mainly refers to the PetroSolar’s tax payable during the quarter (under PEZA rules).

- 60 The deposit for future stock subscription as of March 31, 2017 pertains to total consideration received from non-controlling interests in excess of the authorized capital of entities within the Group, with the purpose of applying the same payment for future issuance of shares. The 36.45% decrease is mainly due to the reclassification of this amount to equity as a result of SEC approval for the increase in capitalization of PetroSolar.

The 1.18% net increase in loans payable – noncurrent pertains to the additional loan availed by PERC and MGI to finance the construction MGPP Phase 2 offset by the reclassification of current portion of existing long-term loans of PGEC, MGI and PetroSolar.

Asset Retirement Obligation amounted to US$1.376 million and US$1.149 million as of March 31, 2017 and March 31, 2016, respectively. The 19.77% increase is mainly due the monthly accretion of the net present value of abandonment cost estimate and additional cost estimate for the Solar Power Project.

The Group’s derivative liability pertains to the payoff structure and put and call options over PetroWind shares. This amounted to US$11.089 million as of March 31, 2016. As of March 31, 2017, this amount was fully reversed. (Please see Note 19).

Accrued retirement liability amounted to US$0.051 million and US$0.067 million as of March 31, 2017 and March 31, 2016, respectively. The 24.08% net decrease is due to additional funds deposited to the retirement fund.

Equity attributable to equity holders of the Parent Company amounted to US$67.661 million or 0.165 book value per share as of March 31, 2017 as compared to US$67.697 million or book value per share of US$0.165 as of March 31, 2016.

Non-controlling interest (NCI) as of March 31, 2017 and March 31, 2016 pertains to the following:  10% share of EEI-PC in PetroGreen;  25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara;  44% share of EEI-PC (direct) and 10% of 56% share (indirect) in PetroSolar;

- 61 2.

Consolidated Results of Operations (For the quarter ending March 31, 2017 and March 31, 2016) % Change

% to Total Revenues

Unaudited 31-Mar-17 OIL REVENUES Electricity Sales Oil Revenues

31-Mar-16

$7,582,721 1,719,589 9,302,310

$5,356,156 1,053,659 6,409,815

41.57% 63.20% 45.13%

70.54% 16.00% 86.53%

2,831,327 853,718 441,539 4,126,584 5,175,726

2,557,504 814,860 636,822 4,009,186 2,400,629

10.71% 4.77% -30.67% 2.93% 115.60%

26.34% 7.94% 4.11% 38.39% 48.15%

581,641

619,625

-6.13%

5.41%

52,971 (52,453)

-86.04% 189.90%

0.07% 0.44%

11,508 (1,641,546) (13,070) 44,837 1,336,610 (207,110)

15,437 (1,807,938) (35,679) 47,863 1,046,823 (732,976)

-25.45% -9.20% -63.37% -6.32% 27.68% -71.74%

0.11% -15.27% -0.12% 0.42% 12.43% -1.93%

INCOME BEFORE INCOME TAX

4,386,975

1,048,028

318.59%

40.81%

PROVISION FOR INCOME TAX

81,391

39,340

106.89%

0.76%

NET INCOME

$4,305,584

$1,008,688

326.85%

40.05%

NET INCOME (LOSS) ATTRIBUTABLE TO: Equity Holders of the Parent Company Noncontrolling interest

$2,858,012 1,447,572

$517,871 490,817

451.88% 194.93%

26.59% 13.47%

NET INCOME

$4,305,584

$1,008,688

326.85%

40.05%

$0.0070

$0.0013

451.88%

COST OF SALES Costs of Electricity Sales Oil production operating expenses Depletion GROSS INCOME GENERAL AND ADMINISTRATIVE EXPENSES OTHER INCOME (CHARGES) Interest income Net unrealized foreign exchange gain (loss) Net unrealized gain (loss) on fair value changes on financial assets at FVPL Interest expense Accretion expense Miscellaneous income Share in net income of an Associate

7,395 47,156

EARNINGS PER SHARE(EPS) FOR NET INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF T H E P A R E N T C O M P A N Y- B A S IC A N D D ILUT E D

Note: Differences in amounts are due to rounding off.

The Group generated net income amounting to $4.306 million and $1.009 million for the period March 31, 2017 and March 31, 2016, respectively. Net income (loss) attributable to equity holders of the Parent Company amounts to US$2.858 million or 0.0070 earnings per share and US$0.518 million or US$0.0013 EPS for the 1st quarter ended March 31, 2017 and March 31, 2016, respectively.

- 62 Revenues: Electricity sales refer to the electricity power generated by MGPP and PetroSolar. The 41.57% increase is mainly due to higher energy generated by MGI, of which it had a 22 day maintenance shutdown in 2016, and PetroSolar’s full operations during the period which started commercial operations on February 10, 2016.

Oil revenues increased by 63.20% from US$1.054 million for the 1st quarter of 2016 to US$1.720 million for the same quarter 2017. The increase is mainly due to higher average crude oil price from an average of $29.79/ barrel to $51.63/barrel.

Costs and Expenses: Costs of electricity sales pertain to the direct costs of generating electricity power including depreciation, and other costs directly attributed to producing electricity. The net increase in cost of sales in 2017 is mainly due to full operations of PetroSolar.

Oil production expenses (OPEX) increased by 4.77% from $0.815 million as of March 31, 2016 to $0.854 million as of March 31, 2017 because of higher royalty (Gabon) expenses brought about by the recovery in average crude oil price.

The 30.67% decrease in depletion is due to lower depletable cost as a result of the impairment main in Gabon assets in December 2016.

General and administrative expenses (G&A) decreased by 6.13% from US$0.620 million as of March 31, 2016 to US$0.582 million as of March 31, 2017. Higher G&A in 2016 is mainly due to higher professional fees paid incurred by MGI related to its VAT refund.

Other income (charges) amounted to (US$0.207) million and (US$0.733) million for the 1st quarter 2017 and 2016, respectively. Below is the itemized discussion of the changes in other income (charges) account.  86.04% net decrease in interest income from US$0.053 million as of March 31, 2016 to US$0.007 million as of March 31, 2017 is mainly due to the interest income from MGI’s trust account in 2016, none in 2017.  Turnaround from forex changes from US$0.052 million loss as of March 31, 2016 to US$0.047 million gain for the same period in 2017 due to fluctuations of Peso vs. US Dollar;  25.45% decrease in net unrealized gain in changes in market values of investments in stocks traded at the PSE from US$0.015 million as of March 31, 2016 to US$0.012 million as of March 31, 2017 is due to lower market value movements of investments;  Interest expense amounted to US$1.642 million as of March 31, 2017 and US$1.808 million as of March 31, 2016. Interest during the period is 9.20% lower than last year mainly due to restructuring of MGI’s loans which includes lower interest rate from 7.72% to 5.59%.  63.37% decrease in accretion expense from US$0.036 million as of March 31, 2016 to US$0.013 million as of March 31, 2017 is mainly due change in estimates;

- 63 Miscellaneous income mainly pertains to the monthly time-writing charges and rental income of PERC and PGEC to PWEI. The 6.32% decrease in miscellaneous income from US$0.048 million to US$0.045 million is due to the changes in weighted average forex rate from 1USD$:P =45.9890 to 1USD$:P =50.0073 in March 31, 2016 and March 31, 2017, respectively.  share in net income of an associate amounted to US$1.337 million and US$1.047 million for the 1st quarter 2017 and 2016, respectively. The 27.68% increase in this account pertains to higher net income of PWEI during the quarter.

Provision for income tax for as of March 31, 2017 represents PetroSolar’s income tax under the 5% PEZA rules; and PERC and PGEC’s Minimum Corporate Income Tax (MCIT). While as of March 31, 2016, this includes provision for PetroSolar and PGEC only since PERC incurred a negative gross income as of March 31, 2016. (Please refer to discussion on the Income Tax Payable) Non-controlling interest (NCI) as of March 31, 2017 and March 31, 2016 pertains to the following:  10% share of EEI-PC in PetroGreen;  25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara;  44% share of EEI-PC (direct) and 10% of 56% share (indirect) in PetroSolar;

- 64 3. Financial Condition (March 31, 2017 and December 31, 2016) Unaudite

Audited % Change

% to Total Assets

31-Mar-17

31-Dec-16

$12,885,523

$12,914,588

-0.23%

5.65%

171,512 7,903,167

162,445 7,860,439

5.58% 0.54%

0.08% 3.47%

9,485,220 147,076,858 10,410,180 27,954,440 31,417 308,128 11,784,168

6,766,450 138,870,569 10,134,234 26,843,396 31,417 308,168 10,408,066

40.18% 5.91% 2.72% 4.14% 0.00% -0.01% 13.22%

4.16% 64.50% 4.57% 12.26% 0.01% 0.14% 5.17%

TOTAl ASSETS LIABILITIES AND EQUITY

$228,010,613

$214,299,772

6.40%

100.00%

Accounts payable and accrued expenses Current portion of loans payable Income tax payable Deposit for future stock subscription Loans payable - net of current portion Asset retirement obligation Accrued retirement liability Deferred tax liabilities Other noncurrent liabilities TOTAL LIABILITIES

6,606,511 18,458,693 128,350 4,256,343 102,477,647 1,376,196 51,197 1,524,098 151,254 135,030,289

4,619,107 15,982,090 45,532 1,781,640 99,505,183 1,366,511 51,651 1,537,586 131,497 $125,020,797

43.03% 15.50% 181.89% 138.90% 2.99% 0.71% -0.88% -0.88% 15.02% 8.01%

2.90% 8.10% 0.06% 1.87% 44.94% 0.60% 0.02% 0.67% 0.07% 59.22%

67,661,004 25,319,320

65,276,897 24,002,078

3.65% 5.49%

29.67% 11.10%

$92,980,324 $228,010,613

$89,278,975 $214,299,772

4.15% 6.40%

40.78% 100.00%

ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss (FVPL) Receivables Prepaid expenses and other current assets Property,plant and equipment Deferred oil exploration costs Investment in a joint venture Investment properties Deferred tax assets-net Other noncurrent assets

EQUITY Attributable to equity holders of the Parent Company Non-controlling interest TOTAL EQUITY TOTAL LIABILITIES AND EQUITY

Note: Difference in amounts is due to rounding off.

Total assets amounted to $228.011 million and $214.300 million as of March 31, 2017 and December 31, 2016, respectively.

Cash and cash equivalents consist of cash on hand, cash in banks and money market placements with original maturities of not more than three months. The 0.23% net decrease from US$12.915 million as of December 31, 2016 to US$12.886 million as of March 31, 2017 is the capital and operating expenses incurred during the period. This is offset by the proceeds from sale of crude oil and electricity sales and proceeds from additional loan of MGI for MGPP Phase 2.

Financial assets at fair value through profit and loss (FVPL) amounted to US$0.172 million and US$0.162 million as of March 31, 2017 and December 31, 2016, respectively. The 5.58% net increase in this account is due to the positive changes in the market prices of the Company’s investments in stocks.

The Receivables account mainly consists of receivables from electricity sales and lifting/sales of crude oil revenue. This account increased by 0.54% from US$7.860 as of December 31, 2016 to US$7.903 million as of March 31, 2017 due to higher outstanding receivable from electricity sales.

- 65 Prepaid expenses and other current assets consist of advances to contractor, deferred financing costs, prepaid insurance, supplies inventory, crude oil inventory, refundable deposits, restricted cash and other prepayments. This account amounted to US$9.485 million and US$6.766 million as of March 31, 2017 and December 31, 2016, respectively. The 40.18% net increase is mainly due to advances made for the contractors of the MGI for its Phase 2.

Property, plant and equipment (PPE) amounted to US$147.077 million and US$138.871 million as of March 31, 2017 and December 31, 2016, respectively. The 5.91% net increase is mainly due to the construction of the MGPP Phase 2.

Deferred oil exploration cost amounted to US$10.410 million and $10.134 as of March 31, 2017 and December 31, 2016, respectively. The 2.72% net increase is due to various expenses for the Etame Expansion activities in Gabon West Africa.

Investment in a joint venture refers to the remaining 40% shareholdings in PWEI. This amounted to US$27.954 million and to US$26.843 million as of March 31, 2017 and December 31, 2016, respectively. The 4.14% net increase mainly pertains to income generated within the quarter.

Investment properties remained unchanged as of March 31, 2017.

Deferred tax assets (liability) (DTA/L) occurs due to timing differences in recognizing temporary deductible expenses and temporary taxable revenues such as accrued profit share, accretion expenses, accrued retirement liability, provision for probable losses, unrealized gains or losses and change in crude oil inventory.

The Group has a DTA of US$0.308million as of March 31, 2016 and December 31, 2016.

The group also recorded a US$1.524 million and $1.538 million DTL as of March 31, 2017 and December 31, 2016, respectively, relative to PetroGreen’s unrealized gain on re-measurement of investment. The 0.88% decrease pertains to translation adjustment.

Other non-current assets amounted to US$11.784 and US$10.408 million as of March 31, 2017 and December 31, 2016, respectively.

Accounts payable and accrued expenses amounted to US$6.607 million and US$4.619 million as of March 31, 2017 and December 31, 2016, respectively. The 43.03% increase mainly pertains to the progress billings from suppliers/contractors for the current development of MGPP Phase 2.

Current portion of loan payable posted as of March 31 2017 amounted to $18.459 million and $15.982 million as of December 31, 2016. The 15.50% increase is mainly due to the MGI’s proceeds from additional loan.

Income tax payable as of March 31, 2017 pertains to PetroSolar’s 5% provision for income tax under the PEZA rules.

The deposit for future stock subscription as of March 31, 2017 and December 31, 2016 pertains to total consideration received from non-controlling interests in excess of the authorized capital of entities within the Group, with the purpose of applying the same payment for future issuance of shares.

The 138.90% increase pertains to additional deposit for PGEC and MGI. The 2.99% increase loans payable – noncurrent mainly pertains to the additional loan availed by MGI amounting to $3.89 million.

Asset Retirement Obligation amounted to US$1.376 million and US$1.367 million as of March 31,

- 66 2017 and as of December 31, 2016, respectively. The 0.71% increase in this account resulted from the amortization of the net present value of abandonment costs estimate.

The minimal 0.88% decrease in accrued retirement liability is due to translation adjustment.

Other non-current liabilities amounted to US$0.151 million and US$0.131 million as of March 31, 2017 and December 31, 2016, respectively.

Non-controlling interest (NCI) as of March 31, 2017 and December 31, 2016 pertains to the following:  10% share of EEI-PC in PetroGreen;  25% share of Trans-Asia, the 10% share of PNOC-RC, and 10% of the 65% share of EEI-PC (indirect) in Maibarara;  44% share of EEI-PC (direct) and 10% of 56% share (indirect) in PetroSolar; The Philippines is still affected by the economic crises resulting in fluctuating foreign exchange rates and increased stock market uncertainties. Uncertainties remain as to whether the country will continue to be affected by regional trends in the coming months. The financial statements do not include any adjustments that might result from these uncertainties. Related effects will be reported in the financial statements, as they become known and estimable.

Material Commitments Maibarara is currently developing the Maibarara Geothermal Porwer Plant Phase 2 to increase power generation by additional 12 MW. This is funded through 70% debt and 30% equity.

4.

KEY PERFORMANCE INDICATORS

The following liquidity and profitability ratios indicate acceptable levels of financial condition and performance of the company: 31-Mar-17 31-Dec-16 31-Mar-16 Current ratio Debt-to-equity ratio Asset-to-equity ratio Operating profit margin Asset turnover

1.03:1 1.45:1 2.45:1 55.64% 4.71%

1.24:1 1.4:1 2.4:1 44.39% 21.49%

0.94:1 1.7:1 2.7:1 37.45% 3.32%

Formula Total Current Assets/Total Current Liabilities Liabilities/Total Stockholders’ Equity Total Assets/ Total Stockholders' Equity Operating profit/Operating Revenue Total Revenue/Total Assets

There is a decline in the group’s current ratio as of March 31, 2017 compared to December 31, 2016 due to 31% increase in total current liabilities.

There is an increase in the group’s debt-to-equity ratio as of March 31, 2017 compared to December 31, 2016 mainly due to additional loans availed during the period.

The asset-to-equity ratio indicates the group’s leverage. This increased because of the on-going expansion of the Group’s projects.

There is higher operating profit margin as of March 31, 2017 compared to March 31, 2016, mainly due to higher electricity generation of PetroSolar and MGI for the period.

Higher asset turn-over within the quarter is mainly due to higher electricity generation of PetroSolar and MGI.

- 67 5.

Discussion of indicators of the Company’s level of performance.

Productivity Program For oil revenue, the operator of said project, VAALCO Gabon (Etame), Inc., and the members of the Consortium have defined some wells to be drilled to increase production. VAALCO has the necessary skills to manage the resources and complete the work on time and within budget.

For the electricity sales, expansion of the Maibarara Geothermal Power Project will increase the power generation from 20 MW to 32 MW. Receivable Management The group’s receivables are mainly due from sale of crude oil in Etame Gabon, through the consortium operator and sale of electricity to Trans-Asia (for the MGPP) and to Wholesale Electricity Spot Market and National Transmission Corporation (for the TSPP). These are being recorded once sale is made. Payment is received every 30-45 days following each sale.

For the crude oil, for the thirteen (14) years since oil production inception, there was no event that the buyer failed to remit the proceeds of the sale.

However, the group is willing to look for another buyer should there be some problem that may happen in the future.

Liquidity Management Management of liquidity requires a flow and stock perspective. Constraint such as political environment, taxation, foreign exchange, interest rates and other environmental factors can impose significant restrictions on firms in management of their financial liquidity.

The Group considers the above factors and pays special attention to its cash flow management. The Company identifies all its cash requirements for a certain period and invests unrestricted funds to money market placements to maximize interest earnings.

Inventory Management The only inventory is the crude oil produced in Gabon. The buyer lifts certain volume and pays the same in 30 days. The operator sees to it that crude oil inventory does not reach 800,000 barrels at any one time to avoid overflow and to generate revenues to cover production costs.

Cost Reduction Efforts In order to reduce costs, the Group employs a total of one thirty six (136) employees with multi-task assignments.

The Company’s general and administrative expense is equivalent to 5.41% of the total revenue.

Rate of Return of Each Stockholder The Company has no existing dividend policy. However, the Company intends to declare dividends in the future in accordance with the Corporation Code of the Philippines.

- 68 The Company declared cash/stock dividends to wit: Date of Declaration January 07, 2004 August 17, 2004 June 08, 2005 June 08, 2005 June 8, 2006 June 8, 2006 January 29, 2007 July 25, 2007 February 06, 2008 July 24, 2008 July 22, 2009 February 23, 2010 October 21, 2010 May 17, 2011 May 17, 2011 April 26, 2012 April 26, 2012 July 22, 2013

Dividends per Share Stock Cash 20% 20% 20% 25% 20% 30% 20% 20% 20% 30% 20% 20% 10% 10% 10% 10% 10% 5%

Record Date January 15, 2004 August 31, 2004 June 23, 2005 August 12, 2005 June 30, 2006 August 15, 2006 February 21, 2007 August 10, 2007 February 22, 2008 August 11, 2008 August 05, 2009 March 15, 2010 November 08, 2010 June 16, 2011 September 20, 2011 May 18, 2012 September 21, 2012 July 25, 2013

Payment Date February 16, 2004 September 24, 2004 July 18, 2005 September 06, 2005 July 26, 2006 September 8, 2006 March 16, 2007 September 05, 2007 March 17, 2008 August 29, 2008 August 31, 2009 April 05, 2010 December 2, 2010 July 13, 2011 October 14, 2011 June 14, 2012 October 17, 2012 August 20, 2013

6. Financial Disclosures in view of the current global financial condition: Assess the financial risks exposures of the Company and its subsidiaries particularly on currency, interest credit, and market and liquidity risks. If any change thereof would materially affect the financial condition and results of operation of the Company, provide a discussion in the report on quantitative impact or such risks and include a description of enhancement in the company’s risk management policies to address the same: The Group’s principal financial instruments include cash and cash equivalents, trading and investment securities (financial assets at FVPL) and receivables. The main purpose of these financial instruments is to fund the Company’s working capital requirements.

Financial Risk Management Objectives and Policies Please refer to Note 22.

- 69 7. Operations Review and Business Outlook A. OIL EXPLORATION Foreign Operations Gabon, West Africa The daily oil production of the four oil fields (Ebouri, Etame, North Tchibala and Avouma) as of March 2017 ranged from 15,690 – 18.080 barrels of oil per day (BOPD). The fluctuations in the daily production were due to 1) shut-down and mechanical repairs on EAVOM-2H in July 2016 due to defective electric submersible pumps (ESP), 2) maintenance works on the compressors of wells ET6H and ET-7H in August 2016, and 3) malfunctions and alarm signals on the FPSO compressors and in Ebouri Platform in September 2016.

Three (3) cargoes with volumes ranging from 402,000 – 602,000 bbls were lifted during 1Q 2017 under the new Crude Oil Sale Purchase and Services Agreement with Glencore. Total cargo lifted in 1Q 2017 amounted to 1.45 Million barrels.

In light of the changes reflected by the passing of Gabon’s new Hydrocarbon Law, the Etame consortium has been conducting a comprehensive economic modeling and valuation of the Etame Marin reserves. This economic valuation takes into account the fiscal terms under the new hydrocarbon Law, remaining oil-in-place and lots of various development options to maximize oil recovery while ensuring positive returns for the consortium.

Philippine Operations SC 6A – Octon, Northwest Palawan On February 13, 2017, the DOE approved the SC 6A 2017 Work Program & Budget, comprising of a Firm budget with budget of US$ 416,013.50 for the conduct of data processing of the 2013 3D seismic data and Quantitative Interpretation works over that processed dataset. In addition, a Contingent budget of US$ 38,753.70 for preliminary well design studies for prospect(s) that can be matured to drillable status is included.

SC 14C2 – West Linapacan, Northwest Palawan After the DOE approved the SC 14C2 2017 Work Program & Budget last January 25, 2017, Operator The Philodrill Corporation issued on February 15, 2017 an Authorization for Expenditure (AFE) covering the Firm commitment of US$ 174,659.00 for: 1) the acquisition of a legacy 3D seismic dataset from DownUnder Geosciences which previous Operator RMA failed to acquire, and 2) Geological & Geophysical (G&G) evaluation work on the West Linapacan block.

PERC approved the said AFE on February 17, 2017, with its 4.137% share amounting to US$ 7,225.64.

SC 51 – East Visayan Basin On January 27, 2017, the DOE met with the SC 51’s Filipino consortium members (Trans-Asia, Alcorn and PERC) to discuss the unsettled Training Fund payments by former Operator Otto Energy to the DOE. It was resolved that the Filipino consortium members may execute a Letter of Undertaking to settle Otto’s remaining Training Fund balance of US$ 124,763.00, only when the DOE has exhausted its legal measures against Otto’s refusal to pay such balance. Upon execution of such undertaking, the consortium can undertake the Subphase 5 Work Program for the remaining two (2)

- 70 years of the Service Contract until 2019 – which includes a Pore Pressure study and a Gravity survey over SC 51.

SC 75 – Offshore Northwest Palawan There were no exploration activities for 1Q 2017 in SC 75, which has been placed under Force Majeure in December 2015.

Summary of Petroleum Properties: Contract Expiry Production Sharing Contract (PSC) 93 – 2021 Gabon Service Contracts (SC) - Philippines SC 6A – Octon-Malajon Block 2024 SC 14C2 – West Linapacan 2025 SC 51 – East Visayan Basin 2019 SC 75 – Offshore Northwest Palawan 2020 Contract No.

Participating Interest % 2.525%

16.667% 4.137% 4.012% 15.000%

Location Gabon Offshore

Northwest Palawan Northwest Palawan East Visayan Sea Northwest Palawan

The Company derives its revenues from its Gabon Operations. All contractual obligations with the Gabonese Government are complied with. The Philippine contracts are in exploration stage and some contracts are being farmed out to reduce risk inherent to the business.

B. RENEWABLE ENERGY PROJECTS Maibarara Geothermal Power Project From January 01 to March 31, 2017, the total net output exported to the grid is at 40,859 MWh, with revenue of PhP 209.08 MM based on the offtake price of PhP 5.00/kWh The discharge testing of well MB-15D was concluded on January 16, 2017. The well, intended for the 12-MW Maibarara-2 expansion project, has an output of about 14 MWe. Further testing would be done in April 2017 once construction activities for the M2 Steamfield have been completed.

The MGPP operated at full load without any interruption except for load reduction only during a 1hour monthly automatic valve test (AVT) of MCVs and MSVs on February 14, 2017. The power plant had a scheduled minor maintenance shutdown on April 4-6, 2017. Activities included checking the turbine condition using a borescope camera, replacement of insulators on several transmission line poles and maintenance activities in the switchyard.

Preparation is ongoing for the work-over of MB-15D, the production well dedicated for Maibarara-2 12-MW power plant (M2). The well’s 9 5/8” casing will be re-lined to 7” and the fills at the major permeable horizon will be cleared.

For M-2’s construction, Phesco Inc’s progress on civil-structural-piping-mechanical works is 72.6%.

PPEMC’s electrical works is 72.3% complete; Yokogawa’s instrumentation works is 73.1% complete; and balance of plant by MGI is 74.3% complete. Further, on February 22-23, 2017, the major Power Plant components from Fuji Electric were unloaded at the port of Manila.

On March 17-19, 2017, the major power plant components from Fuji Electric were delivered on site.

For the steamfield, the steam-water separator vessel was delivered on March 13, 2017, and was

- 71 erected on March 19, 2017. The fabrication of the steam scrubber vessel is also almost complete and target delivery to site is on April 7, 2017.

Nabas Wind Power Project From January 01 to March 31, 2017, the total net energy exported to the grid is 42,469 MWh for the Project’s Phase 1, with revenue of PhP 314.27 MM based on the FiT price of PhP 7.40/kWh. On February 7, 2017, NGCP formally issued PWEI with the Final Approval to Connect.

Consequently, NGCP will reimburse PWEI for the SCADA and telecommunications equipment cost which PWEI advanced during the construction period. This is approximately PhP23.5 Million. To verify the installed equipment and cost for reimbursement, a joint inspection will be conducted on April 25-28, 2017 by NGCP, PWEI and equipment supplier Nayon Kontrol Systems (NKS).

On March 4 and 19, 2017, PWEI went into partial outages when the NGCP 138-kV Nabas-Panit-an line tripped for 3-5 hours, prompting grid maintenance shutdowns. This frequent tripping is caused by the on-going rehabilitation works on the said 138-kV line which was damaged by Typhoon Yolanda in 2013. The 69-kV Nabas-Caticlan line is connected to the 138-kV line and the NWPP transmission line is connected to the 69-kV Nabas-Caticlan line.

Tarlac-1 Solar Power Project (TSPP-1) From January 01 to March 31, 2017, the total net energy exported to the grid is 19,575 MWh, with total revenue of PhP 170.11 MM based on the FiT price of PhP 8.69/kWh. PetroSolar and NGCP successfully completed last January 18, 2017 the final steps of the Variable Renewable Energy (VRE) tests required for compliance with the Philippine Grid Code.

For the planned 49.25-MW(DC) expansion of the project (TSPP-2), PetroSolar is working to secure an offtake agreement for the project. In preparation for the full progression of pre-development activities, PetroSolar already secured the following permits for TSPP-2:  Amended Environmental Compliance Certificate (ECC) from DENR-EMB Region III on February 01, 2017, and 

NGCP approval of TSPP-2 System Impact Study (SIS) on February 20, 2017

In recognition of PetroSolar’s CSR efforts in the field of health, education and livelihood in its host communities, PEZA awarded PetroSolar with the Outstanding Community Project Award for 2016.

This was personally awarded by DTI Secretary Ramon M. Lopez and PEZA Director General Charito B. Plaza to PetroSolar on April 4, 2017 in Pasay City.

Puerto Princesa Solar Power Project The Service Contract for PetroGreen’s (PGEC) newest proposed renewable energy project - the Puerto Princesa Solar Power Project - was signed by DOE Secretary Alfonso Cusi on February 27, 2017. The PPSPP aims to put up a 5-10 MW off-grid solar hybrid power facility in Puerto Princesa, Palawan to meet the increasing electricity demand and address the fluctuating electricity situation in the city through solar power.

PGEC has commenced its pre-development work program approved by the DOE, which includes technical and financial due diligence studies. After securing the favourable endorsement of host barangay Bahile last September 2016, PGEC has secured the Puerto Princesa City Environment & Natural Resources Office (City ENRO) certification for the PPSPP last March 10, 2017. This certification was prerequisite for PGEC to present the PPSPP to the Puerto Princesa City Council last March 27, 2017. To date, PGEC is awaiting the Council’s favorable endorsement of PPSPP. After

- 72 securing the City Council Endorsement for PPSPP, PGEC will lodge its application for the Strategic Environmental Plan (SEP) Clearance from the Palawan Council for Sustainable Development (PCSD), which is a prerequisite for its ECC application with the DENR-EMB Region IV-B.

Plan of operations for the next 12 months: Gabon, West Africa Crude production will continue from the existing wells.

SC 6A – Octon, Northwest Palawan Operator Philodrill will continue with the aforementioned G&G works to define new leads to be further de-risked.

SC 14C2 - West Linapacan, Northwest Palawan Operator Philodrill will commence acquisition of the legacy 3D seismic data from DownUnder Geosolutions, and continue with the aforementioned G&G works to define new leads to be further derisked.

SC 47 - Offshore Mindoro and Panay The consortium is still awaiting the DOE's approval of the relinquishment of the block. After which, the block will be opened up for bidding should it be included in a future license bid round.

SC 51 - East Visayan Basin The consortium is awaiting DOE’s formal approval of the revised Work Program. Once approved, Trans-Asia will commence with the conduct of the pore pressure study and gravity survey.

SC 75 - Offshore Northwest Palawan The service contract is currently under Force Majeure. Once lifted, the Consortium will proceed to Subphase 2, with the conduct of a ~1,000 sq.km 3D seismic survey over the identified leads in SC 75.

Maibarara Geothermal Power Project Production in Maibarara -1 will continue. Construction for the expansion (Maibarara-2) activities will continue this year (i.e. civil works, planned start of commercial operations is on the 4rth quarter of 2017).

Nabas Wind Power Project The plant will be in continuous operation from the 18 WTGs comprising the project's Phase 1.

Tarlac Solar Power Project The TSPP1 will continue to supply electricity to the grid. Preparations for PetroSolar’s Tarlac Phase-2 MERALCO bid are ongoing.

Puerto Princesa Solar Power Project PGEC will continue with its pre-development activities for the PPSPP – including permitting works with the Puerto Princesa City Council and the PCSD, as well as securing the project’s ECC with the DENR. Also, PGEC will be firming up the project costs in order to substantiate the project’s offtake optons with PALECO.

- 73 Part II - OTHER INFORMATION The Company has no other information that needs to be disclosed other than disclosures made under SEC Form 17-C (if any).

- 74 -

PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION AND DISCLOSURES REQUIRED ON SRC RULE 68 AS AMENDED MARCH 31, 2017

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation Code Rule SRC Rule 68 which consolidates the two separate rules and labeled in the amendment as “Part I” and “Part II”, respectively. It also prescribed the additional information and schedule requirements for issuers of securities to the public.

Below are the additional information and schedules required by SRC Rule 68, as Amended (2011) that are relevant to the Group. This information is presented for purposes of filing with the SEC and is not required part of the basic financial statements.

Schedule A. Financial Assets The Group is not required to disclose the financial assets in equity securities as the total financial assets at fair value through profit and loss securities amounting to $171,512 do not constitute 5% or more of the total current assets of the group as at March 31, 2017.

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties and Principal Stockholders (Other than Related Parties) As of March 31, 2017 there are no amounts receivable from directors, officers, employees, related parties and principal stockholders that aggregates each to more than P =100,000 or 1% of total assets which-ever is less.

Schedule C. Amounts Receivable from/Payable to Related Parties which are Eliminated during the Consolidation of Financial Statements The following is the schedule of receivables from related parties, which are eliminated in the consolidated financial statements as at March 31, 2017:

Name and Designation of debtor PetroGreen Energy Corporation Maibarara Geothermal, Inc. PetroSolar NRDC*

Balance at beginning of period $– 764,654 – (45,650) $719,004

Additions $37,542 49,807 40,080 – $127,429

Amounts collected $37,542 41,610 40,080 – $119,232

Amounts written off $– – – – $–

Balance at Not Current end of period $– $– – 772,851 – – – (45,250) $– $727,601

*Difference is due to foreign exchange differences.

Transactions with other related parties outside the Group.

Please refer to Note 21 of the Unaudited Consolidated Financial Statements.

Schedule D. Intangible Asset The Group has an insignificant amount of intangible assets as of March 31, 2017 amounting to $2.96 million. Bulk of the intangible asset pertains to the land rights acquisition of PetroSolar.

Schedule E. Long-term Debt Please refer to the Consolidated Audited Financial Statement, Note 16 for details of the loans.

- 75 Schedule F. Indebtedness to Related Parties (Long Term Loans from Related Companies) The Group has no outstanding long-term indebtedness to related parties as of March 31, 2017.

Schedule G. Guarantees of Securities of Other Issuers The Group does not have guarantees of securities of other issuers as of March 31, 2017.

Schedule H. Capital Stock

Title of issue Common Shares

Number of shares authorized 700,000,000

Number of shares issued and outstanding as shown under related balance sheet caption 410,736,330

Number of Shares reserved for options, warrants, conversion and other rights –

Number of shares held by related parties 92,029,566

Directors, Officers and Employees 3,923,839

Others 314,782,925

- 76 PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES SCHEDULE OF FINANCIAL SOUNDNESS INDICATORS AS OF MARCH 31, 2017 AND DECEMBER 31, 2016 Financial Soundness Indicators Below are the financial ratios that are relevant to the Group for first quarter ended March 31, 2017 and year ended December 31, 2016: Financial ratios

Formula

Current ratio

Total current assets Total current liabilities

Long-term + short-term liabilities Debt-to-Equity Ratio

Audited 31-Dec-16

1.03:1

0.94:1

1.24:1

0.05:1

0.02:1

0.11:1

1.45:1

1.7:1

1.4:1

2.45:1

2.7:1

2.4:1

3.67:1

1.84:1

1.67:1

0.0070

0.0013

0.0043

11.46

62.11

20.33

40.05%

13.32%

12.72%

1.14:1

1.36:1

1.15:1

41.38

6.69

2.52

Total Liabilities Total Stockholder's equity

Asset-to-Equity Ratio

Total Assets Total Stockholder's equity

rate

Unaudited 31-Mar-16

After tax net profit + depletion and depreciation

Solvency ratio

Interest ratios

Unaudited 31-Mar-17

coverage

Earnings before interest and taxes (EBIT) Interest expense

Earnings per share

Net income Attributed to Parent Company Weighted average no. of shares

Price Earnings Ratio

Closing price Earnings per share

Return on revenue

Net income Total revenue

Long term debt-to-equity ratio

Long term debt Equity

EBITDA to total interest paid

EBITDA* Total interest paid

*Earnings before interest, taxes, depreciation and amortization (EBITDA)

- 77 PETROENERGY RESOURCES CORPORATION REPORT ON SRO PROCEEDS March 31, 2017 On December 05, 2014, the BOD approved a 2:1 Stock Rights Offering (SRO). The SRO was undertaken during the period May 11 to 15, 2015. The proceeds of the SRO amounted to Php 599.68 million or US$12.36 million.

As disclosed in the Prospectus the Company expects to raise gross proceeds of approximately PhP599.68 million or US$12.36 million and after deducting listing, registration fees related to the offer of PhP592.46 million or US$ 12.26 million.

The proceeds from the SRO will be used to partially fund the expansion, construction and developmeny of PERC’s renewable enery projects: the 10 MW Phase 2 of the MGPP (Maibarara 2) and Solar Power Project, as well as the expansion of the Etame Project in Gabon, West Africa.

The table below shows the gross and net proceeds; each expenditure item where the proceeds were used.

Proceeds from the Stock Rights Offering Gross Proceeds Less: Listing and Registration Fees

PhP599,675,043 5,072,677

Net Proceeds

PhP594,602,366

2015 & 2016 Less: Expenditures A. Etame Expansion - Drilling of Wells B. Maibarara Geothermal Project - Phase 2 Well Cost Power Plant Fluid Collection & Reinjection System Insurance G&A and Other Costs Financing Costs

157,943,406

96,881,836 39,472,422 943,019 1,480,774 6,844,895 175,500 145,798,446

C. Tarlac Solar Power Project Various Previously Reported Expenses 174,673,326 Total Expenses Allocated to Proceeds

478,415,178

Remaining proceeds as of March 31, 2017 Remaining proceeds as of March 31, 2017 in USD

2017 1st Quarter -

40,861 106,232,086 7,709,176 972,940 826,434 405,691 116,187,188

116,187,188

Total

157,943,406

96,922,697 145,704,508 8,652,195 2,453,714 7,671,329 581,191 261,985,634

174,673,326 594,602,366 PhP0 $0

PETROENERGY RESOURCES CORPORATION AND SUBSIDIARIES MAP OF RELATIONSHIPS OF THE COMPANIES WITHIN THE GROUP Group Structure Below is a map showing the relationship between and among the Group and its subsidiaries as of March 31, 2017: PETROENERGY RESOURCES CORPORATION GROUP STRUCTURE PetroEnergy Resources Corporation 90% PetroGreen Energy Corporation 65 % Maibarara Geothermal, Inc.

*investment in a joint venture

56% PetroSolar Corporation

40% PetroWind Energy, Inc.*

SIGNATI'RDS Pursuant to the requirements ofthe Securities Regulation Code, the registant has duly caused this r€port to b€ signed on behalfofthe undersigned thereunto duly authorized.

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