2021 ANNUAL REPORT
Information regarding AGM
Annual General Meeting of shareholders of
Maha Energy AB (publ) will be held on Tuesday
May 31, 2022, 3:00 p.m. at 30 Grev Turegatan
in Stockholm. The notice and the complete
proposals will be available at www.mahaenergy.
ca. To be entitled to participate, shareholders
must be included in the register of shareholders
maintained by Euroclear Sweden AB, in their
own names, as of Friday May 20, 2022 and must
notify Maha Energy AB of their attendance no
later than Tuesday May 24, 2022. Shareholders
who have their shares registered in the name
of a nominee must request temporary entry
in the transcription of the share register kept
by Euroclear Sweden AB (so-called voting
rights registration) in order to be entitled to
participate and vote for their shares at the
meeting. The shareholder must inform the
nominee well in advance of Friday May 20,
2022, at which time the register entry must
have been made. Voting rights registration that
has been requested by the shareholder at such
time that the registration has been completed
by the nominee no later than Tuesday May 24,
2022, will, however, be taken into account in the
preparation of the share register. According to
the Swedish Companies Act, a shareholder who
wishes to attend by proxy, must present a proxy
in writing, dated and signed by the shareholder.
TABLE OF CONTENTS
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03
05
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09
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13
15
19
21
27
29
Corporate Calendar
The Company plan to publish its’ Quarterly
Reports as follows for 2022:
Quarter 1
Three Month Report 2022
19 May, 2022
Quarter 2
Six Month Report 2022
15 August, 2022
Quarter 3
Nine Month Report 2022
14 November, 2022
Quarter 4
Year End Report 2022
28 February, 2022
Corporate Governance
Report
Notes to the Financial
Statements
Key Financial Data and
Ratios
32 Administration Report
32 Corporate Structure
33 Financial Results Review
39 Risk Management
43
49 Financial Statements
57
82
85 Board Assurance
88 Auditor’s Report
Maha Energy Highlights
Letter to Shareholders
About Maha Energy
Maha Vision and Strategy
Assets
Road Map
Future of Fossil Fuels
Timeline
Interview with the Founder
Sustainable Operations – ESG
The Board of Directors
The Share
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MAHA ENERGY 2021 ANNUAL REPORT
IN EARNINGS PER SHARE
COMPARED TO 2020
(Basic earnings per share in 2021
was USD $0.19)
+210%
2021 MAHA HIGHLIGHTS
R
E
V
E
N
U
E
$68.3 MILLION
E
B
I
T
D
A
$47.7 MILLION
USD
N
E
T
R
E
S
U
L
T
I
N
2
0
2
1
$21.6 MILLION
USD
USD
SAFETY AWARENESS AND
TRAINING MAN HOURS
9,900+
BOEPD
3,387
PRODUCTION
1,309
SAFETY
OBSERVATION
CARDS
A LOCAL STAKEHOLDER
ENGAGEMENT PROGRAM,
IMPLEMENTED AT MAHA’S
FACILITIES
MAN HOURS
WORKED
690,000+
MahaConnect
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2
3
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MAHA ENERGY 2021 ANNUAL REPORT
Letter to Shareholders
Dear Friends and Fellow Shareholders of Maha Energy AB,
2021 was a year of transition for Maha. The drilling of a single well in Brazil (Tie-4) dominated
the year and although it was not completed as a horizontal producer, as planned, it delivered
record production rates instead. The Tie-4 well tested 4,695 BOEPD on a 24 hour pump test at
the beginning of 2022. The year finished with yet another Corporate all time annual average
production volume record despite drilling delays and production setbacks. The drilling and
production problems experienced during the year caused significant deferral of crude oil production
from the Tie field, and longer than planned dewatering from the Illinois Basin (IB) stimulated
wells meant delays in much needed oil production from the IB area. The continued drilling delays
and production interruptions experienced during 2021 is something management is taking very
seriously and is addressing with utmost priority.
As luck will have it though, rising oil prices during the first 2 months of 2022 coincided with
significant production increases coming online at the same time from both the Tie field and IB
wells. Corporate average monthly production for January and February, 2022 was 4,328 BOEPD
and 5,106 BOEPD respectively. Average Brent crude oil prices for the same periods were $86.51
and $97.13 per barrel. In the Illinois Basin we broke the USD 1 million per month revenue mark
for the first time ever, and corporately we broke the 5,000 BOEPD mark in February. Our highest
daily production record was 6,847 BOEPD and was recorded on January 20, 2022.
The Company finances are in good shape and the Company is in a good place to embark on
further organic growth in Oman, Brazil, and the USA in 2022 and beyond.
In Oman, and aer 6 months of Covid-19 border closures, Maha established an oce and assembled
the beginnings of a drilling team during 2021. All long lead equipment for the 2022 drilling
campaign, including Progressive Cavity Pumps (PCP), the pump of choice for the Mafraq field,
were ordered. At the beginning of 2022, casing, tubing and wellheads were being delivered in
accordance to plan. A drilling rig has been selected, and the drilling of six wells is scheduled to
begin on the Mafraq field during the 2nd quarter of 2022. Two appraisal wells will be drilled first
to acquire important information such as the oil water contact, crude oil properties and cores of
the producing interval. Additionally, four horizontal wells will be drilled and placed on extended
well test production to evaluate water encroachment in the fractured limestone reservoir.
The Brazilian Tie field is being transitioned from a primary depletion drive to water flooding. To
that extent, important water injectors will be drilled during 2022 to enhance reservoir pressure.
Oil production from the Tie field is dependent on several factors, such as well deliverability,
reservoir pressure maintenance, gas handling and otake, oil sales and surface pump uptime.
The plan is to reach and maintain the field plateau rate aer the current Tie-5 horizontal well is
completed later in 2022.
At Tartaruga, also in Brazil, plans are being laid to boost production by drilling at least one
horizontal well into the Penedo sandstone, starting in 2022. Horizontal wells are well suited to
increase production of this tight, but extensive, sandstone reservoir.
In 2021 the Illinois Basin team delivered twelve production wells that are now all on production.
New and additional acreage was added adjacent to existing producing wells in the beginning of
2022. This new area provides 23 new and future drilling locations for the Company. Maha will
revisit drilling plans for IB towards the middle of 2022 once more production information has
been obtained from the 2021 wells. It is important that production rates justify the investments
and any future investments must be compared and ranked along with the Company’s other
investment opportunities. The cost control at IB is excellent and the predictability of reservoir
productivity and response to stimulation makes IB a very low risk, low cost, and compelling
investment case at current oil prices.
Finally, something that is noticeable of the Company “becoming of age”, is the increased focus
on HSE and ESG. Whilst Health, Safety, and Environment (HSE) has always been at the center of
everything operational at Maha, Environmental, Social, and Governance (ESG) matters are catching
up fast. Maha’s second Sustainability Report is issued the same time as this Annual Report and
I encourage you to review it. Our ESG team are doing so many wonderful and important things.
We track and report so many things. All of which carry important indications of a responsible
global corporate citizen. For example, in Brazil over 85% of our associated gas resource was
consumed in electrification and heavy industries and our Gas-to-Wire (GTW) electrification project
expanded from 17 Units to 22 Units as well during the year. Finally, I am particularly proud of
initiatives like MahaConnect, our local community outreach program, our Wyoming scholarship
program, and our direct involvement and impact on the Tamar turtle protection program in Brazil.
To conclude, I want to thank all our hardworking employees for their unwavering dedication and
support. And to all fellow shareholders and friends of Maha thank you for your continued support.
Jonas Lindvall
Chief Executive Ocer (CEO)
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MAHA ENERGY 2021 ANNUAL REPORT
Exploration
Appraisal
and development
Production
Risk/Reward
UPSTREAM
Prospecting,
Exploration,
Development
and Production
of Crude Oil and
Natural Gas
MIDSTREAM
Storage and
Transportation
of Unrefined
Crude Oil and
Natural Gas
DOWNSTREAM
Product
Manufacturing
and Distribution
About Maha
Maha is a Sweden-based independent,
international upstream oil and gas company
that focuses on Enhanced Oil Recovery (EOR)
engineering solutions for underperforming oil
and gas assets. Maha has assembled a team of
industry experts with individual expertise to
build a solid foundation of production assets
and an objective to grow through petroleum
engineering and near field exploration
technologies. The primary focus is to implement
state-of-the-art EOR technologies to existing
and maturing oil and gas fields.
Maha Energy is traded on Nasdaq Main Market
in Stockholm under the ticker symbol ‘MAHA-A’.
Enhanced Oil Recovery Technology
To reduce and manage risk, Maha, utilizes
proven and modern oil enhancing technologies
to extract oil. Crude oil development and
production in oil reservoirs can include up to three
distinct recovery phases – primary, secondary,
and tertiary recovery. Primary recovery is also
known as natural depletion, whereas secondary
and tertiary recovery technologies are known
as Enhanced Oil Recovery (EOR). Secondary and
tertiary recovery is implemented when primary
conventional recovery methods are no longer
able to produce the remaining oil. To reduce
subsurface risk, Maha’s strategic business model
is to focus on areas with proven hydrocarbon
production by exploring areas that may have
had previously overlooked discoveries.
10%
40%
50%
Appraisal
Near field
exploration
Appraisal
Exploration
Development
Development
Maha’s Vision and Strategy
To be a leading successful upstream oil and gas
company, Maha’s team of experts has laid the
foundation for an innovative and progressive
business model that not only produce oil and
gas but also add value to Maha’s shareholders.
The focus on producing high quality, low cost
barrels of oil proves Maha’s resilience in a
volatile global market whilst also maintaining
an absolute focus on safety and operational
reliability.
A proactive and decisive approach has been
developed by Maha in its corporate strategy
to reduce potential operational and business
associated risks. While maintaining organic
development, Maha will continue to evaluate
new acquisitions and growth opportunities
to strengthen Maha’s portfolio and balance
sheet.The multifaceted business and operation
strategy can be condensed to four components:
1. Adding Value Through Enhance Oil
Recovery Engineering Solutions
State-of-the-art engineering technology
together with a team of industry sub-surface
experts, give Maha the competitive edge in oil
and gas exploitation and production. Maha’s
objective is to grow and produce hydrocarbons
through petroleum engineering and near field
exploration technologies.
2. Balanced Asset Classification and
Risk & Reward Pyramid
Maha has the philosophy of acquiring existing
hydrocarbon assets and increase value by
applying modern hydrocarbon recovery
technologies through a 50:40:10 asset ratio.
This means the Company strives for at least
50% of its assets to consist of low risk,
consistent cash yielding production assets, and
that 40% of assets should be of some risk to
consummate production. The final 10% of near
field exploratory production will be confined
to: (a) self-funded from existing cash flows and
(b) be in the near vicinity of Company-owned
producing fields and infrastructure.
3. Sector Growth Cycle
The Upstream Development Cycle is based
on using internally generated funds from
production operations to explore for more
oil and gas. External funding for exploratory
activities are not generally used.
4. The “Three Legged Stool”
The ‘Three Legged Stool’ strategy is centered on
value, jurisdictional and economic diversification
and stable production opportunities. All
opportunities evaluated by the Maha team is
centered on a value per barrel basis. In order
to diversify from political, regulatory, financial
and jurisdictional risks, the Company’s vision is
to produce oil from at least three independent
political jurisdictions.
BRAZIL USA OMAN
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MAHA ENERGY 2021 ANNUAL REPORT
The Company’s production goal is to grow
from a small junior independent production
company to a healthy mid-size independent
oil and gas company with significant
production volumes. Maha’s business
activities and operations has grown and
matured mirroring the classic ‘S’-growth
curve for business framework. The economic
business growth concept, also known as
the Sigmoidal Curve of business (or the
S-Curve), predicts and demonstrates the
business growth over time. Every business
starts the S-Curve model at the bottom with
slow growth rates, or in some cases, even
negative growth rates – as the business
begin to monetise their products and
services to the market. As time progresses
the growth of the business accelerates as
consumers recognize and welcomes the
product or services. This marks the steepest
part of the ‘S’ curve, and rapid expansion
usually follows. Then, as diminishing returns
from the assets, products or services begins,
the growth tapers o at the top of the ‘S’.
At this point, the Company must migrate
onto the next ‘S’ curve. Maha started the
second ‘S’ curve with the development of
the Illinois Basin asset in the United States,
the initiation of Mafraq, and the expansive
production growth of the Tie field.
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MAHA ENERGY 2021 ANNUAL REPORT
WHY BRAZIL?
WHY OMAN?
WHY
USA?
LAK RANCH – WYOMING
Independent Third Party, RPS Knowledge
Reservoir calculated best case estimate of
original oil in place (OOIP) to be 62 million
barrels. To date, ~ 150,000 barrels of oil has
been produced from the LAK Field.
» 2021 Average Production: Shut In
» 19 deg. API oil
» Working Interest: 99%
» Year of Acquisition: 2013
» 2021 Average Production: 212 BOPD
» 35 deg. API oil
» Working Interest: 97%
» Year of Acquisition: 2020
ILLINOIS BASIN – ILLINOIS/INDIANA
The Illinois Basin (IB) is one of the oldest oil
producing basins in North America having
produced over 4 billion barrels of oil to date. The
IB is a light oil producing asset with dependable
low risk, shallow, fully delineated and solid
performing assets. Multiple infill drilling
locations have been identified on the IB lands.
» 2021 Average Production: 0 BOPD
» 13 deg. API oil
» Working Interest: 100%
» Year Awarded: 2020
BLOCK 70 (MAFRAQ)
Block 70 is an onshore block that includes the
shallow and undeveloped Mafraq heavy oil field.
The Mafraq field is estimated by third parties
to contain between 185-510 million barrels of
original oil in place (OOIP). The Block covers
an area of 639 km
2
and is covered by both 2D
and 3D seismic data that has been acquired
by previous operators that has been made
available to Maha. Eight wells have been drilled
within the block boundary, five of which are on
the Mafraq oil field.
» 2021 Average Production: 2,981 BOEPD
» 36-38 deg. API oil
» Working Interest: 100%
» Year of Acquisition: 2017
TIE FIELD
The Tie light oil field was discovered in 2009.
Maha acquired the field in 2017 and immediately
embarked on an expansion project of the field.
At the time of acquisition, the Tie field acquired
1,300 BOPD and the processing facilities were
rated to handle up to 2,000 BOPD. Between
2018 and 2020, the Tie field production facilities
were expanded to handle up to 5,000 BOPD
and accompanying sales contracts for the
crude were negotiated of up to 4,850 BOPD.
The production volumes from the Tie field has
grown steadily since acquisition and as of early
2022, the Tie-4 well alone tested an impressive
4,695 BOEPD.
» 2021 Average Production: 194 BOEPD
» 41 deg. API oil
» Working Interest: 75%
» Year of Acquisition: 2017
TARTARUGA FIELD
The Tartaruga light oil field was discovered in
1994. The discovery well found oil in a sandstone
that normally does not contain oil and gas in
this part of Brazil. Following testing operations,
the well was placed on production almost
immediately. The field is currently producing
from two wells and has produced over 1 million
bbls since the discovery.
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MAHA ENERGY 2021 ANNUAL REPORT
Road Map
Maha is well positioned in this very exciting
industry to deliver more barrels and more
gas as demand continues to grow. Not only is
Maha positioned to provide more oil and gas,
but it has centered its growth opportunities on
value per barrel basis. Many companies chase
“barrels”, but core to Maha is that it focus on a
value per barrel. Focus is on producing highly
profitable barrels rather than large volumes of
unprofitable barrels. The whole idea, basic as
it seems, is to maximize value on a per barrel
basis whilst continuing to grow the Company.
In its’ short life, Maha has proven to be resilient
and in some cases thrived in the turbulent
global markets. Maha’s trend in hydrocarbon
production, business growth and profitability
continues to be positive. Maha has gone from
1,000 BOEPD in 2017 to over 5,000 BOEPD
in February, 2022 – and that is with a global
pandemic and negative oil prices to boot.
After being a privately held Company for
three years, Maha listed on the First North
Growth Market in 2016. During the next
four years, the Company added over 10,000
shareholders and more than quadrupled its’
Market Capitalization. Liquidity has remained
very high and is considered an above average
liquid share on NASDAQ Stockholm. Therefore,
in 2020, and during a raging pandemic, Maha
decided to graduate from NASDAQ First North
Growth Market to the NASDAQ main market in
Sweden. As of December 2020, Maha is now
on the small - medium cap list of the NASDAQ
main market in Stockholm, Sweden.
The future growth for Maha is fueled by the
Company’s cash cow, the Tie field in Brazil. Aer
two turbulent years (2019 and 2020), the Tie
field is now equipped to process up to 5,000
BOPD and associated gas along with adjoining
water handling and injection facilities. Crude
oil sales contracts of up to 4,850 BOPD has also
been secured. Future production growth will
include the Tie field as foundational production
volumes, but organic growth will mainly come
from Oman, and to a lesser degree from Illinois
Basin in the USA and the Tartaruga oil field in
Brazil.
During 2021, progress for the commencement
of the Omani Block 70 has been made towards
obtaining necessary approvals and the
purchasing of long lead equipment to allow
for drilling activities to commence during the
first half of 2022. The increased rate of new
Covid-19 infections in Oman during the first
half of 2021 led to tighter Covid-19 restrictions,
including curfews and suspension of entry into
the country for non-Omanis, and is likely to
have an impact on the Company’s initially
planned activity timeline. However, progress
has been made to expand and develop the Block,
where approximately half of the Company’s
future reserves and resources are located, for
production to begin.
2021 PRODUCTION HIGHLIGHTS
Tie Production
2,981
BOEPD
(2020: 2,673 BOEPD)
2021 Average
Production
3,387 BOEPD
(2020: 3,301 BOEPD)
2021 Assets
5
(2 in Brazil,
2 in the USA, 1 in the
Sultanate of Oman)
2021 Average
Realized Oil Price
USD $56.62/BOE
(2020: USD$ 33.22/BOE)
14
Wells drilled in
2021
44
Active production
wells in 2021
2021
Exit Production
3,407BOEPD
(2020: 4,112 BOEPD)
Illinois Basin
Production
212 BOPD
(2020: 150* BOPD)
*Note Annual averages may dier
due to rounding eects and number
of days in actual production.
Tartaruga
Production
194 BOEPD
(2020: 513 BOEPD)
3%+
Overall production
increase
2021 Revenue
USD
$68.3
MILLION
(2020: USD $39.0 million)
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MAHA ENERGY 2021 ANNUAL REPORT
Country
Concession
name
Maha Working
Interest (%)
Status Net Area (acres) BOEPD (
1
) Partner
Brazil Tie (REC-T 155) 100% Producing 1,511 2,981
Brazil REC-T 155 100% Exploration 4,276 –
Brazil REC-T 129 100% Exploration 7,241 –
Brazil REC-T 142 100% Exploration 6,856 –
Brazil REC-T 224 100% Exploration 7,192 –
Brazil REC-T 117 100% Exploration 6,795 –
Brazil REC-T 118 100% Exploration 7,734 –
Brazil Tartaruga 75% Producing 5,944 194
Petrobras
(25%)
USA
Il Basin
(various)
97% Producing 3,134 212
USA LAK Ranch 99% Pre-Production 6,475 – SEC (1%)
Oman Block 70 100% Pre-Production 157,900 – –
Future of Fossil Fuels
Since the oil price collapse of 2014, and the
ensuing pandemic of 2020/21, the oil industry
has been hit hard. Capital investment into the
industry has suered and as demand continues
to grow unabated, despite calls for the great
energy transition, the world is now finding
it-self short of oil and gas. As a result of the
recent global energy crisis, energy company
stocks are surging. The basic supply and demand
law is finally catching up aer many years of
underinvestment in the oil and gas sector.
Oil prices are experiencing a strong rebound,
reaching their highest levels since the 2014
downturn.
While energy diversification towards renewable
energy seems to be in the forefront of today’s
energy conversation, fossil fuels continue to
play an important role in the energy matrix and
will continue to support global energy demands.
While renewable energy is expanding quickly,
it is not enough nor quick enough to satisfy
the rebound in global energy demand
2
. As the
global demand for energy rebounds and grows,
fossil fuels continue to be a reliable, aordable,
and versatile energy product that contributes
to the electrification of society.
3
1
As per the current quarter reported net production volumes to Maha before royalties. 1BBL = 6,000SCF of gas. Approximately 87% of Maha’s oil equivalent production is crude oil.
2
https://www.iea.org/news/global-electricity-demand-is-growing-faster-than-renewables-driving-strong-increase-in-generation-from-fossil-fuels
3
https://www.iea.org/news/global-electricity-demand-is-growing-faster-than-renewables-driving-strong-increase-in-generation-from-fossil-fuels
https://ourworldindata.org/energy-mix
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MAHA ENERGY 2021 ANNUAL REPORT
2015
2019
2021
2017
2020
2018
2013
2016
2014
» Refinancing agreement with Brazilian investment Bank, BTG Pactual, for USD $70 million to finance Company’s
production expansion and objectives.
» Itaparica formation was discovered, extensively tested, and flowed 42
o
API oil to surface at initial and unstable
rate at 139 BOPD.
» Tie-3 well initial testing flowed oil and gas rate of 472 BOPD.
» Company publishes first Sustainability Report for 2020.
» Maha Energy AB admitted to Nasdaq Stockholm main board as small cap
company – first day trading is 17 December, 2020.
» GTW generators commissioned for commercial export of electricity at the
Tartaruga field.
» Drilling of Tie-3 well started.
» Maha awarded Block 70 in Oman.
» Maha acquired Illinois Basin in the USA.
» Maha assumes the GRI and SASB frameworks as guidelines for ESG disclosure.
» Company exceeds 3,000 BOEPD average annual production volumes.
» Gas to Wire (GTW), a Brazilian company, is contracted to process and convert
gas to electricity at the Brazilian fields.
» Maha invited to bid for highly attractive Block 70 onshore Oman. The
Company submits a competitive bid and enters into negotiations with Omani
Government.
» Custom hydraulic jet pump at the Tie Field installed, almost
doubling the Tie production.
» Two additional horizontal producer and 4 hot water injection wells
were drilled at the LAK Ranch oil field.
» Maha acquires Tartaruga (75% WI) and Tie (100% WI) Fields in Brazil.
» Immediate doubling of production at the Tartaruga Field by adding
artificial li.
» Maha Energy AB is created and listed on Nasdaq Stockholm First
North Growth Market – first day of trading 29 July, 2016.
» FNCA appointed as Company’s certified advisor.
» LAK Ranch development continued.
» Chapman Petroleum Engineering Ltd. Prepares the Company’s first
Canada NI 51-101 compliant reserves report.
» Maha assumes 99% working interest at LAK Ranch
property in Wyoming.
» Minor interests in producing wells in Canada was
acquired by Maha and later sold in 2016.
» Maha Energy Inc. is incorporated in Alberta, Canada
by Jonas Lindvall and Ron Panchuk.
» LAK Ranch property in Wyoming acquired and 3
wells immediately drilled.
» Corporate Governance Policies created.
Maha’s Timeline
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MAHA ENERGY 2021 ANNUAL REPORT
2021 Challenges and Triumphs
Aer experiencing multiple and severe hole
problems trying to land the Tie-4 well as a
horizontal producer in the Agua Grande (AG)
reservoir in the Tie field, onshore Brazil, it was
decided to reconfigure the well to a vertical
producer. Once the well was plugged back and
sidetracked, it did not take long to reach the
total depth of 2,221 m on December 17th, 2021.
A new Electric Submersible Pump (ESP) tested
a record 4,695 BOEPD for Maha. It is the best
producing well ever drilled in the Company’s
short history, and in Brazil it ranks as the third
best well ever drilled onshore Brazil.
After several months of Covid-19 related
delays, Maha’s Oman drilling team started to
assemble in the fall of 2021 in Muscat, Oman.
Several field visits were made during 2021 and
it became evident that the previous Operator
of the Mafraq field had le two fully equipped
wells along with road and location infrastructure
in place. Something Maha will be able to utilize
in the exploration phase of Mafraq.
Delivery of long lead equipment for up to 6 wells
were delivered during the first 3 months of 2022,
and the Company stands ready to commence
drilling and testing operations during the first
half of 2022.
A total of 12 wells were drilled during the summer
of 2021 in the Illinois Basin. As at the end of 2021
all but one of the new wells were on production.
Longer than anticipated stimulation flow back
periods meant valuable delays to IB production
at the end of 2021. However, during the first
part of 2022, production has grown consistently
along with rising oil prices. February 2022 was
a record month with a monthly average oil sales
production rate of 442 BOPD and a monthly
revenue of almost USD1.1 million.
Perhaps more telling of the eciency of the
IB operations is the tight cost control that the
Company maintains. The 2021 drilling costs
came in approximately 5% less than the budget.
Illinois Basin SuccessOpening the Oman Oce Tie-4 – 4,695 BOEP
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MAHA ENERGY 2021 ANNUAL REPORT
An Interview with the Founder
Maha’s story begins in 2013 at the foothills of
Alberta, Canada near the scenic yet rugged
and wild terrain of the Rocky Mountains. Jonas
Lindvall, CEO and co-founder of Maha Energy,
put together a team of experts, opened an oce,
and got to work. That same year, the strong
corporate governance foundation was built
by creating and integrating Company Policies
that are still used today. It also incorporated
Maha Energy (USA) Inc. in Wyoming where it
acquired the LAK Ranch asset. Since 2013, Maha
has grown in production, employees, oces,
assets, and has listed on both Nasdaq First North
Growth Market and the NASDAQ Main Market.
The Company are present in 5 countries – Brazil,
Canada, Oman, USA, and Sweden.
Over the years, you’ve been part of a
transformational journey of Maha - from empty
hands in 2013 to now, a multinational company
with over 80 employees, in 2021. What have
been some of the key learnings from this
experience?
Building a Company from scratch is really hard.
It takes a massive amount of time and work. You
need quality assets to work with, a supportive
shareholder base and good people you can trust.
What has been the hardest part of building
Maha?
Keeping to schedule. Delivering the wells that
in turn deliver the production in Brazil has been
by far the hardest thing for us. Challenging
drilling conditions, bureaucratic delays and
human resources in Brazil all make for a very
tough operating environment. Of course, the
pandemic and the ensuing oil price crash of 2020
was also very challenging. At one point we were
running corporate economic model sensitivities
on a daily basis to base near term decisions on.
How do you see the Company changing in the
next few years?
The Company is now firmly in a great position.
We have a robust foundation production volume
on which we will continue to grow. It makes it a
lot easier to focus on business growth when cash
flows are positive and the bank balance increases
every month. We can now focus on delivering
organic growth from our Tartaruga asset. We will
continue our growth in IB, United States - which is
very low risk and very predictable. We are eying
further production growth in other areas of the
USA. And finally, we will start test production
in Oman. The Mafraq field accounts for almost
half our future oil volumes and if we can prove up
the Oil Water Contact to where strong indications
suggest it is, we are poised to deliver significant
volumes of oil from Oman.
What do you foresee be some of the challenges
ahead? And what opportunities do you see
laying ahead?
The Pandemic has created short term supply
problems. For example, the Progressive Cavity
Pumps we may need for Oman are already seeing
20 - 26 week delivery delays. The supply chain
disruption is going to play havoc with our growth.
Fortunately, we have managed to secure most of
our long lead requirements for Oman, including
casing and tubing - but I have no doubt that we
will be caught on something.
Another challenge I foresee is catching up
with the pressure maintenance of the Tie field
reservoirs. The knock on eect of the delays
in drilling at the Tie field has further delayed
water re-injection in the Tie field. We have some
catching up to do there.
Because we were able to secure great assets
during the Pandemic (IB and Oman), we are well
set for delivering production growth through
the drill-bit over the next few years. We are
therefore less dependent of acquisitions for
growth, which at current oil prices (USD 100+/
bbl) will be dicult.
What do you attribute Maha’s resilience and
growth to?
It’s people! We have assembled a great team over
the past 5 years. We also have great shareholder
support that understand the importance of cash
flows and reinvesting into the business. Without
a doubt the growth is attributable to our 5 assets,
and in particular the current engine, the Tie field.
Can you share a particularly memorable
moment?
There are many, but one that stands out is the
pizza party the guys threw at the Tie gathering
station in Brazil when we tested 4,695 BOEPD
from the Tie-4 well in January 2022. It was
spontaneous and all the guys in the field were
super excited! It truly demonstrates the team
spirit - almost like family spirit. I loved it even
though I was not there.
Another one was when Andres Modarelli, our
CFO, provided inspiration and energy to me
during the NASDAQ main market listing process.
The NASDAQ audit process was ferocious in the
fall of 2020 and I was beaten down pretty hard,
but Andres doubled down and pulled us through.
I was inspired by his resilience and perseverance.
Jonas Lindvall
Chief Executive Ocer (CEO)
21
22
MAHA ENERGY 2021 ANNUAL REPORT
ESG Highlights
ENVIRONMENTAL STEWARDSHIP
Respecting and minimizing impacts to the
environment Maha operates in is a key
component in Maha’s development plans and
operations. Maha incorporates environmental
management strategies into operational
planning, execution, and all stages of Maha’s
business activities. Company operations are
conducted in a manner that respects and
protects the environment and is, at a minimum,
in compliance with the applicable environmental
laws and regulations.
Emissions
Part of Maha’s philosophy of proactive
environmental planning includes maximizing
the use of resources to reduce the production
of waste. Natural gas, a bi-product of Maha’s
operations, is also a resource. While excess
associated natural gas may be flared, Maha
endeavours to utilize the natural gas in the
best and most economical manner. In Brazil,
and wherever economically feasible, Maha has
taken actions to lower Greenhouse Gas (GHG)
emissions by reducing the flaring of natural
gas through capital investments in three gas
utilization projects:
1. Gas electrification (Gas to Wire)
2. Compressed natural gas (CDGN)
3. Gas re-injection program
Water Production and Handling
Water is a shared and valuable resource and Maha recognizes the protection of freshwater is an
essential part of responsible oil and gas exploration and production. Thereby, Maha is committed
to following all applicable laws and regulations related to water protection as well as wherever
possible seek to reduce the use and discharge of water. As such, Maha maintains well-developed
sites with spill and run-o controls as measures to protecting nearby surface water sources.
Enhanced and upgraded secondary spill containment and incident material are readily available
to minimize any spill impact on surface ecology. Additionally, Maha uses proven technology to
limit potential contamination risks during drilling operations. For example, a casing program
is implemented, and pressure tested, whereby sucient cemented casing is used to prevent
underground contamination.
» 15 Surface Water
Analysis Reports were
conducted at both
the Tie and Tartaruga
Facilities
» Over 270,000
m
3
of water
was produced,
whereby 96%
of the water
was reinjected
» 100% water was
completely consumed
or reinjected at Illinois
Basin and Tie Fields
» No impact on Ground
Water due to Maha’s
activities
»
97% of water was completely consumed
or reinjected, any water discharged was
collected and transported to a third-
party governmental licensed water
disposal facility
» 23.7% decrease
in water
withdrawal
usage compared
to 2020
IN 2021
Gas to Wire (GTW)
»
Twenty two 200kW generators
at the Tie and Tartaruga fields
»
In 2021, GTW generators
converted over 860 thousand
cubic meters of gas to power
Maha’s Brazilian facilities, and
during 2021
»
GTW generators provided 9.4
million kWh’s to support the
local electricity grid
CDGN
» Four commercial gas
compressors at the Tie Field
generates Compressed Natural
Gas (CNG) for industrial use
» 17 million cubic meters of gas
was sold to local end-users
22
23
24
MAHA ENERGY 2021 ANNUAL REPORT
Social
Meet some of the Members of the Maha Team Meet some of the Members of the Maha Team
Meet Andre Naslausky
When did you join the Maha Team?
I joined the team in November 2021.
What’s your role at Maha and what is your educational/professional
background?
I am the Managing Director of Maha Energy Brazil Ltda.. I am a
Mechanical-Aeronautical engineer graduated from Instituto Tecnologico
de Aeronautica in Brazil and continued my education with a Masters in
Management for the Oil and Gas Industry from Heriot-Watt University,
Edinburgh in the United Kingdom. Before joining Maha I worked for
independent oil companies in Brazil but my main career position was
with one of the largest oil and gas service companies where I and had
international assignments.
What’s been the greatest challenge at Maha?
Aligning eectively and as quick as possible our Brazil Maha organization,
exceeding our stakeholders expectations while delivering successfully a
very comprehensive production development campaign.
What has been the greatest success at Maha?
Being able to support my team to deliver on our production & budgeting
targets by broadening our planning horizon, bridging dierent perspectives
and establishing a results oriented organization.
What is a key moment that stands out to you at Maha?
Maha has an outstanding work environment and agile decision making
across the entire organization, with a very approachable and resourceful
senior management team. I also wanted to note that at Maha Brazil we
continue with a strong focus on safety and we have a top-notch team.
By working closely with the subsurface team and sr. management , we
are delivering relevant improvement in our production by use of EOR
technologies, drilling new wells and performing workovers with high
ROI. We are proud to work together with our communities, suppliers and
support our oil and gas clients/otakes to exceed.
A key moment for me was the testing of the Tie-4 well. The Tie-4 well
was a very challenging well and aer many months of hard work we were
ready to start producing from that well. Aer several field trips I was again
with both my management and field teams at our Tie Station in Reconcavo
Baiano - Brazil, that time, taking the first production measurements of
Tie-4. The productivity of Tie-4 well turned out to be a huge success and
enjoying the sense of achievement with my team was one of the most
rewarding moments in my career.
Meet Walter Lima
When did you join the Maha Team?
I joined the Maha Team on April 20th, 2020.
What do you do at Maha?
I am a Field Production Supervisor for the Tie Field in Brazil.
Before that role, I as a production engineer for an oil field
operator in the Reconcavo and Potiguar Basin in Brazil.
What’s been the greatest challenge at Maha?
As the younger person in the production team, my greatest
challenge was to get the confidence of the team as a leader
and show how I can add value to the team.
What has been the greatest success at Maha?
It’s the culture that I helped to develop. For example, to
guide the operators to be more autonomous and to do
small maintenance work around the area – this resulted in
decreasing the downtime of the wells.
What is a key moment that stands out to you at Maha?
The great work environment at Maha. The entire crew is
committed to the positive work atmosphere at the field.
When the new wells and GTE-03 were equipped with ESPs.
As an ESP specialist, I was waiting anxiously for this moment.
This was where I could show how is reliable and versatile this
artificial li method could be! In turn showing how I can add
value the Company by bringing new solutions to increase
the production safety.
Meet Richard Hengstmengel
When did you join the Maha Team?
I joined in January 2021.
What do you do at Maha?
I studied Mining Engineering at the Technical University
Del in The Netherlands. I received my MSc in 1989. I joined
the Maha Team in January 2021 and I am now the Drilling
Manager in Oman for Maha.
What’s been the greatest challenge and success at Maha?
With Maha being a multinational company, with assets and
people spread across North and South America, Sweden,
and now Oman, I found the greatest challenge to be the
distance and time-zone dierences. However, even with this
challenge, I am pleasantly surprised at how much the team
can do with such few people!
What is a key moment that stands out to you at Maha?
The CEO phoning me on the morning of a Board Meeting in
Stockholm and asking me how I was doing. When I started
talking about how the drilling on TIE 4 was coming along
(rather poorly at the time), he made it clear he was more
interested in me as a person. That was something I had never
experienced before in 30 years in the oilfield. Maha Energy
has a real family feel.
Meet Hayden Ott
When did you join the Maha Team?
I started as an engineering intern during the summer of
2017 and then I joined Maha team full time in February 2019.
What do you do at Maha?
My academic background in petroleum engineering
from University of Wyoming in the United States. I also
have experience as a Production Chemicals Engineer and
Operations Engineer in the Powder River Basin. I’ve now been
the US Operations Manager for Maha for 2 years.
What’s been the greatest challenge at Maha?
My greatest challenge has been overseeing a new asset
in a basin that I was not familiar with – the Illinois Basin.
It was a time where challenges were many and solutions
were not easy. Covid had locked down the United States
and oil have just gone negative. It was crucial to be able
to quickly evaluate the best way forward during one of the
most challenging down turns in the industry.
What has been the greatest success at Maha?
One of the many joys of working at Maha is the people
– my greatest success is working together with these
individuals and pushing them (and myself) to ensure the
job is successfully completed. It truly takes a dedicated team
of many individuals to reach a common goal and being a
part of that process has been extremely rewarding to me.
What is a key moment that stands out to you at Maha?
A key moment was when I received the call to move to Illinois
to help oversee the Illinois Basin asset. It was at that moment,
I knew Maha was going to continue grow and that the future
was very bright with opportunity for all of us at Maha.
25
26
MAHA ENERGY 2021 ANNUAL REPORT
Health and Safety
Employee health, safety, and wellness is of
utmost importance at Maha. Proactive health
and safety measures are taken to minimize,
if not eliminate, potential occupational
hazardous risks that may impact a member
of the Maha Team. Maha’s HSE Policy acts as
a guide in improving and maintaining a safe
work environment, however, safety at Maha
is viewed as a mindset and a culture rather
than a procedure or protocol. Safety culture
is the collection of beliefs shared amongst
colleagues that value safe work in all daily
activities. The creation of a safety culture and
individual beliefs achieved through the active
participation of every individual at Maha. This
means individuals must place emphasis on
individual risk assessments, safe work practices,
and safety conversations. Maha listens to all
employees and stakeholders and their safety
concerns through the DuPont™ STOP® Safety
Program. The Behavioral Safety Program aims
to change the thinking and behavior of people
towards a safety-oriented mindset. Participants
of the program are given safety information,
real-world examples, and skills to work more
safely. This program has been studied, tested,
and proven to help reduce accidents and injuries
at the workplace.
» 1,309 Safety Cards
Collected during 2021
This helps Maha review, analyze, and address
potential safety risks
» 83% of all Maha sta and direct
contractors DuPont™ STOP® Certified
This helps integrate a safety culture and
mindset at Maha
» 60 DuPont Training Session Hours
Completed in 2021
Safety Performance
Key Performance Indicators help Maha review
quantifiable health and safety data, which in
turn allows for strategies to be implemented
to reduce future risks.
2*
Lost Time Injuries (LTI)
5
Total Recordable Injuries (TRI)
0
Fatalities
9,900+
Safety Awareness and Training Man Hours
*Two minor injuries occurred, when an individual twisted an
ankle when walking down a short staircase and a kitchen
sta received two small stiches aer cutting their hand.
Both individuals have since recovered and are back at work.
Governance
Corporate Governance is an integral part of the company foundation that guide Maha’s corporate
culture, business objectives, and helps accommodate stakeholder interests. Maha is committed
to conducting business honestly, safely, ethically, and with integrity in full compliance with laws,
rules, and regulations applicable to the business in the countries in which it operates. Maha’s
business model is built on the corporate governance foundation, which aims to decrease associated
risk of unethical behavior, unclear responsibilities, and avoid potential conflicts of interests. The
Corporate Governance Framework further strengthens and clarifies Maha’s corporate governance
foundation and ensures that business is conducted in a responsible manner. This ultimately
increases work eciency, stakeholder trust, and shareholder value.
For more information on Maha’s ESG initiatives or sustainability eorts, please visit the website
and the Sustainability Report found on the website (www.mahaenergy.ca).
0
Discrimination reports
0
Political contribution
100%
of employees have reviewed, understood,
and complied with key Corporate Policies
through the MahaConnect initiative
0
Anti-Corruption reports
0
Whistleblowing reports
130+
individuals at Maha have been trained
in Corporate Governance and Workplace
Expectations
27
28
MAHA ENERGY 2021 ANNUAL REPORT
Harald Pousette
(Born 1965)
Chairman of the Board
Jonas Lindvall
(Born 1967)
Chief Executive Ocer (CEO)
Anders Ehrenblad
(Born 1965)
Nicholas Walker
(Born 1962)
Fredrick Cappelen
(Born 1962)
The Board of Directors
The Company has its registered oce in Stockholm, Sweden. Pursuant to the Company’s articles of
association, the board of directors shall consist of not less than three (3) and not more than seven
(7) ordinary members, without any deputy members. Currently, the Company’s board of directors
consists of six (6) ordinary members, appointed until the end of the next annual shareholders’
meeting. The composition of the board of directors in the Company has not changed since the
Company’s 2021 Annual General Meeting (AGM).
The Board is responsible for the strategy and organisation of Maha and its aairs. The Board
shall regularly assess Maha’s and the Group’s financial position and ensure that its organisation
is formed in such manner that accounting, management of funds and Maha’s and the Group’s
finances in general, are monitored in a satisfactory manner.
Member of the Board of Directors since June 2017 and Chairman since May
2020
Harald Pousette (born 1965) has been a Board member of Maha since June
2017. Harald holds a Bachelor of Arts (Economics) from the University of
Uppsala, Sweden. Harald is currently the CEO of Kvalitena AB (publ). During his
career, Harald has worked in the finance and real estate industries including
recently at Kvalitena AB as CFO. Harald is Chairman of Norrfordon Holding
AB, Bil Dahl AB, Bil- och Traktorservice i Stigtomta AB, Jitech AB, and Board
member of Stig Svenssons Motorverkstad AB and companies in the Kvalitena
Group. Harald holds 786,484 Shares in Maha.
Member of the Board of Directors since 2013 and Chairman between May 2019
and May 2020
Anders Ehrenblad (born 1965) has been a Board member of Maha since 2016. Anders
is currently working as an independent Investment Advisor in the Energy and Tech
sectors to Corporate Finance firms and Family Oces. Board positions in addition
to Maha are; Ehrenblad Invest and Ehrenblad Advisory AB. Previous positions and
board assignments; Investment Manager and Partner of Graviton AB, Board member
of RF Coverage AB (acquired by Tcecur) and Maven Wireless AB (publ). Co-founder of
Venture Capital Fund Alpha One. Previous senior positions in Fairchild Semiconductor
Ltd, Farnell Group Ltd and Ericsson Components AB. Anders holds a M.Sc. in Business
Administration from University of Uppsala, Sweden. Anders holds 378,607 Shares
in Maha.
Member of the Board of Directors since May 2020
Fredrik Cappelen (born 1962) and a resident of Norway, obtained his Bachelor of
Arts in Business from Regents University in the United Kingdom. Fredrik Cappelen
has been on the Maha Board since 2020 and has a long history in the Norwegian
oil and gas financing scene. He is chairman of Stella and Stella Industrier as, both
controlled by Fredrik. Chairman of Proterm, and Board member of Frigaard Gruppen
and Proxll. Former Head of Equities and Head of ECM at Arctic Securities and SEB
Enskilda. Fredrik holds 150,000 shares in Maha.
Member of the Board of Directors since May 2019
Nicholas Walker (born 1962) has been a Board member of Maha since 2019. Nicholas
(Nick) holds a BSc degree in Mining Engineering from Imperial College London, an
MSc in Computer Science from University College London as well as an MBA from
City University Business School in London. Nick has over 30 years of international
experience in the upstream oil and gas industry in senior executive/management
positions across Europe, Africa, Asia and the Americas including Bow Valley Energy
Inc., Talisman Energy Inc., Africa Oil Corp. and Lundin Energy AB. Nick is currently
CEO for Lundin Energy. Nick holds 464,211 Shares in Maha.
Member of the Board of Directors since May 2020
Seth Lieberman (born 1961) and a resident of the United Kingdom, obtained a
Bachelor of Arts in Economics from Tu University, USA. Seth Lieberman has been
on the Maha Board since 2020 and is a seasoned veteran within the international
real estate sector, particularly in his native USA and Europe. He also has broad
experience within business solutions, financing and private equity participation. He
has held senior roles at Advanced Capital’s Real Estate Fund, UBS Investment Bank,
Hypo Real Estate, Lehman Brothers International, Credit Suisse and GE Capital. Seth
Lieberman is a member of EQT Real Estate Funds I & II investment committee. Seth
Lieberman is the Chairman of Kvalitena AB (publ.) and a number of its’ subsidiaries,
including Huski Chocolate and Svenskt Industriflyg. Seth holds 222,333 Shares in Maha.
Member of the Board of Directors since 2013 and Managing Director since 2016
Jonas Lindvall (born 1967) has been a Board member of Maha since 2016. Jonas
holds a B. Sc. In Petroleum Engineering and a M.E.B. in Energy Business, both
from the University of Tulsa, USA. He is a seasoned senior executive with 30
years of international experience in the upstream oil and gas industry across
Europe, North America, Africa and Asia with such companies as Talisman
Energy, Tethys Oil AB, Shell Oil and Lundin Oil. Jonas holds 4,911,147 Shares
in Maha and 45,000 Warrants.
Seth Lieberman
(Born 1961)
29
30
MAHA ENERGY 2021 ANNUAL REPORT
The Share
Maha Energy AB (Maha) was listed on Nasdaq
First North Growth Market in Stockholm, Sweden
on July 29, 2016. Subsequently, on 17 December
2020, the Company migrated to Nasdaq Main
Board in Stockholm, Sweden.
Share Data
As at December 31, 2021 the Company had
119,715,696 shares outstanding of which all
were Class A shares.
Dividends
The Board of Directors will propose not to pay
dividends for 2021, as it anticipates that all
available funds will be invested to finance the
growth of its business. The board of directors
will propose if and when dividends should be
declared and paid in the future, based on Maha’s
financial position at the relevant time.
Major Shareholder Number of Shares Held % of Outstanding Shares
KVALITENA AB* 21,588,327 18.03%
BANCO BTG PACTUAL S.A. 7,470,491 6.24%
FÖRSÄKRINGSAKTIEBOLAGET, AVANZA PENSION 5,936,586 4.96%
JONAS LINDVALL (Maha CEO and Managing Director) 4,911,147 4.10%
ÅLANDSBANKEN I ÄGARES STÄLLE 2,076,584 1.73%
”NATURAL PERSON, NAME OMITTED BY REQUEST OF THE
SHAREHOLDER”
1,882,267 1.57%
HSBC TRINKHAUS AND BURKHARDT AG, DUESSELDORF, W8 1,750,000 1.46%
NORDNET PENSIONSFÖRSÄKRING AB 1,669,177 1.39%
SIX SIS AG, W8IMY 1,401,125 1.17%
SYDBANK I ÄGARES STÄLLE 1,374,876 1.15%
Sub Total 50,060,580 41.82%
Remaining Shareholders 69,655,116 58.18%
Total Maha A 119,715,696 100%
List of Major Shareholders as of December 31, 2021
* Includes 50,000 shares on loan
31
32
MAHA ENERGY 2021 ANNUAL REPORT
Administration Report
The Board of Directors and the Managing Director of
Company Registration Number 559018-9543, hereby
report the Company’s Annual Report covering the period
1 January 2021 until 31 December 2021, and the associated
consolidated Financial Report for the year 1 January 2021
until 31 December 2021. This report is a review of Maha
Energy AB results and management’s analysis of its
financial performance for the year ended 31 December
2021. The consolidated financial statements included in
this Annual Report have been prepared in accordance
with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards
Board (“IASB”) and adopted by the European Union (EU).
Significant accounting policies used are set out in Note 2
to the financial statements. All amounts are expressed in
United States Dollars (USD), except in the Parent Company
Annual Report where all amounts are expressed in Swedish
Krona (SEK), unless otherwise indicated.
Corporate Structure
Corporate structure as at 31 December 2021:
which includes the Company’s subsidiaries Maha Energy
Services LLC (incorporation number 2018-002241022),
Maha Energy Inc. (incorporation number 2018256518), a
company incorporated pursuant to the laws of Alberta,
Canada and its wholly-owned subsidiary Maha Energy
(US) Inc. (incorporation number 2013-000637593), a
company incorporated pursuant to the laws of the State
of Wyoming, United States of America (which owns 99%
of LAK Ranch in the USA) and its wholly-owned subsidiary
Maha Energy (Indiana) Inc. (incorporation number
802584723) which owns the Illinois Basin properties,
Maha Energy (Oman) Ltd, based in Cyprus (which owns
100% of exploration and production sharing agreement
for Block 70 in Oman through its Oman Branch), Maha
Energy I (Brazil) AB (incorporation number 559058-0907),
a Swedish private limited liability company, Maha Energy
II (Brazil) AB (incorporation number 559058-0899), a
Swedish private limited liability company, Maha Energy
Finance (Luxembourg) S.A.R.L (incorporation number -
B163089) a company incorporated pursuant to the laws of
Luxembourg owning 99.9% of the issued and outstanding
shares of Maha Energy Brasil Ltda. (incorporation number
11.230.625/0001-66) and Maha Energy I (Brazil) AB owning
remaining 0.01%. This Brazil limited company owns 100%
of the Tie Field, and Blocks 155, 117, 118, 129, 142, 224 and
75% of Tartaruga Block in Brazil.
The consolidated financial statements reflect the activity
of Maha for the years ended 31 December 2021 and 2020.
Maha Energy
Brasil Ltda.
Brazil
Maha Energy (Oman)
Ltd. (Oman Branch)
Oman
Maha Energy Finance
(Luxembourg)
S.À.R.L Sverige filial
(Sweden branch)
Sweden
100%
Maha Energy
(Indiana) Inc.
USA
Maha Energy
(US) Inc.
USA
100%
100%
100% 100%100% 100% 100%
100%100%
0.01%
99.99%
Note: The Company structure shows all the subsidiaries of the Group as of 31 December 2021.
33
34
MAHA ENERGY 2021 ANNUAL REPORT
Financial Results Review
Result
The net result for the year amounted to income of TUSD
21,587 (2020: TUSD -10,259) representing earnings per
share of USD 0.19 (2020: USD -0.10). Higher net result
for the full year was mainly driven by significantly higher
revenue from higher oil commodity prices with production
volumes increasing slightly against comparative period.
This was oset by higher operating costs, depreciation,
depletion and amortization expense, and finance costs
resulting from higher loan amount. Also contributing to
the higher net result were other one-time gains mainly
related to reversal of provisioned minimum work penalties
for TUSD 5,164 and lower general and administrative costs.
Included in the comparative period result is an impairment
charge of TUSD 21,000 on exploration and evaluation
assets (LAK Ranch).
The Company also generated higher earnings before
interest, tax, depletion and amortization (EBITDA) for
the year which amounted to TUSD 47,725 (2020: 18,104)
mainly due to higher revenue resulting from improved
commodity markets which was oset by higher royalties
and operating costs.
2021 2020
Delivered Oil (Barrels)
1
1,104,631 1,113,785
Delivered Gas (MMSCF) 790,532 566,437
Delivered Oil & Gas (BOE)
2
1,236,386 1,208,191
Daily Volume (BOEPD) 3,387 3,301
Production volumes shown are net working interest volumes
before government and freehold royalties. Approximately
89% (2020: 92%) of Maha’s oil equivalent production is
crude oil. Average daily production volumes for the full
Year 2021 were mainly in line with the same period in 2020.
Lower production volumes due to production interruptions
at both the Tie and Tartaruga fields during the second and
fourth quarters lowered the average production volumes
for the full year of 2021. The Company was anticipating an
increase in production volumes in 2021 with the Tie-4 well
coming on production during the third quarter; however,
the well had suered significant setbacks during drilling
the production hole which has resulted in deferral of 469
BOEPD of production on an annualized basis.
Revenue
(TUSD, unless otherwise noted) 2021 2020
Oil & Gas revenue 68,306 39,018
Sales volumes (BOE) 1,206,332 1,174,386
Oil realized price (USD/BBL) 62.60 36.05
Gas realized price (USD/MSCF) 0.79 0.67
Equivalent Oil realized price (USD/
BOE)
56.62 33.22
Reference Price - Brent (USD/BBL)
3
70.86 41.76
Reference price – Average WTI
(USD/BBL)
3
68.13 39.16
Revenue for the year amounted to TUSD 68,306 (2020:
TUSD 39,018), an increase of 75% as compared to the full
year 2020 from significantly higher oil realized prices
by 74% while sales volumes were 3% higher than the
comparative period. Higher realized oil prices resulted from
the improved market conditions for oil and gas commodity
prices aer significant price declines suered during 2020
due to the eects of the COVID-19 pandemic.
Crude oil realized prices in Brazil are based on Brent price
less applicable contractual discounts, reviewed annually,
as follows:
Tie Field crude oil
Crude oil from the Tie field is mainly sold to a nearby
refinery Dax Oil Refino S.A. (“DAX”) and Petrobras. For
crude oil sold to DAX the discount to Brent oil price is as
per the following price-based scale:
BRENT Price (USD/bbl) Discount (USD/bbl)
< $30 $5
Between 30.1 to 40 $6
Between 40.1 to 50 $7
Between 50.1 to 80 $8
Over 80.1 10%
Eective 1 April 2022, crude oil sales to Petrobras from the
TIE field are sold at a significantly lower discount to Brent
oil price of $5.17/bbl. Previously, discount was $6.48/bbl for
the first 22,680 monthly delivered barrels, and $5.44/bbl
thereaer, plus associated taxes calculated as 5% of the
net price aer applying the contractual discount which no
longer apply under the renewed sales agreement.
Tartaruga Field crude oil
Crude oil from the Tartaruga field is entirely sold to
Petrobras. Eective 1 July 2021, crude oil sales to Petrobras
from the Tartaruga field are sold at a discount to Brent oil
price of $3.40/bbl.
Illinois Basin
Crude oil from the Illinois Basin is sold to a refinery at the
benchmark monthly average WTI price minus a discount
of approximately $3/bbl.
More revenue information is detailed in Note 4 to the
Consolidated Financial Statements.
Royalties
(TUSD, unless otherwise noted) 2021 2020
Royalties 9,384 5,829
Per unit ($/BOE) 7.78 4.96
Royalties as a % of revenue 13.7% 14.9%
Royalties are settled in cash and based on realized prices
before discounts. Royalty expense increased by 61% for
the full year 2021 as compared to the same period in 2020.
This increase in royalty expense is consistent with higher
revenue for the same period. Eective royalty rate for the
full year 2021 was lower than the comparative periods of
2020 due to lower sales from the Tartaruga field which
has a higher royalty rate as compared to the other fields.
ANP Resolution 853/2021 – Reduction of Royalties Rate for
Small and Medium-sized Companies
The National Agency of Petroleum, Natural Gas and
Biofuels in Brazil (“ANP”) published a resolution allowing
for the reduction of the royalty rates on fields operated by
small or medium-sized companies which became eective
on 1 November 2021. The royalty reduction shall be applied
for by the operator and for each producing field.
In early November, Maha applied for the royalty rate
reduction for its producing fields in Brazil. On 28 December
2021 ANP issued a resolution approving Maha’s request
of reduction of royalties. The reduced royalty rate
became eective February 2022. The new royalties will
remain eective for the remaining term of the respective
Concession Agreements as long as Maha is considered
a medium sized company. Since Maha is considered a
medium sized company (average annual global production
of less than 10,000 BOEPD) the government royalty rate
has been reduced to 7.5% from 10% currently.
Had the new royalty rate been enacted at the beginning
of the fiscal year, Maha would have paid approximately
USD 1.4 million less in total royalty expense during 2021.
Production expenses
(TUSD, unless otherwise noted) 2021 2020
Production costs 11,196 7,536
Transportation costs 1,666 2,130
Total Production expenses 12,862 9,666
Per unit ($/BOE) 10.66 8.23
Production expenses were higher by 33% for 2021 and
amounted to TUSD 12,862 (2020: 9,666) as compared to
the same period in 2020.
Operating costs are higher for 2021 as compared to 2020
due to the following main reasons: first, the Tie field had
additional costs for multiple slickline operations; second,
repairs, spares and maintenance costs of certain producing
wells were higher due to a focus on maintenance work to
improve uptime during the year; and third, the Company’s
consumption of electricity also continued to be higher than
prior period due to more wells being placed on artificial li.
Maha’s production is trucked to the delivery points
therefore transportation costs are directly correlated to
the sales volumes. Transportation costs for the year were
lower than the comparative period mainly due to lower
Tartaruga block sales during 2021 which carry higher
transportation costs.
On a per BOE (or unit) basis, production expenses were
USD 10.66 per BOE (USD 8.23 per BOE), an increase by
30% against the comparative year due to the reasons
stated above.
Operating Netback
(TUSD, unless otherwise noted) 2021 2020
Operating Netback 46,060 23,523
Netback ($/BOE) 38.18 20.03
Operating netback is calculated as revenue less royalties
and production expenses and is a metric used in the oil and
gas industry to compare performance internally and with
industry peers. Operating netback for 2021 was 96% higher
than the comparative period mainly from significantly
higher oil realized prices during the year. This was partially
oset by higher production and royalty costs during 2021.
Oil prices were significantly lower during 2020 due to the
eects of the COVID-19 pandemic.
Depletion, depreciation and amortization (“DD&A”)
(TUSD, unless otherwise noted) 2021 2020
DD&A expense 8,535 5,624
DD&A expense ($/BOE) 7.08 4.79
The depletion rate is calculated on proved and probable
oil and natural gas reserves, taking into account the future
development costs to produce the reserves. Depletion
expense is computed on a unit-of-production basis. The
depletion rate will fluctuate on each re-measurement
period based on the amount and type of capital spending
and the number of reserves added.
DD&A expense increased by 52% for 2021 and amounted
to TUSD 8,535 (at an average rate of USD $7.08 per BOE) as
compared to TUSD 5,624 (at an average rate of USD $4.79
per BOE). Depletion expense and depletion rate on a per
BOE basis increased because of the higher depletable base
for Brazil which was impacted by the increase in the future
development capital costs at year-end 2021 and reduction
in the year-end 2021 Brazil reserves. Illinois Basin DD&A
expense was relatively similar to the comparable period.
Impairment of Exploration and Evaluation
assets (E&E assets)
As at 31 December 2021, the Company assessed for
impairment indicators and noted that there were
impairment indicators for the Brazil properties. As a
result, impairment test was performed which resulted in
no impairment.
As at 31 December 2020, the Company assessed the
decrease in forecasted prices as an indicator of impairment.
As a result, an impairment test was performed and the
carrying value of the LAK Ranch was written down to the
estimated recoverable amount, resulting in a non-cash
impairment charge of $21.0 million.
General and Administration expenses (“G&A”)
(TUSD, unless otherwise noted) 2021 2020
G&A 5,517 5,939
G&A ($/BOE) 4.57 5.06
G&A amounts are presented net of certain costs allocated
to production expenses. G&A expenses for 2021 amount
to TUSD 5,517 (USD 4.57 per BOE) which is lower by 7%
from the comparative year of TUSD 5,939 (USD 5.06 per
BOE) mainly due to 2020 having additional costs related
to the Nasdaq main market listing fees, costs associated
to refinancing eorts and related legal costs.
On a per BOE basis, G&A expenses were 10% lower than the
1
Includes LAK Ranch delivered oil of 2,473 BBLs in 2021 and
9,124BBLs in 2020.
2
BOE is Barrels of Oil Equivalent and takes into account gas
delivered and sold. 1 BBL = 6,000 SCF of gas.
3
Reference price is as per U.S. Energy Information
Administration website.
35
36
MAHA ENERGY 2021 ANNUAL REPORT
comparative periods mainly due to lower G&A expenses
by 7%.
Additionally, the Company applied for the Canada
Emergency Wage Subsidy (“CEWS”) program during the
current year and qualified for TUSD 41 (2020: TUSD 157).
This subsidy has been recorded as a reduction to the
eligible remuneration expense incurred by the Company
during this period.
Exploration and business development costs
Exploration and business development costs amounted
to TUSD 6 for 2021 as compared to TUSD 208 for the
comparative period. Exploration and business development
costs are related to costs incurred for the maintenance of
the exploration blocks in Brazil and Maha’s pre-exploration
study and evaluation work of new areas or new ventures,
including business development eorts.
Foreign currency exchange gain or loss
The net foreign currency exchange gain for 2021
amounted to TUSD 30 gain (2020: TUSD 245 loss). Foreign
exchange movements occur on settlement of transactions
denominated in foreign currencies. As of July 1, 2021,
Maha Energy AB (“the Parent Company”) changed its
functional currency from Swedish Krona to US Dollars
to better reflect the Company’s business activities. This
change eliminates the translation of the Parent Company
to US Dollars for the presentation purposes. The change
in functional currency was accounted for prospectively
from 1 July 2021. In accordance with the Swedish Annual
Accounts Act (1995:1554), the presentation currency of the
Parent Company’s financial statements is Swedish Krona.
Other income
Other income for 2021 amounted to TUSD 2,443 (2020:
1,066). During the year, the Company recognized other
income of TUSD 2,443 related to tax credits sold in Brazil
known as Imposto sobre Circulação de Mercadorias e
Serviços (“ICMS”). ICMS is a tax on the circulation of goods
and transportation and communication services, a state
sales tax. These tax credits can be applied to importation
related duties of the Company or can be sold to external
parties for their utilization.
Other gains
Other gains for 2021 amount to TUSD 5,164 (2020: nil) due
to provisions reversals and adjustments. During the fourth
quarter, the Company reversed a minimum work penalty
provision on its Block 224 in Brazil, as the Company was
granted a full waiver on the related outstanding work
commitment on the block. In addition, the Company
reversed the long-term provisions for the minimum work
commitments penalties of the Blocks 117 and 118 in Brazil,
as the Company was granted extensions until November
2024 on these blocks and these contracts are no longer
considered onerous contracts. The Company also adjusted
labor and contractor claims related provisions as per the
updated assessments.
Net finance costs
Net finance costs for 2021 amount to TUSD 9,963 (2020:
TUSD 4,982) and are detailed in Note 6. Net finance costs
are higher for the current period as compared to the
comparative period mainly due to the additional interest
expense from the higher loan amount, amortization of
deferred financing fees in connection with the new bank
debt (See Note 15) and certain transactions costs of TUSD
505 related to the financing activities but not directly
attributable to the bank debt. Net finance costs for 2021
also includes foreign exchange loss of TUSD 784 due to
the Parent Company’s increased exposure to US dollars
fluctuation resulting from the US dollars debt financing
in the Parent Company, which had Swedish Krona as
the functional currency until 30 June 2021. During the
second quarter, Swedish Krona weakened in comparison
to US dollar from the time the funds were received by the
Company to the end of the quarter resulting in unrealized
foreign exchange loss.
Income Taxes
Current tax expense is higher by 109% and amounted
to TUSD 2,311 for 2021 as compared to TUSD 1,106 for
the comparative period. Higher taxable income in Brazil
resulting from higher oil and gas prices realized during the
year was oset by higher credits relating to tax incentives
at year-end. Taxation of corporate profits in Brazil is a
combined 34% rate (25% corporate income tax and 9%
Social contribution); however, Maha Energy Brazil Ltda.
has secured certain tax incentives (SUDENE) in both of
its fields until fiscal year 2029 allowing for the reduction
of 75% of the corporate income tax from 25% to 6.25%,
bringing the combined tax rate to 15.25%.
Deferred tax expense for 2021 amounted to TUSD 5,359 as
compared to deferred tax recovery of TUSD 4,594 for the
comparative period. For 2020, the Company determined
that, based on Brazil operating segment results and reserve
engineer forecasts, it is probable that it will be able to
recover previously unrecorded tax assets associated with
the Tie Field and recorded a deferred tax recovery. The
deferred tax asset was recognized in respect of certain tax-
deductible temporary dierences and estimated tax loss
carry-forwards. No deferred tax assets were recognized
in any other jurisdiction. See Note 7 for further details.
The Company operates in various countries and fiscal
regimes where corporate income tax rates are dierent
from those in Sweden. Corporate income tax rates for the
Company can vary between 15 and 28 percent however the
majority of it relates to Brazil where the resulting income
tax rate for Maha, following approved incentives, is 15.25%.
The eective tax rate for the reporting period is aected
by several items which do not receive a full tax credit.
Brazil tax reform:
On 1 September 2021, Brazil’s House of Deputies approved
Bill 2,337 as the comprehensive reform to the Brazilian tax
system. If enacted, the bill would reduce the corporate
income tax rate, from a combined 34% to 27% (may be
reduced further to 26%, subject to certain budgetary
targets being met). It would require corporate income
taxes to be calculated and paid on a quarterly basis, rather
than an annual basis, would establish a 15% withholding
tax rate on dividends (currently, zero), eliminate the
interest on net equity (i.e., similar to a dividend payment
that is deductible in Brazil), require taxpayers to carry out
capital reductions at fair market value (currently allowed
at book value), and strengthen the rules on disguised
distributions of profits, which would require domestic
transactions between related parties to be at arm’s length
(additional compliance requirements).
The legislative process usually takes time in Brazil, and
the current wording of the bill may still be amended in the
next steps of this process. This bill was sent to the Federal
Senate, where it has remained and therefore, it is dicult
to predict the approval of this bill during 2022.
Exchange dierences on translation of foreign
operations
The exchange differences on translation of foreign
operations presented in Statement of Comprehensive
Earnings amounted to loss of TUSD 5,914 for 2021 mainly
due to US Dollars exchange rate strengthening against
Brazilian Reals during the year. The functional currency of
Company’s subsidiary in Brazil is Brazilian Reals; however,
for the presentation purpose all assets and liabilities
are translated at the period end exchange rate and the
Statement of Operations is translated at the average
exchange rate of the period. The 31 December 2021 USD/
BRL exchange rate increased by 7% as compared to 31
December 2020 exchange rate.
Balance sheet
Non-current assets
Property, plant and equipment amounted to TUSD 117,411
(2020: TUSD 91,045) and are detailed in Note 8. Exploration
and evaluation expenditure amounted to TUSD 13,660
(2020: TUSD 11,014) and are detailed in Note 9.
Total expenditures incurred during the year were as follows:
2021 (TUSD) Brazil USA Oman Total
Development 32,164 8,821 – 40,985
Exploration
and
evaluation
– 760 1,886 2,646
32,164 9,581 1,886 43,631
2020 (TUSD) Brazil USA Oman Total
Acquisition – 4,538 10,350 14,888
Development 25,562 1,508 – 27,070
Exploration
and
evaluation
– 448 – 448
25,562 6,494 10,350 42,406
The 2021 development expenditures in Brazil mainly
related to drilling of the Tie-4 and Tie-3 wells, and
upgrade of Tie and Tartaruga facilities. The Tie-3 well was
completed and tested during the second quarter of 2021.
A remediation workover to remove drilling damage was
completed successfully and the well has been converted to
a jet pump artificial li well to further increase drawdown
and rate. Maha spudded Tie-4 in July 2021 with a planned
Electric Submersible Pump (ESP) artificial li system. The
Tie-4 well was originally designed as a horizontal well
in the Agua Grande reservoir, but was reconfigured at
the end of 2021 as a vertical comingled dual zone oil
producer aer encountering severe drilling problems.
On 20 January 2022, the Tie-4 well was tied into the
permanent production facilities at Tie and underwent a
24 hour pump test using the ESP.
In the Tartaruga field, during the third quarter the 7-TTG-
1D-SES (TTG1) well developed a leak in the completion
necessitating a workover to repair the leak. A rig was
mobilized during October and the well was worked over and
restored to production during the fourth quarter of 2021.
The Tie Production Facility has been upgraded to
handle up to 5 000 BOPD along with associated gas
and water production. The gas re-injection capability
has been decoupled oil production from the associated
gas production and allows for continuous oil production
irrespective of gas delivery constraints.
In the Illinois Basin, Maha completed the twelve well
drilling and stimulation program along with ramping of
oil production commencing as wells came onstream.
Initial production rates varied between 50 - 75 BOPD for
each stimulated well. Current production was curtailed in
certain areas where stimulations were being carried out
to optimise results. The Company is currently producing
oil from a total of 34 wells in the area.
On 5 October 2020 the Company entered into an Exploration
and Production Sharing Agreement (“EPSA”) with the
government of the Sultanate of Oman, for Block 70, an
onshore block in Oman. The EPSA was subsequently ratified
by Royal Decree of His Majesty the Sultan of Oman on 28
October 2020 and Maha became the operator of the block,
holding a 100% working interest. Initial consideration for
Block 70 was USD 10 million along with USD 0.3 million in
certain annual payment obligations. During 2021, progress
was made towards obtaining necessary approvals and the
purchasing of long lead equipment to allow for drilling
activities to commence during the first half of 2022. The
increased rate of new Covid-19 infections in Oman during
the first half of 2021 led to tighter Covid-19 restrictions,
including curfews and suspension of entry into the country
for non-Omanis, therefore delaying some of the planned
activities during the year.
The LAK Ranch heavy oil asset was shut in at the beginning
of the 2020 Covid-19 Pandemic and remained shut in
during 2021. The Company was not focused on the LAK
Ranch during the year.
In 2020, Maha recognized a deferred tax asset of TUSD
4,594, increasing the deferred tax asset to 9,978 as detailed
in Note 7. The Company determined that based on Brazil
operating segment results and reserve engineer forecasts
there was a reasonable certainty that it will be able to
recover previously unrecorded tax assets, associated with
the Tie Field. The deferred tax asset has been recognized
in respect of certain tax deductible temporary dierences
and estimated tax loss carry-forwards. During 2021,
deferred tax expense was recognized as Brazil realized high
taxable income resulting from improved oil commodity
prices and corresponding deferred tax asset was reduced
to TUSD 3,583.
37
38
MAHA ENERGY 2021 ANNUAL REPORT
Other long term assets amounted to TUSD 491 (2020: TUSD
432) mainly relates to performance bonds and long term
crude inventory in Brazil. Performance bonds represents
the Company’s financial guarantee to operate the lease
in LAK Ranch area and Illinois Basin.
Current assets
Prepaid expenses and deposits amounted to TUSD 1,239
(2020: TUSD 1,434) and represented mainly prepaid
operational and insurance expenditures. 2021 prepaid
expenses decreased as advances relating to certain capital
projects were utilized.
Crude oil inventories amounted to TUSD 247 (2020:
TUSD 347) from oil inventory in Brazil. Inventory amount
decreased compared to last year mainly due to lower year-
end inventory buildup at the Tartaruga field. Tartaruga’s
inventory is sold once it is loaded on the shipping vessels.
Accounts receivables amounted to TUSD 5,948 (2020:
TUSD 3,092) and are detailed in Note 10. Trade receivables,
which are all current, amounted to TUSD 2,658 (2020: TUSD
1,600) and included invoiced oil and gas sales.
Cash and cash equivalents amounted to TUSD 25,535 (2020:
TUSD 6,681) as the Company was able to secure funds with
a new financing (see Note 15 for details). The proceeds
were used to redeem the SEK 300 million bonds payable
and remaining funds are being used to finance the ongoing
capital projects of the Company. Cash balances are held
to service debt payments and meet ongoing operational
funding requirements, if needed.
Non-current liabilities
On 30 March 2021, the Company entered into a loan
agreement (the “Term Loan”) and equity financing
subscription with Brazilian Investment Bank BTG Pactual
S.A. for total proceeds of USD 70 million before customary
fees and expenses. The proceeds were used to redeem
the SEK 300 million bonds payable during the second
quarter. As at 31 December 2021, balance for the bank debt
amounted to TSUD 44,234 and the short term portion of
the debt amounted to TUSD 11,250 which was classified
as current liability. See Note 15 for further details.
The decommissioning provision amounted to TUSD 2,264
(2020: TUSD 2,597) and relates to future site restoration
obligations as detailed in Note 16. During the year
additional provision was setup for the new wells drilled
in the Illinois Basin and the new wells drilled in Brazil which
was more than oset by significant revisions of certain
assumptions at year-end.
The lease commitments amounted to TUSD 2,385 (2020:
3,450) and related to the long-term portion of the lease
commitments. During 2020 the Company entered into a
5-year lease agreement to lease 2 HP Ariel Compressors
units which increased the lease liability for the year. The
Company entered into no new leases during the current
year. The short-term portion of the lease commitments
was classified as current liability.
Other long-term liabilities and provisions amounted to
TUSD 651 (2020: TUSD 4,825) and are detailed in Note 18.
The Company reversed the long-term provisions for the
minimum work commitments penalties of the Blocks 117
and 118 in Brazil, as the Company was granted extensions
until November 2024 on these blocks and these contracts
are no longer considered onerous contracts. The Company
also adjusted labor and contractor claims related provisions
as per the updated assessments.
Current liabilities
The Bonds payable amounted to nil (2020: TUSD 36,022)
and are detailed in Note 14. The Company redeemed all
outstanding bonds during the second quarter of 2021 from
the proceeds of the Term Loan. Current portion of the bank
debt amounted to TUSD 11,250 (2020: nil).
Accounts payables amounted to TUSD 9,644 (2020: TUSD
10,731) and accrued liabilities amounted to TUSD 5,189
(2020: TUSD 9,599) and are detailed in Note 19. Accounts
payable and accrued liabilities were higher in 2020 due
to higher capital activity at year-end relating to Tie-2
and Tie-3 drilling and workover activities whereas 2021
year-end had capital activity mainly relating to Tie-4. In
addition, the Company reversed current provision relating
to the minimum work commitment penalty for the Block
224 in Brazil as the Company was granted a full waiver
on the related outstanding work commitment, whereas,
in 2020 this liability was still outstanding. Current portion
of the lease commitment amounted to TUSD 1,072 (2020:
TUSD 1,243).
Share data
Shares outstanding
Class 31 December 2021 31 December 2020
A 119,715,696 101,146,685
B – 483,366
Total 119,715,696 101,630,051
During 2021, a total of 10,134,916 bond warrants were
exercised at a strike price of SEK 7.45 prior to their
expiration on 30 June 2021 and the same number of new
class A shares were issued. The remainder of the bond
warrants are now expired. The total proceeds from this
transaction were SEK 75.5 million (approximately USD
9.0 million) before issuance costs. In addition, 300,000
incentive warrants were converted to class A shares during
the year and all outstanding class B shares (483,366) were
converted to Class A shares.
As part of the Term Loan financing during the second
quarter of 2021, Maha also received an equity contribution
of USD 10 million through a private placement issuance
of 7,470,491 new class A shares to Brazilian Investment
Bank BTG Pactual S.A., at a price of SEK 11.59 per share
(See Note 15 for further details).
Cash flow
Cash flow from operating activities amounted to TUSD
31,005 (2020: TUSD 18,984), an increase of 63% from
prior year mainly due to higher net back resulting from
higher realized prices. Cash flow from investing activities
amounted to TUSD -46,995 (2020: TUSD -33,580) mainly
due to cash capital expenditure in Brazil on the Tie-3 and
Tie-4 wells and Oman Block 70 exploration and evaluation
assets. Cash flow from financing activities amounted to
TUSD 35,949 (2020: TUSD 492) mainly from the proceeds
of BTG Term Loan of USD 54.9 million (net of financing
fees), shares subscription of USD $9.0 million (net of share
issuance costs) and USD 9.2 million from the exercise
of bond and incentive warrants. Cash was used for the
repayment of Maha’s SEK bond of approximately USD 36.0
million (including accrued interest) and lease payments
during the year.
Liquidity and capital resources
The Company manages its capital structure to support the
Company’s strategic growth. The Company’s objectives
when managing its capital structure are to maintain
financial flexibility, preserve access to capital markets,
ensure its ability to finance internally generated growth
and to fund potential acquisitions while maintaining the
ability to meet the Company’s financial obligations as they
come due. The Company considers its capital structure
to include shareholders’ equity of USD $91.4 million (31
December 2020: USD $55.6 million) plus net debt of USD
$29.9 million (31 December 2020: USD $29.3 million). At
31 December 2021, the Company’s working capital surplus
was USD $5.8 million (31 December 2020: Deficit of USD
$10.0 million), which includes USD $25.5 million of cash
(31 December 2020: USD $6.7 million).
The Company may adjust its capital structure by issuing
new equity or debt and adjusting its capital expenditure
program, within its contracted work commitments. To
facilitate the management of its capital requirements,
the Company prepares annual expenditure budgets that
are monitored and updated as necessary depending on
various factors, including capital deployment plans and
general market and industry conditions. The annual budget
and subsequent revisions are approved by the Board of
Directors.
The Company secured financing during the year via the
Term Loan and equity financing subscription with Brazilian
Investment Bank BTG Pactual S.A. for total proceeds of USD
70 million. The proceeds were used to redeem the SEK 300
million bond during the second quarter. The remaining
funds are being used to finance capital expenditures
across Maha’s portfolio and general corporate purposes.
The Company’s bond holders also exercised the bond
warrants during the year, prior to warrants expiration,
which provided additional approximately USD 9.0 million
cash for the Company. The Company does not have any
externally imposed material capital requirements to which
it is subject except for the loan covenants (See Note 15).
Legal matters
The Company has several disclosed legal matters
concerning labor, regulatory and operations. All of
these are considered routine and consistent with doing
business in Brazil. Provisions for lawsuits are estimated in
consultation with the Company’s Brazilian legal counsel
and have been recorded under Other long-term liabilities
and provisions.
Health, Safety and the Environmental (“HSE”)
Maha considers that oil and gas developments can
and must be undertaken in a manner that is safe for
employees, contractors, stakeholders, neighbors, and
the environment. At Maha, HSE is a key component of its
management systems. Maha Energy strives to provide
a safe and healthy work environment for all employees,
contractors and suppliers. This means the safety of life,
limb, environment and property always comes first – in
that order. The Company actively monitors all operational
sites and proactively encourages everyone to be mindful
of all the Company’s HSE Values. This is achieved through
education, enforcement and reporting. Everyone working
or visiting our sites have the right to stop work at any
time to prevent potential HSE incidents occurring. Maha’s
HSE Values set the tone for how employees, contractors,
stakeholders and the environment are approached.
Considering the ongoing COVID-19 pandemic Maha has
continued to evolve its management practices to ensure
the health and safety of our workers and contractors.
Where possible Maha has temporarily scaled back
headcount, implemented work from home policies,
implemented practices to monitor and control access to
our operation sites via typical COVID monitoring protocols
and continue to, at a very minimum, comply with local
country legislations. To date Maha has been able to operate
all our facilities throughout the pandemic and believe that
it will continue to do so going forward.
Environment, Social, and Governance (ESG)
Through responsible operations and strategic planning,
Maha seeks to create long-term value for all of its
stakeholders. Thereby, Maha conducts its operations in a
manner respects its workforce, neighboring communities,
and the environment. Part of contributing to society and
being a good global citizen must entail doing ‘what is right’,
in addition to adhering to laws and regulations.
Environment
As part of the business culture, Maha implements the
philosophy of being proactive rather than reactive in its
environmental management. By preventing costly and
impactful scope changes in development plans, Maha
can anticipate and identify potential risks and reduce, if
not eliminate, potential environmental and social impacts
prior to them possibly happening. Proactive management
can also address potential irreversible impacts and allow
for decisions to be made on strategy and management,
rather than responding out of necessity to a situation. Part
of the proactive environmental management strategy is
to maximize the use of all resources and reduce waste
wherever economically possible. For example, Maha
recycles or reinjects produced water at the facilities, which
not only reduces having to find water from another source,
but also reduces wastewater treatment requirements. In
Brazil, Maha is reducing the release of natural gas by using
the waste gas from oil production to generate electricity.
Social
Maha values the relationship with its employees,
community members, and other stakeholders. Therefore,
eorts are made to engage with its employees and local
communities in a transparent and respectful manner.
Additionally, Maha seeks to ensure local communities
benefit from its operations, both directly and indirectly.
Direct hiring and encouraging subcontractors to hire local
39
40
MAHA ENERGY 2021 ANNUAL REPORT
suppliers wherever possible is a way for Maha to contribute
to the local communities and economy. Maha has also
connected with Local Community Associations to maintain
an open and transparent dialogue with the communities
near its operations.
Governance
Maha has a zero-discrimination tolerance and is committed
to promote equal opportunities for employees. Additionally,
personal and business ethics are taken seriously at Maha
and underlie all the regulations in Corporate Governance.
Part of Maha’s Corporate Governance is that Maha does
not tolerate any form of corrupt practices and has in place
Corporate Governance Policies that clearly define how
business must be conducted. The best way to prevent
corruption is through transparency - one of our core
values. The Company has established a Code of Business
Conduct and Anti-Corruption policies for all its employees,
contractors, and workers to adhere to. All of Maha’s
Corporate Governance policies, procedures and guidelines
are readily available to employees.
Sustainability Report
For more ESG information, the Company has issued its
2021 Sustainability Report, which is separate from the
Administration Report. The Sustainability Report is
available on the Company’s website.
Related Party Transactions
The Company did not enter into any material transactions
with related parties in 2021 and 2020. See Note 27 for
details.
Parent Company
Business activities for Maha Energy AB focuses on a)
management and stewardship of all Group affiliates,
subsidiaries and foreign operations; b) management of
publicly listed Swedish entity; c) fundraising as required for
acquisitions and Group business growth; and d) business
development. The Parent Company has two employees.
The net result for the Parent Company for 2021 amounted
to TSEK -126,461 (2020: TSEK -258,342) which is better
than the comparative period mainly due to lower
impairment amount of loans and investment in a subsidiary
of TSEK 69,304 (2020: TSEK 202,748), lower general and
administrative expenses of TSEK 9,365 (2020: TSEK
13,360), and unrealized foreign currency exchange gain
of TSEK 32,069 (2020: TSEK 22,906 loss). This was oset
by higher net finance costs of TSEK 79,861 (2020: TSEK
24,828) resulting from higher interest expense on the Term
loan and higher foreign exchange loss resulting from the
exposure to US dollars debt financing. Included in the net
finance costs is TSEK 32,134 of interest income from the
loans to subsidiaries.
Proposed Distribution of Earnings
The Board of Directors proposes no dividends to be paid
for the year. Furthermore, the board of Directors proposes
that the unrestricted equity of the Parent Company of SEK
222,501,540 including the net result for the year of SEK
(126,461,609) be brought forward as follows:
SEK
Dividend –
Carried forward 222,501,540
Total (SEK) 222,501,540
Risk Management
The Company is engaged in the exploration, development
and production of oil and gas and its operations are
subject to various risks and uncertainties which include
but are not limited to those listed below. The risks and
uncertainties below are not the only ones that the Group
faces. Additional risks and uncertainties not presently
known to the Company or that the Company currently
considers immaterial may also impair the business and
operations of the Company and cause the price of the
Mahas’ shares to decline.
A detailed analysis of Maha’s financial risks and mitigation
of those risks through risk management are detailed in
Note 22.
COVID-19 Pandemic
The Covid-19 virus and the restrictions and disruptions
related to it have had a drastic adverse eect on the world
demand for, and prices of, oil and gas as well as the market
price of the shares of oil and gas companies generally,
including the Maha’s common shares. There can be no
assurance that these adverse eects will not continue or
that commodity prices will not decrease or remain volatile
in the future. These factors are beyond the control of
the Company and it is dicult to assess how these, and
other factors, will continue to aect the Company and its
common shares. As at the date of this Annual Report, the
Company continues to review and assess its business plans
and assumptions regarding the business environment, as
well as its estimates of future production, cashflows and
capital expenditures.
The current and any future COVID-19 outbreaks may
increase the Company’s exposure to, and magnitude of,
each of the risks and uncertainties identified. Even aer
the COVID-19 outbreaks have subsided, the Company
may continue to experience materially adverse impacts
to the business because of the global economic impact.
The Company will continue to monitor this situation and
will work to adapting its business to further developments
as determined necessary or appropriate.
Non financial risks
Volatility in oil and gas commodity prices
Prices for oil and natural gas are subject to large fluctuations
with a variety of factors. These factors include, but are not
limited to: the economic conditions in the United States,
Brazil, Canada, the Sultanate of Oman, Europe and other
key markets; governmental regulation; political stability
in the Middle East, Northern Africa and elsewhere; risks
of supply disruption; natural disasters; terrorist attacks;
the availability of alternative fuel sources; and the actions
of the Organization of Petroleum Exporting Countries
(“OPEC”) and other major oil producing countries aecting
the global output of oil and natural gas. In addition,
geopolitical and regional tensions such as ongoing military
conflict between Ukraine and Russia can have a material
impact on the volatility in oil and gas prices. In recent years
OPEC and associated countries have, from time to time,
agreed to voluntary production limitations, and Oman
has in the past participated in such agreements. If Oman
agrees to voluntary production limitations this may have
an adverse eect on the Company’s future oil and gas
production and sales from Oman. Prices for oil and natural
gas are also subject to the availability of foreign markets
and the Company’s ability to access such markets. Because
of lower prices or an increase in production costs, the
economics of producing from some wells may change,
which could result in reduced production of oil or natural
gas and/or a reduction in the economic volumes of the
Company’s reserves.
All the factors listed above could result in a material
decrease in the Company’s expected net production
revenue and a decline in its oil and natural gas acquisition,
development and exploration activities. Any substantial
and/or extended decline in the price of oil and natural gas
would have an adverse eect on the Company’s revenues,
profitability and cash flows from operations and could
also aect the Company’s ability to obtain equity or debt
financing on acceptable terms. In addition, volatile oil and
natural gas prices make it dicult to estimate the value
of producing properties for acquisitions and oen cause
disruption in the market for oil and natural gas producing
properties.
Concentrated production in a small number of fields in
two jurisdictions
The Company’s current production of oil and gas is
currently concentrated in two oil producing fields in
Brazil and two oil producing fields in the United States
(however pre-commercial production from the LAK
Ranch has temporarily been suspended). As a result of
these concentrations, the Company is disproportionately
exposed to the eect of regional supply and demand
factors, delays or interruptions of production from wells
in these areas caused by governmental regulation,
availability of equipment, equipment failure, interruptions
of facilities, personnel or services market limitations,
weather events, or interruption of the processing or
transportation of oil. Additionally, the Company may be
exposed to risks, such as changes in field-wide rules and
regulations that could cause the Company to permanently
or temporarily close the wells within these fields. These
risks may, if materialized, adversely aect the Company’s
ability to conduct its operations in one or several of these
fields, which could have a material adverse eect on the
Company’s results and financial position.
Exploration, development and production risks
Exploration for and development of oil and gas involves
many risks, such as risks associated with expenditures
made on future exploration by the Company which may
not always result in discoveries of oil in commercial
quantities, or commercial quantities of oil may not at all
be discovered by the Company. The Company currently
has six concession agreements in Brazil in the exploration
phase (RECT-T 155, REC-T 129, REC-T 142, REC-T 224, REC-T
117, and REC-T 118), and one in the Sultanate of Oman
(Block 70). It is dicult to project the costs of implementing
an exploratory drilling program due to the uncertainties
associated with drilling in unknown formations. The costs
are associated with various drilling conditions, such as over
pressured zones and equipment that might get lost in the
hole, and changes in drilling plans and locations as a result
of prior exploratory wells or new interpretations of seismic
data. Future oil exploration may involve unprofitable
eorts, not only from dry wells, but from wells that are
productive but do not produce sucient net revenues to
return a profit aer drilling, operating and other costs.
Completion of a well does not necessarily assure a profit
on the investment or recovery of drilling, completion and
operating costs.
Risks related to gathering and processing facilities and
general infrastructure
The Company is dependent on available and functioning
infrastructure relating to the properties on which it
operates, such as roads, power and water supplies, and
gathering systems for oil and gas. Depending on the area
in which the Company operates, certain infrastructure and
services commonly associated with petroleum operations
may not be readily available. With respect to the Company’s
operations in Brazil, certain oil and gas services that would
commonly be readily available to an operator may need to
be brought from a considerable distance within Brazil and
potentially another country. The Company’s business in
Brazil is further highly dependent on road transportation
and truck drivers with respect to transportation of the
production output which may subject the delivery of the
production to road conditions and drivers´ strikes. If any
infrastructure or systems failures occur or do not meet
the requirements of the Company, this could result in
delayed, postponed or cancelled petroleum operations,
lower production and sales and/or higher costs, and result
in the Company’s inability to realize the full economic
potential of its production or in a reduction of the price
oered for the Company’s production.
Dependency on counterparties
The Company is dependent on a few important
counterparties, where the agreements in Brazil with
Petrobras and Dax Oil Refino S.A. (“Dax”) regarding oil
otake, and the agreements with GTW Geração e Serviços
Ltda. (“GTW”) and CDGN Logistica S.A. (“CDGN”) regarding
41
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MAHA ENERGY 2021 ANNUAL REPORT
gas sales, are the most material. These counterparties
represent 92 per cent of the Company’s total revenue value
from customers. Currently there are no viable options to
these counterparties in the short-term, and a loss of any of
these material counterparties is expected to be particularly
costly and time-consuming and would also lead to a certain
period of adjustment to such new circumstances. There is
further a risk that these counterparties will change their
terms or increase their prices (discounts) which would
result in weakened margins for the Company. There
is also a risk that these counterparties will encounter
diculties in providing services due to a shortage of raw
materials, strikes, damage, financial diculties or other
circumstances that aect the counterparty. If the risks
would materialize, this may adversely aect the Company’s
possibility to deliver products to end customers, and lead
to increased costs as well as delays and/ or non-delivery,
which could have an adverse impact on the Company’s
operations and, indirectly, on the Company’s net sales.
Environmental and climate-related risks
All phases of the oil and natural gas business present
environmental risks and hazards and are subject to
environmental regulation pursuant to a variety of laws
and regulations in the dierent jurisdictions where the
Company operates. Environmental legislation provides for,
among other things, restrictions and prohibitions on spills,
releases or emissions of various substances produced
in association with oil and natural gas operations. The
legislation also requires that wells and facility sites be
operated, maintained, abandoned, decommissioned and
reclaimed in a certain way to satisfy applicable regulatory
authorities. Environmental regulations are expected
to become more stringent in the future, and costs are
expected to increase. Failure to comply with any such
environmental regulations or any undertakings imposed
on the Company might entail civil, administrative and
criminal sanctions.
The Company’s operations are located in regions where
there are numerous environmental regulations including
restrictions on where and when oil and gas operations
may occur, regulations on the release of substances
into groundwater, atmosphere and surface land and
the location of production facilities. There is currently a
federal conservation area, created to protect sea turtle
nesting areas, close to the Company’s Tartaruga field
operations. Because of this reserve, there is a possibility
for a drilling ban from September to April, which may
limit the Company’s exploitation opportunities. The
geographical boundaries of such conservation unit as
well as the activities to be allowed therein are currently
being questioned through a Public Civil Action filed by
the Federal District Attorney´s Oce. The Company is
not a party to the proceedings but its result might aect
and restrict the Company´s Tartaruga field operations.
In addition, there is a risk that other areas the Company
operates in may be subject to similar regulations in the
future which would restrict the ability for the Company
to conduct its operations.
The Company faces the evolving worldwide energy
transition risks as demand for energy and global
advancement of alternative sources of energy that are not
sourced from fossil fuels could change assumptions used
to determine the recoverable amount of the Company’s
PP&E and E&E assets and could aect the carrying value
of those assets, may aect future development or viability
of exploration prospects, may curtail the expected useful
lives of oil and gas assets thereby accelerating depreciation
charges and may accelerate decommissioning obligations
increasing the present value of the associated provisions.
Changes in environmental legislation can result in
a curtailment of production, and require significant
expenditures, e.g. regarding production, development
and exploration activities. In addition, a breach of
applicable environmental regulation or legislation may
result in liabilities such as the recovery of the damages,
the imposition of fines and penalties, some of which may
be material, and/or restrictions or cessation of operations.
The legislative framework in the jurisdictions where the
Company operates regarding the environment features
items such as strict liability and joint, and several liability
with regard to joint venture operations.
The energy transition could impact the future prices
of commodities. Pricing assumptions used in the
determination of recoverable amounts incorporate
markets expectations and the evolving worldwide demand
for energy. Changes to assumptions could result in a
material adjustment to the carrying amount of assets
and liabilities within the next financial year.
Decommissioning
The Company has assumed certain obligations in respect of
the decommissioning of its fields and related infrastructure
in all operating areas of the Company. In some cases,
these liabilities are derived from legislative and regulatory
requirements, and in other cases, these liabilities can also
be contractual obligations. In Brazil, such requirements
are still under discussion and waiting for approval by
the ANP, concerning the decommissioning of wells and
production facilities and require the Company to make
provision for and/or underwrite the liabilities relating to
such decommissioning. The Company’s accounts make a
provision for such decommissioning costs based on the
management’s estimate in accordance with applicable
accounting standards but there is a risk that the actual costs
of decommissioning exceed the amount of the long-term
provision set aside to cover such decommissioning costs.
The Company’s decommissioning provision amounted to
TUSD 2,597 as per 31 December 2021, which includes all
wells and facilities in Brazil and the USA. In addition, the
Company may be required to decommission wells that have
not reached the end of their service life as a result of e.g.
regulatory requirements. These risks may, if materialized,
have a material adverse eect on the Company’s business
and result. In addition, local or national governments and
lessors of oil and gas leases may require the Company to
provide cash-back guarantees, blocked cash deposits or
similar upfront payments and escrow relating to future
decommissioning costs which would aect the Company’s
liquidity.
Financial risks
Management estimates and assumptions
In preparing consolidated financial statements in
conformity with IFRS, estimates and assumptions are
used by management in determining the reported
amounts of assets and liabilities, revenues and expenses
recognized during the periods presented and disclosures
of contingent assets and liabilities known to exist as of
the date of the financial statements. These estimates and
assumptions must be made because certain information
that is used in the preparation of such financial statements
is dependent on future events, cannot be calculated with
a high degree of precision from data available, or is not
capable of being readily calculated based on generally
accepted methodologies. In some cases, these estimates
are particularly dicult to determine and the Company
must exercise significant judgment. Actual results for all
estimates could dier materially from the estimates and
assumptions used by the Company, which could have a
material adverse eect on the Group’s business, financial
condition, results of operations, cash flows and future
prospects.
Credit risk
The Company may be exposed to third party credit risk
through its contractual arrangements with its current or
future joint venture partners, customers, and other parties.
Currently, the Company has a Joint Operating Agreement
regarding the Tartaruga field with Petrobras. Furthermore,
oil sales in Brazil are made to Petrobras and a private
refinery, Dax. Historically, Petrobras and Dax have fulfilled
their payment obligations. Crude oil sales made to Dax are
prepaid, but occasional credit is extended to the customer
during long weekends or public holidays. The Company
receives payment between 20 and 30 days in arrears from
Petrobras. In the USA, the Company markets and sells its
oil through Country Mark (Illinois Basin) and Mercuria
Energy Trading (LAK Ranch) and receives payment 30
days in arrears. In the USA, historically, the Company has
always received full payment. The Company’s financial
position may be materially adversely aected in the event
such partners fail to meet their contractual obligations to
the Company.
A portion of the Company’s cash is held by banks in foreign
jurisdictions where there could be increased exposure to
credit risk. In the event the Company’s counterparty does
not fulfill its obligations in accordance with agreements,
this could adversely affect the Company’s business,
financial position and results.
Liquidity and Refinancing Risk
Liquidity risk is the risk that the Company will not be
able to meet its financial obligations as they fall due.
The Company has since inception been equity and debt
financed through share and bonds issues, and also financed
by asset divestment. Additional capital could be needed
to finance the Company’s future operations and/or for
acquisition of additional licences. The main risk is that this
need could occur during less favourable market conditions.
Management relies on cash forecasting to assess the
Company’s cash position based on expected future cash
flows. The Company has outstanding bank debt amounting
to approximately USD 55.5 million of which USD 11.3 million
is current. The terms of the debt contain provisions which
limit the Company’s ability to make certain payments and
distributions (such as paying dividends), incur additional
indebtedness, make certain disposals of, or provide security
over its assets, or engage in mergers or demergers. Further,
the Company is required to meet certain maintenance
covenants. If the Company would fail to comply with any
of the maintenance covenants, all of the outstanding debt
may be declared immediately due and payable together
with any other amounts payable. The Company has current
assets of approximately USD 33.0 million. There is a risk
that the Company either has insucient funds to settle
the current portion of the debt or repay or refinance the
debt when due.
Refinancing risk is the risk that financing cannot be
obtained or renewed on expiry of its term or can only be
obtained or renewed at significantly increased costs. There
is a risk that additional capital cannot be obtained or can
only be obtained at unfavorable terms and conditions.
Foreign currency exchange rate risk
The Company is exposed to changes in foreign exchange
rates as expenses in foreign subsidiaries, oil and gas
expenditures, or financial instruments may fluctuate due
to changes in rates. The main functional currencies of
the Company’s subsidiaries are Brazilian Reals (”BRL”) for
the subsidiaries in Brazil and Luxembourg and Swedish
Krona (”SEK”) for the subsidiaries in Sweden, making the
Company sensitive to fluctuations of these currencies
against US Dollar (”USD”). Majority of the Company’s oil
sales are denominated in BRL based on a USD oil price
and all operational, administrative and capital activities
related to the Brazil properties are transacted primarily in
BRL. In Sweden, the Company’s expenditures are in SEK.
Further, with regards to BRL, there is a risk of inflation or
hyper-inflation.
Foreign exchange controls in Brazil
In the event the operations in Brazil require financing,
exchange controls could be in place that restrict such
financing. The Brazilian government requires that the
Company registers inflows and outflows of funds with
the Brazilian Central Bank. In Brazil, all transactions
must be settled in the country’s local currency. Future
exchange controls in Brazil could prevent the Company
from transferring funds abroad, which could impede the
Company’s ability to conduct its operations in Brazil, and
lead to decrease or the loss of earnings from this market.
In addition, exchange controls or changes in tax regime
could aect the dividends the Company receives from
its subsidiary in Brazil. The above could have an adverse
eect on the profitability of the Company’s operations
in Brazil. For further details on Brazil tax reform and its
impact, see section on income taxes.
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MAHA ENERGY 2021 ANNUAL REPORT
Corporate Governance Report
This Corporate Governance Report has been prepared
in accordance with the Swedish Companies Act (SFS
2005:551), the Annual Accounts Act (SFS 1995:1554) and
the Swedish Corporate Governance Code (the “Code”) and
has been subject to a review by the Company’s statutory
auditor.
The Company is not aware of any deviations from Nasdaq
Stockholm’s Rulebook for Issuers, recommendations from
the Swedish Securities Council, decisions from Disciplinary
Committee at Nasdaq Stockholm or statements from the
Swedish Securities Council.
Maha Energy AB (publ), company registration number
559018-9543, has its corporate head oce at Strandvägen
5A SE-114 51 Stockholm, Sweden and the registered
seat of the Board of Directors is Stockholm, Sweden. The
Company’s website is www.mahaenergy.ca.
This 2021 Corporate Governance Report is submitted in
accordance with the Swedish Annual Accounts Act and the
Code. It explains how Maha has conducted its corporate
governance activities during 2021.
As a Swedish public company listed on Nasdaq Stockholm
(under symbol MAHA-A) Maha Energy is subject to the
Rulebook for Issuers of Nasdaq Stockholm which can be
found on www.nasdaqomxnordic.com. In addition, the
Company abides by principles of corporate governance
found in several internal and external documents to build
trust on how Maha responsibly conducts its business.
External and Internal governance framework
The Company observes good corporate governance
practices in accordance with the laws and regulations
of Swedish legislation, the Company’s own Articles of
Association and policies. The Company’s Articles of
Association do not contain any provisions for a special
procedure for changing the Articles of Association. The
Company issues Annual Consolidated Financial Statements
and interim reports in accordance with the International
Financial Reporting Standards (IFRS), as adopted by the
EU, and Swedish Annual Accounts Act.
Maha adheres to both the internal and external rules
for Corporate Governance principles; thus, decreasing
potential risks associated with unclear individual and
company responsibilities and avoiding conflicts of
interests between its shareholders, managers, and board
of directors.
External Corporate Governance Rules
The Annual Accounts Act
The Exchange Rules for Issuers
NASDAQ Rules and Regulations
The Swedish Companies Act
Swedish Code of Corporate Governance
Statements of the Stock Market Committee
Internal Corporate Governance Rules
Anti-Corruption Policy
Articles of Association
Code of Conduct
Company Policies, Guidelines, and
Procedures
Corporate Governance Policy
Health, Safety, and Environment Policy
Internal Control and Risk Management
Swedish Corporate Governance Code
The Swedish Corporate Governance Code is based on the
tradition of self- regulation and the principle of “comply
or explain”. It acts as a complement to the corporate
governance rules contained in the Swedish Companies Act,
the Annual Accounts Act, EU rules and other regulations
such as the Rulebook for Issuers and good practice on
the securities market. The Code is published on www.
bolagsstyrning.se, where a description of the Swedish
Corporate Governance model can be found. A revised
version of the Code applies as of 1 January 2021.
During 2021, the Company deviated from the Code rules 8.1
and 8.2 as the board of directors’ evaluations of the work
of the board or the CEO have not been conducted through
a formalized process as set forth within these rules. The
board of directors’ assessment is that such formalized
processes have not been deemed necessary, as no major
development areas with regards to the board of directors’ or
the CEO’s work have been identified during previous years.
The board of directors however continuously evaluates
the operational management of the Company including
the work of the CEO as well as the work of the board of
directors (for further information, please refer to heading
“The Board and its work”). An evaluation of the board of
director’s work, competence and composition is further
included in the duties of the Nomination Committee. The
Nomination Committee also considers criteria such as the
background and experience of the board, and evaluates
the ongoing work (for further information, please refer
to heading “Nomination Committee and its Function”).
The Company is not aware of any other deviations from
the Code.
Shareholders
The Company’s shares (MAHA-A) are listed on Nasdaq
Stockholm. At year-end 2021 the share capital amounted
to SEK 1,316,872.656, represented by 119,715,696 shares,
of which 119,715,696 were Class A shares and nil were
class B shares. All shares represent one vote each. At 31
December 2021, the number of shareholders was 9,481
(2020: 11,207). Of the total number of shares, foreign
shareholders accounted for approximately 26.13 percent.
Kvalitena AB is the only shareholder with a holding in
excess of 10 percent of shares and votes, with a holding
of 21,588,327 shares representing approximately 18.03
percent of shares and votes. For further information on
share, share capital development and shareholders, see
pages 29-30 and the Company’s website.
Annual General Meeting
According to the Swedish Companies Act (2005:551),
the general meeting is the Company’s highest decision-
making body. At the general meeting, the shareholders
exercise their voting rights in key issues, such as changes
to the articles of association, the election of the board of
directors and auditors, adoption of the income statement
and balance sheet, discharge from liability of the board
of directors and the CEO and Managing Director, the
appropriation of profit or loss and the principles for the
appointment of the nomination committee. The Annual
General Meeting (“AGM”) must be held within six (6)
months of the close of the fiscal year. The Company calls
the meeting through announcements in the Swedish
Ocial Gazette, the Svenska Dagbladet and the Company’s
website.
Right to attend AGMs
All shareholders who are listed in the share registry on the
record date, and who have notified the Company of their
participation in due time, are entitled to participate in the
AGM. Shareholders of Class A and B shares are entitled to
exercise their respective voting rights in accordance with
the description above (Shareholders).
Annual General Meeting 2021
The 2021 AGM was held on 27 May 2021 through postal
voting only due to coronavirus pandemic and in accordance
with the Swedish Act (2020:198) on temporary exceptions
to facilitate the execution of general meetings in companies
and other associations. The AGM was attended by 7
shareholders, personally or by proxy, representing 6.41
percent of the share capital. The Chairman of the Board, all
Board members including the CEO and Managing Director
were present, as well as the Company’s auditor and the
majority of the members of the Nomination Committee for
the 2021 AGM. The members of the Nomination Committee
for the 2021 AGM were also present. Under the Articles
of Association and Swedish law, the AGM must address
those matters listed below marked with “*”.
The submissions and resolutions passed by the 2021 AGM
included the following:
»
Approval of administrative matters concerning the
AGM*;
»
Submission of the annual report and the auditor’s
report and the consolidated financial statements and
the auditor’s report on the group*;
»
Resolution in respect of adoption of the profit and loss
statement and the balance sheet and the consolidated
profit and loss statement and the consolidated
balance sheet*;
»
Resolution in respect of Company’s funds available
shall be carried forward and no dividends shall be
paid for the last financial year;
»
Resolution in respect of the members of the Board
and the Managing Director’s discharge from liability*;
»
Resolution that the Board of Directors shall comprise
of six (6) ordinary members and no deputy members;
»
Determination of the fees payable to the members
of the Board and the auditors*;
» Election of members of the Board and auditors*;
»
Resolution on a policy for remuneration to the senior
executives;
» Approval of the remuneration report*;
»
Resolution regarding principles for the appointment of
and instructions regarding a Nomination Committee
(see below)*;
»
Resolution regarding an incentive program and
issuance of warrants to the executive management
(LTIP 5) (see below);
»
Resolution regarding an incentive program and
issuance of warrants to the executive management
(LTIP 6) (see below);
» Resolution regarding authorisation for the Board to
increase the share capital. The Board of Directors
was authorized to resolve on issuance of new shares,
warrants and/or convertible debentures during the
period until the next annual general meeting and at
one or more occasions, with consideration in cash and,
in kind or by set-o and with the right to deviate from
the shareholders’ preferential rights, through which
the share capital may be increased by an amount
corresponding to 20 per cent of the share capital and
number of shares in the company as of on the date
the Board of Directors make use of the authorization.
Annual General Meeting 2022
The Annual General Meeting of shareholders of Maha
Energy AB (publ) will be held on Tuesday May 31, 2022,
3:00 p.m. at 30 Grev Turegatan in Stockholm.
Nomination Committee and its Function
The duties of the nomination committee include the
preparation and drafting of proposals regarding the
election of members of the board of directors, the chairman
of the board of directors, the chairman of the general
meeting and auditors. The nomination committee shall
also propose fees for board members and the auditor.
The composition of the nomination committee is publicly
announced at least six months ahead of the AGM.
In accordance with the Nomination Committee proposal
approved by the 2021 AGM (proposal not to change
the principles for the appointment of and instructions
regarding a nomination committee adopted at the Annual
General Meeting in 2019), the Nomination Committee for
the 2022 AGM consists of members appointed by three
(3) of the largest shareholders of the Company based on
shareholdings as at 30 September 2021 and the Chairman
of the Board. The names of the members of the Nomination
Committee were announced and posted on the Company’s
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46
MAHA ENERGY 2021 ANNUAL REPORT
website on 26 November 2021 (within the time frame
of six (6) months before the AGM, as prescribed by the
Code). Henrik Moren is the Chairman of the Nomination
Committee.
The Nomination Committee for the 2022 AGM consists of:
» Christer Lindholm, appointed by Kvalitena AB
»
Edwyn Neves, appointment by Banco BTG Pactual S.A
» Henrik Moren, appointed by Jonas Lindvall
» Harald Pousette, Chairman of the Company’s Board
The Nomination Committee Report, including the final
proposals to the 2022 AGM, is published on the Company’s
website at the same time the Notice of the AGM is given.
During 2021, the Nomination Committee has met and
conferenced one (1) time during which all members
attended or were in conference.
The Nomination Committee’s purpose is to produce
proposals for certain matters including, amongst others,
the following (which will be presented to the 2022 AGM
for consideration):
» Number of members of the Board of Directors
»
Remuneration to the Chairman of the Board of
Directors, the other members of the Board of Directors
and auditors respectively
» Election of auditors
» Remuneration, if any, for committee work
» The composition of the Board of Directors
» The Chairman of the Board of Directors
» Resolution regarding the process of the Nomination
Committee 2022
» Chairman at the AGM
The work of the Nomination Committee includes evaluation
of the Board’s work, competence and composition, as well
as the independence of the members. The Nomination
Committee will also consider criteria such as the
background and experience of the Board, and evaluate
the ongoing work.
The Board and its work
Board composition
Aer the general meeting, the board of directors is the
highest decision-making body. According to the Swedish
Companies Act, the board of directors is responsible for the
organisation and management of the company’s aairs,
which means that the board of directors is responsible for,
among other things, establishing targets and strategies,
securing procedures and systems for monitoring of set
targets, continuously assessing the company’s financial
position and evaluating the operational management.
Furthermore, the board of directors is responsible for
ensuring that proper information is given to the company’s
shareholders, that the company complies with laws and
regulations and that the company develops and implements
internal policies and ethical guidelines. Moreover, the
board of directors is responsible for ensuring that annual
reports and interim reports are prepared in a timely matter.
The board of directors also appoints the company’s CEO
and Managing Director and determines its salary and other
compensation.
The members of the board of directors are elected annually
at the annual general meeting for the period until the
end of the next annual general meeting. Pursuant to the
Company’s Articles of Association, the Board shall consist
of not less than three (3) and not more than seven (7)
ordinary members, without any deputy members. There
are no specific stipulations in the Company’s Articles of
Association on how the board members should be assigned
or dismissed. The Company aims to promote diversity
at all levels of the Company and as such, a Board seat
was oered to a female candidate in the past who turned
it down. Currently, the Company’s Board consists of 6
ordinary members, appointed until the end of the next
annual shareholders’ meeting. The composition of the
Board of the Company changed at the 2021 AGM. The
current Board is as follows: Mr. Harald Pousette (Chairman),
Mr. Jonas Lindvall, Mr. Anders Ehrenblad, Mr. Fredrik
Cappelen, Mr. Nick Walker and Mr. Seth Lieberman (see
bios in section “The Board of Directors and Management”).
Member Elected Position
Year of
Birth
Nationality
Independent
in Relation
to Company
Independent in relation
to the Company’s major
shareholders
Harald Pousette 2017 Chairman 1965 Swedish Yes No
Anders Ehrenblad 2013 Member 1965 Swedish No Yes
Jonas Lindvall
4
2013 Member 1967 Swedish No Yes
Nick Walker 2020 Member 1962 British Yes Yes
Fredrik Cappelen 2021 Member 1962 Norwegian Yes Yes
Seth Lieberman 2021 Member 1961 United States Yes No
Rules of Procedure
The Board’s work is governed by the approved Rules of
Procedure. The Board supervises the work of the Managing
Director by monitoring the Company’s operational and
financial activities. The Board ensures that the Company’s
organisation, administration, and controls are properly
managed. The Board adopts strategies and goals and
provides review and approval of larger investments,
acquisitions and disposals of business activities or
assets. The Board also appoints the Managing Director
and determines the Managing Director’s salary and other
compensation. The Chairman of the Board supervises
the Board and is responsible for it functioning well. The
Chairman, among other things, is regularly updated on
the Company’s operations, meets with the Managing
Director and is responsible to ensure information and
documentation is provided by the Company to ensure high
quality discussions and proper consideration of matters.
Board’s Yearly Work Cycle:
Q1 / Q2 targeted main activities:
» Approval of the fourth quarter report;
»
Approval of the Annual Report and other annual reports;
»
Review of the Auditor’s Report and meeting with the
Auditor (excluding Management) to discuss the audit
process, risk management and internal controls;
»
Review of the Policy on Remuneration for submission
to the AGM;
» Determination of the AGM details and approval of the
AGM materials;
» Approval of the first quarter report;
» Annual investor relations assessment;
» Review of the Rules of Procedure
Q3 / Q4 main activities:
» Adoption of the budget and work programme;
»
Consideration of the Board self-evaluation to be submitted
to the Nomination Committee;
» Approval of the second and third quarter reports;
» Review of the third quarter Auditor’s Report and meeting
with the Auditor (excluding Management) to discuss interim
review results;
»
Performance assessment of the CEO and Managing Director;
»
Consideration of the performance review of Group
management and Remuneration Committee remuneration
proposals;
» Long-term strategy discussions;
» Evaluation of internal controls;
» Insurance Program renewal
The Board’s work in 2021
During 2021, the Board held nine (9) in-person meetings
and one (1) per-capsulam meetings. Attendance for the
in-person meetings is shown in the tables below. The
Company’s CFO acted as the Board’s corporate secretary.
Prior to each meeting, Board members were provided
with an agenda and written information on the matters
to be covered. Each meeting has included the possibility
to discuss without management representatives being
present. The Company’s Auditor also met at least once
with the board or respective board committee.
Board Member Board Attend
Audit
Committee
Attend
Remuneration
Committee
Attend
Reserves/
HSE
Committee
Attend
*Harald Pousette
*
6/6
*
3/3
Anders Ehrenblad
*
6/6
*
3/3
*
2/2
Jonas Lindvall
*
6/6
*
1/1
Nick Walker
*
6/6
*
2/2
*
1/1
Fredrik Cappelen
*
6/6
*
3/3
*
1/1
Seth Lieberman
*
5/6
*
3/3
*
2/2
Board Member Board Attend
Audit
Committee
Attend
Remuneration
Committee
Attend
Reserves/
HSE
Committee
Attend
*Harald Pousette
*
3/3
*
2/2
Anders Ehrenblad
*
3/3
*
2/2
*
1/1
Jonas Lindvall
*
3/3
*
1/1
Nick Walker
*
3/3
*
1/1
*
1/1
Fredrik Cappelen
*
3/3
*
2/2
*
1/1
Seth Lieberman
*
3/3
*
2/2
*
1/1
Pre 27 May 2021 AGM
Post 27 May 2021 AGM
Board Committees
In order to increase the eciency of its work and enable
a more detailed analysis of certain matters, the Board
has formed three (3) committees: Audit Committee;
Remuneration Committee; and Reserves/HSE Committee.
Committee members are appointed by the Board within
the Board members up to the next AGM. The Committee’s
duties and authorities are governed by those Mandates,
Policies and Terms of Reference described below. The
committees perform monitoring and evaluations, resulting
in recommendations to the Board, where all decision-
making takes place.
Audit Committee
The Board established an Audit Committee just aer the
2021 AGM for the period up to and including the 2022
AGM, consisting of Harald Pousette as Chairman, Anders
Ehrenblad, Seth Lieberman and Fredrik Cappelen as
members. The Committee convened five (5) times during
2021.
4
Jonas Lindvall is also Managing Director of the Company.
47
48
MAHA ENERGY 2021 ANNUAL REPORT
The Audit Committee is a supervisory body within the Board
of Maha. The Audit Committee shall ensure compliance
with the Board’s monitoring responsibilities pertaining to
financial reporting, risk management and assessing the
eciency of the Company’s internal controls over financial
reporting. The Audit Committee shall thereby, in particular,
contribute to sound and regular financial reporting to
ensure the market’s trust in Maha. The Audit Committee
shall furthermore regularly liaise with the Company’s
external auditors as part of the annual audit process and
review their fees, as well as the auditors’ qualifications,
independence and impartiality. The Audit Committee
shall also ensure that good communication is maintained
between the Board and the external auditor(s). As per the
Audit Committee’s functions and responsibilities, Audit
Committee met with the external auditors more than once
during the year and also met without the presence of the
management.
Remuneration Committee
The Board established a Remuneration Committee for
the period up to and including the 2022 AGM, consisting
of Seth Lieberman as Chairman, Nick Walker and Anders
Ehrenblad as members. The Committee convened three
(3) times during 2021.
The Remuneration Committee is a preparatory body within
the Board of Directors with the main duties to prepare
resolutions to be adopted by the Board of Directors
pertaining to matters regarding remuneration principles,
remuneration and other terms of employment for executive
management; monitor and evaluate current and during
the year finalized programs for variable compensations
for the executive management, and monitor and evaluate
the compliance with the guidelines for remuneration for
the executive management which the general meeting by
law shall adopt, and applicable remuneration structures
and remuneration levels in the Company. The work of the
Remuneration Committee is governed by established rules
of procedures that have been set by the Board of Directors.
Reserves/HSE Committee
The Board established a Reserves/HSE Committee aer the
2021 AGM for the period up to and including the 2022 AGM,
consisting of Nick Walker, Chairman, Fredrik Cappelen and
Jonas Lindvall. The Committee convened two (2) times
during 2021.
The Reserves & HSE Committee is responsible for the
following functions:
»
assist the Board in fulfilling its oversight responsibilities
generally with respect to the oil and natural gas
reserves evaluation process of the Company and public
disclosure of reserves data and related information in
connection with the Company’s oil and gas activities;
» evaluation of and recommendation on appointment
of independent qualified reserve auditor, oversight
of the reserves audit process;
»
developing, implementing and monitoring policies,
standards and practices of the Company with respect
to matters concerning health, safety and environment,
including public disclosures.
Remuneration of Board members
The remuneration of the Chairman and other Board
members follows the resolution adopted by the AGM.
The Board members, except for the CEO and Managing
Director, are not employed by the Company, do not receive
any salary from the Company and are not eligible for
participation in the Company’s incentive programmes.
The Policy on Remuneration approved by the AGM also
comprises remuneration paid to Board members for work
performed outside their directorships.
The 2021 AGM resolved that remuneration of the chairman
of the Board of Directors shall be TSEK 415 per annum and
of the other members TSEK 300 per member per annum.
Remuneration is not paid for service of the Boards or
directors of subsidiaries. Jonas Lindvall, who is employed
by Maha, does not receive any remuneration for his service
on the Board of Directors. Annual fee for committee
members is TSEK 40 per committee assignment. The
annual fee for the chairman of the audit committee,
chairman remuneration committee and reserve and health,
safety and environment committee is TSEK 60. Further, if
a member of the Board of Directors, following a resolution
by the Board of Directors, performs tasks which are outside
the regular Board work, separate remuneration will apply.
Management
The executive management in Maha throughout 2021 has
consisted of the Managing Director and Chief Executive
Officer (Jonas Lindvall), the Chief Financial Officer
(Andres Modarelli), the Vice President of Operations
(Alan Johnson) until 8 August 2021 and was promoted
to the Chief Operating Ocer beginning 8 August 2021,
the Vice President of Exploration and Production (Jamie
McKeown) until 30 November 2021 when he retired, the
Manager of Investor Relations and Deputy Managing
Director (Victoria Berg), and Sub-surface Manager (Robert
Thomson) beginning 1 November 2021. The Board of
Directors has adopted an instruction for the Managing
Director which clarifies the responsibilities and authority
of the Managing Director. According to the instruction, the
Managing Director shall provide the Board of Directors with
decision data to enable the Board to make well-founded
decisions and with documents to enable it to continually
monitor the activities for the year. The Managing Director
is responsible for the day-to-day business of the Company
and shall take the decisions needed for developing the
business – within the legal framework, the business plan,
the budget and the instruction for the Managing Director
adopted by the Board of Directors as well as in accordance
with other guidelines and instructions communicated by
the Board of Directors.
Remuneration for Management
At the AGM 2021 it was resolved to adopt a policy for
remuneration and other employment conditions for
the Executive Management which is available at the
Company’s website.
For additional information on Board member and senior
management compensation please refer to Note 29
to the Financial Statements as well as the Company’s
Remuneration Report available at the Company’s website.
External Auditors
At the 2021 AGM and for the period until the conclusion
of the next Annual General Meeting the accounting firm
Deloitte AB was elected as Maha’s independent auditor.
The Auditor in charge is Fredrik Jonsson.
Financial Reporting and Internal Controls
The Board of Directors has the ultimate responsibility
of the internal controls over financial reporting. Maha’s
systems of internal control, with regard to financials
reporting, is designed to minimize risks involved in financial
reporting process and ensure a high level of reliability in
the financial reporting. Furthermore, the system of internal
control ensures compliance with applicable accounting
requirements and other disclosure requirements that Maha
is required to meet as a publicly listed company.
Internal Controls
While the Board (with assistance from the Audit Committee),
in accordance with the Swedish Companies Act, has the
ultimate responsibility for the internal controls over the
Company’s financial reporting; front line responsibility
for such is with the CEO and Managing Director and CFO
under the approved Instructions for Financial Reporting
and the Instructions to Managing Director. In line with
listed companies of similar size in the oil and gas sector,
Maha maintains a system of internal controls for its
financial reporting that is designed to minimize risks of
error and ensure a high level of reliability and compliance
with applicable accounting principles. The Company’s CFO
and Managing Director continually work on improving the
financial reporting process through evaluating the risk
of errors in the financial reporting and related control
activities. Control activities include close monitoring and
approval by the Company’s executive team, in line with
the authorization guidelines of: invoices, other payables,
contracts and legal commitments, and other financial and
treasury activities in relation to the oil and gas operations
of the Company in the United States, Brazil and Oman. The
purpose of these activities is to ensure and monitor that
control activities are in place for the areas of identified risks
related to financial reporting and potentially fraudulent
activities. The Audit Committee, the CFO, and the Managing
Director follow up on the compliance and eectiveness
of the Company’s internal controls to ensure the quality
of internal processes is appropriate and develop controls
as considered necessary.
There were no complaints reported under the Company’s
Anti-Corruption Policy and Code of Business Conduct and
Ethics.
Information and Communication
The Board has adopted an Information and Communication
Policy for the purpose of ensuring that the external
information is correct and complete. There are also
instructions regarding information security and how to
communicate financial information.
Monitoring
Both the Board (with assistance from the Audit Committee)
and the management follow up on the compliance and
eectiveness of the Company’s internal controls to ensure
the quality of internal processes. The Audit Committee
ensures and monitors that adequate controls are in place
for the identified areas of risk related to financial reporting
activities. For this purpose, an independent consultant
reporting directly to the Audit Committee is engaged to
monitor and test eectiveness of internal controls.
49
50
MAHA ENERGY 2021 ANNUAL REPORT
Financial Statements
(TUSD) except per share amounts Note 2021 2020
Revenue
Oil and gas sales 4 68,306 39,018
Royalties (9,384 ) (5,829 )
Cost of sales
Production expense 3 (12,862 ) (9,666 )
Depletion, depreciation and amortization 8 (8,535 ) (5,624 )
Gross profit 37,525 17,899
General and administration 5 (5,517 ) (5,939 )
Stock-based compensation 12 (419 ) (338 )
Exploration and business development costs (6 ) (208 )
Impairment of exploration and evaluation assets 9 – (21,000 )
Foreign currency exchange (loss) gain 30 (245 )
Other income 2,443 1,066
Other gains 5,164 –
Operating result 39,220 (8,765 )
Net finance costs 6 (9,963 ) (4,982 )
Result before tax 29,257 (13,747 )
Current tax expense 7 (2,311 ) (1,106 )
Deferred tax recovery (expense) 7 (5,359 ) 4,594
Net result for the year 21,587 (10,259 )
Earnings per share basic 13 0.19 (0.10 )
Earnings per share diluted 13 0.19 (0.10 )
Weighted average number of shares:
Before dilution 112,912,781 101,357,757
Aer dilution 113,080,714 106,478,943
(TUSD) Note 2021 2020
Net result for the year 21,587 (10,259 )
Items that may be reclassified to profit or loss:
Exchange dierences on translation of foreign operations 2 (5,914 ) (23,324 )
Comprehensive result for the year 15,673 (33,583 )
Attributable to:
Shareholders of the Parent Company 15,673 (33,583 )
Consolidated Statement of Operations
For the Financial Year Ended 31 December
Consolidated Statement of Comprehensive Earnings
For the Financial Year Ended 31 December
(TUSD) Note 2021 2020
ASSETS
Non-current assets
Property, plant and equipment 8 117,411 91,045
Exploration and evaluation assets 9 13,660 11,014
Deferred tax assets 7 3,583 9,978
Other long-term assets 491 432
Total non-current assets 135,145 112,469
Current assets
Prepaid expenses and deposits 1,239 1,434
Crude oil inventory 247 347
Accounts receivable 10 5,948 3,092
Cash and cash equivalents 11 25,535 6,681
Total current assets 32,969 11,554
TOTAL ASSETS 168,114 124,023
EQUITY AND LIABILITIES
Equity
Share capital 146 122
Contributed surplus 86,292 66,120
Other reserves (40,010 ) (34,096 )
Retained earnings 44,997 23,410
Total equity 12 91,425 55,556
Liabilities
Non-current liabilities
Bank debt 15 44,234 –
Decommissioning provision 16 2,264 2,597
Lease liabilities 17 2,385 3,450
Other long-term liabilities and provisions 18 651 4,825
Total non-current liabilities 49,534 10,872
Current liabilities
Accounts payable 19 9,644 10,731
Accrued liabilities and other 19 5,189 9,599
Current portion of lease liabilities 17 1,072 1,243
Bank debt 15 11,250 –
Bonds payable 14 – 36,022
Total current liabilities 27,155 57,595
Total liabilities 76,689 68,467
TOTAL EQUITY AND LIABILITIES 168,114 124,023
Consolidated Statement of Financial Position
For the Financial Year Ended 31 December
51
52
MAHA ENERGY 2021 ANNUAL REPORT
(TUSD) Note 2021 2020
Cash flow from operations
Net result 21,587 (10,259 )
Adjustments for:
Depletion, depreciation and amortization 8 8,535 5,624
Impairment of exploration and evaluation assets 9 – 21,000
Stock based compensation 12 419 338
Accretion of decommissioning provision 16 122 108
Accretion of bonds payable 14 497 1,063
Amortization of deferred financing fees 15 1,233 –
Other gains (5,164 ) –
Interest expense 6 6,920 3,930
Current tax expense 7 2,311 1,106
Deferred tax expense 7 5,359 (4,594 )
Unrealized foreign exchange amounts 1,576 567
Interest received 43 117
Interest paid (7,223 ) (3,930 )
Income taxes paid (2,494 ) (2,556 )
Changes in working capital 24 (2,716 ) 6,470
Cash flow from operations 31,005 18,984
Investing activities
Asset acquisition (net of cash) 8 – (4,152 )
Capital expenditures — property, plant and equipment 8 (44,334 ) (19,776 )
Capital expenditures — exploration and evaluation assets 9 (2,645 ) (10,798 )
Restricted cash (16 ) 1,146
Cash flow from investment activities (46,995 ) (33,580 )
Financing activities
Lease payments 17 (1,235 ) (450 )
Repayment of bonds payable 14 (35,919 ) –
Bank debt borrowing 15 60,000 –
Paid financing fees (5,132 ) –
Shares subscription (net of issue costs) 15 9,047 –
Exercise of warrants, net of issuance costs 12 9,188 942
Cash flow from financing activities 35,949 492
Change in cash and cash equivalents 19,959 (14,104 )
Cash and cash equivalents, beginning of year 6,681 22,450
Foreign exchange on cash and cash equivalents (1,105 ) (1,665 )
Cash and cash equivalents at the end of the year 25,535 6,681
Consolidated Statement of Cash Flows
For the Financial Year Ended 31 December
(TUSD) Share Capital
Contributed
Surplus
Other Reserves
Retained
(Deficit)
Earnings
Total
Shareholders’
Equity
Balance at 1 January 2020 122 64,840 (10,772 ) 33,669 87,859
Comprehensive result
Result for the year – – – (10,259 ) (10,259 )
Currency translation dierence – – (23,324 ) – (23,324 )
Total comprehensive result – – (23,324 ) (10,259 ) (33,583 )
Transactions with owners
Stock based compensation – 338 – – 338
Exercise of warrants and options
(net of issuance costs)
Total transactions with owners – 1,280 – – 1,280
Balance at 31 December 2020 122 66,120 (34,096 ) 23,410 55,556
Comprehensive result
Result for the period – – – 21,587 21,587
Currency translation dierence – – (5,914 ) – (5,914 )
Total comprehensive result – – (5,914 ) 21,587 15,673
Transactions with owners
Stock based compensation – 419 – – 419
Share issuance (net of issue
costs)
Exercise of warrants (net of
issue costs)
Total transactions with owners 24 20,172 – – 20,196
Balance at 31 December 2021 146 86,292 (40,010 ) 44,997 91,425
Consolidated Statement of Changes in Equity
For the Financial Year Ended 31 December
53
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MAHA ENERGY 2021 ANNUAL REPORT
(Expressed in thousands of Swedish Krona) Note 2021 2020
Revenue – –
Expenses
General and administrative 5 (9,365) (13,360)
Foreign currency exchange (loss) gain 32,069 (22,906)
Operating result 22,704 (36,266)
Net finance costs 6 (79,861) (24,828)
Impairment on investment in subsidiaries and loans 30,31 (69,304) (202,748)
Group contribution – 5,500
Result before tax (126,461) (258,342)
Income tax 7 – –
Result for the year (*) (126,461) (258,342)
Parent Company Income Statement
For the Financial Year Ended 31 December
(*) A separate report over Other Comprehensive Income is not presented for the Parent Company as there are no items included in Other
Comprehensive Income for the Parent Company.
(Expressed in thousands of Swedish Krona) Note 2021 2020
Assets
Non-current assets
Investment in subsidiaries 30 8,003 4,368
Loans to subsidiaries 31 644,044 471,839
652,047 476,207
Current assets
Accounts receivable and other 10 – 116
Restricted cash 50 50
Cash and cash equivalents 88,170 7,292
88,220 7,458
Total Assets 740,267 483,665
Equity and Liabilities
Restricted equity
Share capital 1,316 1,117
Unrestricted equity
Contributed surplus 686,398 516,500
Retained earnings (337,434) (79,092)
Net result (126,461) (258,342)
Total unrestricted equity 222,503 179,066
Total equity 223,819 180,183
Non-current liabilities
Bank debt 15 412,964 –
Current liabilities
Accounts payable and accrued liabilities 19 1,406 7,658
Bank debt 15 102,078 –
Bonds Payable 14 – 295,824
103,484 303,482
Total liabilities 516,448 303,482
Total Equity and Liabilities 740,267 483,665
Parent Company Balance Sheets
For the Financial Year Ended 31 December
55
56
MAHA ENERGY 2021 ANNUAL REPORT
(Thousands of Swedish Krona)
Restricted equity Unrestricted equity
Share Capital
Contributed
Surplus
Retained
Earnings
Total Equity
Balance at 1 January 2020 1,113 504,682 (79,092) 426,703
Total comprehensive income – – (258,342) (258,342)
Transaction with owners
Stock based compensation – 3,143 – 3,143
Exercise of bond warrants
(net of issuance costs)
10 6,928 – 6,938
Exercise of incentive warrants 3 1,747 1,750
C2 shares cancellation (9) – – (9)
Total transaction with owners 4 11,818 – 11,822
31 December 2020 1,117 516,500 (337,434) 180,183
Total comprehensive income – – (126,461) (126,461)
Transaction with owners
Stock based compensation – 3,627 – 3,627
Share issuance (net of issuance costs) 82 88,178 – 88,260
Exercise of warrants (net of issuance costs) 117 78,093 – 78,210
Total transaction with owners 199 169,898 – 170,097
Balance at 31 December 2021 1,316 686,398 (63,895) 223,819
Parent Company Statement of Changes in Equity
For the Financial Year Ended 31 December
(Expressed in thousands of Swedish Krona) Note 2021 2020
Cash flow from operations
Net result (126,461) (258,342)
Adjustment for
Impairment on investment in subsidiary and loans 69,304 202,748
Accretion of bonds liability 14 4,176 9,787
Amortization of deferred financing fees 15 10,772
Interest expense 6 61,534 36,000
Interest income (32,134) (20,959)
Unrealized foreign exchange 2,228 22,898
Interest paid (61,534) (36,000)
Changes in working capital (6,136) 3,152
Total cash flow from operations activities (78,251) (40,716)
Cash flow from investing
Investment in subsidiaries (25,924) (4,483)
Loan repayment by subsidiaries 31 17,396 57,494
Loans to subsidiaries 31 (170,354) (163,121)
Total cash flow investing activities (178,882) (110,109)
Cash flow from financing
Repayment of bonds payable 14 (300,000) –
Bank debt borrowing (net of deferred financing fees) 15 470,534 –
Shares subscription (net of issue costs) 15 78,560 –
Exercise of warrants (net of issue cost) 12 78,210 8,679
327,303 8,679
Change in cash during the year 70,170 (142,146)
Cash, beginning of the year 7,292 152,115
Foreign exchange on cash 10,708 (2,677)
Cash, end of the year 88,170 7,292
Parent Company Cash Flow Statement
For the Financial Year Ended 31 December
57
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MAHA ENERGY 2021 ANNUAL REPORT
Notes to the Financial Statements
For the years ended December 31, 2021 and 2020. (Tabular
amounts are in US Dollars, except in the Parent Company
Financial Statements where the amounts are in Swedish Krona
(SEK), unless otherwise stated).
1. Corporate Information
Maha Energy AB (“Maha (Sweden)” or “the Company”)
Organization Number 559018-9543 and its subsidiaries
(together “Maha” or “the Group”) are engaged in the
acquisition, exploration and development of oil and gas
properties.
The Company has operations in Brazil, the United States and
Oman. The head oce is located at Strandvägen 5A, SE-114 51
Stockholm, Sweden. The Company’s subsidiary, Maha Energy
Inc., maintains its technical oce at Suite 240, 23 Sunpark
Drive SE, Calgary, Alberta, Canada T2X 3V1. The Company also
has an oce in Rio de Janeiro, Brazil and operations oces
in Grayville, IL and Newcastle, WY, USA.
Maha (Sweden) was incorporated on June 16, 2015 under the
Swedish Companies Act and was registered by the Swedish
Companies Registration Oce on July 1, 2015. Maha Energy
Inc. (“Maha (Canada)”), was incorporated on January 23, 2013
pursuant to the Alberta Business Corporations Act. Maha
(Canada) began its operations on February 1, 2013.
2. Accounting Policies
Basis of preparation
The consolidated financial statements of Maha Energy AB
and its subsidiaries have been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee (IFRIC) interpretations issued
by International Accounting Standards Board (IASB), as
adopted by the European Union (EU) Commission and the
Swedish Annual Accounts Act (1995:1554). In addition, RFR
1 “Supplementary Rules for Company’s” has been applied as
issued by the Swedish Financial Reporting Board. The Parent
Company applies the same accounting policies as the Group
unless otherwise stated.
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates
and also requires management to exercise its judgement in the
process of applying the Company’s accounting policies. The
areas involving a higher degree of judgement or complexity,
or areas where assumptions and estimates are significant to
the consolidated financial statements are disclosed under
the heading “Critical accounting estimates and judgements”.
The consolidated financial statements have been prepared
under the historical cost convention, except for items that
are required to be accounted for at fair value as detailed in
the Group’s accounting policies. Intercompany transactions
and balances have been eliminated.
Changes in Accounting Policies and disclosures
During the year, the Company applied the amended accounting
standards, interpretations and annual improvement points
that are eective as of 1 January 2021. The application of
the amendments did not have a material impact on the
consolidated financial statements. IASB issued several
amended accounting standards that were endorsed by
EU, eective date 1 January 2022. The new and revised
accounting standards or interpretations are not expected to
have a material impact on the Company’s financial statements.
The Company has not early adopted any other standards,
interpretations or amendments that have been issued but
are not yet eective.
Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of
Maha and its subsidiaries. Subsidiaries are all entities (including
structured entities) over which the Company has control. The
Company controls an entity when the Company is exposed
to, or has rights to variable returns from its involvement with
the entity and has the ability to aect those returns through
its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Company.
They are de-consolidated from the date that control ceases.
Inter-company transactions, balances and unrealized gains
on transactions between Company companies are eliminated.
Unrealized losses are also eliminated. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Company.
Joint arrangements
Under IFRS 11 Joint Arrangements investments in joint
arrangements are classified as either joint operations or
joint ventures. The classification depends on the contractual
rights and obligations of each investor, rather than the legal
structure of the joint arrangement. Maha has joint operations
in Brazil’s Tartaruga field (see Note 4). Maha recognizes its
direct right to the assets, liabilities, revenues and expenses
of joint operations and its share of any jointly held or incurred
assets, liabilities, revenues and expenses. These have been
incorporated in the financial statements under the appropriate
headings. The Company conducts oil- and gas operations as
a joint operation that does not have a separate legal entity
status through licenses which are held jointly with other
companies. The Company’s financial statements reflect the
Company’s share of production, capital costs, operational
costs, current assets and liabilities in the joint operations.
Business combinations
The acquisition method of accounting is used to account
for acquisitions of businesses and assets that meet the
definition of a business under IFRS. The cost of an acquisition
is measured as the fair value of the assets given up, equity
instruments issued and liabilities incurred or assumed at the
date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination
are measured initially at their acquisition date fair values.
If the consideration of acquisition given up is less than
the fair value of the net assets received, the dierence is
recognized immediately in the Statement of Operations. If
the consideration of acquisition is greater than the fair value
of the net assets received, the dierence is recognized as
goodwill on the statement of financial position. Acquisition
costs incurred are expensed.
Any contingent consideration to be transferred by the acquirer
is recognised at fair value at the acquisition date. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted within equity. Contingent
consideration classified as an asset or liability that is a financial
instrument and within the scope of IFRS 9 is measured at
fair value with the changes in fair value recognized in the
statement of operations in accordance with IFRS 9. Other
contingent consideration that is not within the scope of IFRS 9
is measured at fair value at each reporting date with changes
in fair value recognized in profit or loss.
There is an option to apply a concentration test that permits a
simplified assessment of whether an acquired set of activities
and assets is in fact a business. The optional concentration
test is met if substantially all of the fair value of the assets
acquired is concentrated in a single identifiable asset or group
of similar identifiable assets. An entity may make such an
election separately for each transaction or other event. If the
concentration test is met, the set of activities and assets is
determined not to be a business and no further assessment
is needed.
Foreign currencies
Items included in the financial statements of each of the
Company’s entities are measured using the currency of the
primary economic environment in which the entity operates
(‘functional currency’). The consolidated financial statements
are presented in US dollars (USD) which is the currency the
Company has elected to use as the presentation currency.
The functional currencies of the Company’s subsidiaries are
as follows:
Subsidiary
Functional
Currency
Maha Energy Inc. USD
Maha Energy (USA) Inc. USD
Maha Energy Services LLC USD
Maha Energy (Indiana) Inc. USD
Maha Energy 1 (Brazil) AB SEK
Maha Energy 2 (Brazil) AB SEK
Maha Energy Brasil Ltda BRL
Maha Energy Finance (Luxembourg) S.À.R.L BRL
Maha Energy (Oman) Ltd USD
Transactions and balances
Monetary assets and liabilities denominated in foreign
currencies are translated at the rates of exchange prevailing
at period end and foreign exchange currency dierences
are recognized in the income statement. Transactions
in foreign currencies are translated at exchange rates
prevailing at the transaction date. Exchange dierences are
included in financial income/expenses in the Consolidated
Statement of Operations.
Presentation currency
The Consolidated Statement of Financial Position and the
Consolidated Statement of Operations of foreign Group
companies are translated for consolidation purposes using
the current rate method. All assets and liabilities of the
subsidiary companies are translated at the period end rates
of exchange, whereas the Statement of Operations are
translated at average rates of exchange for the year, except
for transactions where it is more relevant to use the rate of
the day of the transaction. The translation dierences which
arise are recorded directly in the foreign currency translation
reserve within other comprehensive income. Upon disposal of
a foreign operation, the translation dierences relating to that
operation will be transferred from equity to the Statement
of Operations and included in the result on sale. Translation
dierences arising from net investments in subsidiaries, used
for financing exploration activities, are recorded directly in
other comprehensive income.
For the preparation of the financial statements for the
reporting period, the following exchange rates have been used.
31 December 2021 31 December 2020
Currency Average Period end Average Period end
SEK / USD 8.581 9.074 9.209 8.212
BRL / USD 5.396 5.581 5.153 5.197
Segment reporting
Operating segments are based on geographic perspective
due to the unique nature of each country’s operations,
commercial terms or fiscal environment and reported in a
manner consistent with the internal reporting provided to
the Executive Management. Information for segments is only
disclosed when applicable.
Current versus non-current classification
The Company presents assets and liabilities in the Consolidated
Statements of Financial Position based on current/non-current
classification. An asset is current when it is:
• Expected to be realised or intended to be sold or con-
sumed in the normal operating cycle.
• Expected to be realised within twelve months aer the
reporting period.
• Or cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve
months aer the reporting period.
All other assets are classified as non-current.
A liability is current when:
• It is expected to be settled in the normal operating
cycle.
• It is due to be settled within twelve months aer the
reporting period.
• Or there is no unconditional right to defer the settle-
ment of the liability for at least twelve months aer the
reporting period.
All other liabilities are classified as non-current.
59
60
MAHA ENERGY 2021 ANNUAL REPORT
Oil and gas properties
Oil and gas properties are initially recorded at historical cost,
where it is probable that they will generate future economic
benefits. All costs for acquiring concessions, licenses or
interests in production sharing contracts and for the survey,
drilling and development of such interests are capitalized
on a field area cost center basis. This includes capitalization
of decommissioning and restoration costs associated with
provisions for asset retirement (see Note 16). Oil and gas
properties are subsequently carried at cost less accumulated
depreciation, depletion and amortization (including any
impairment). Gains and losses on disposals are determined by
comparing the proceeds with the carrying amounts of assets
sold and are recognized in income. Routine maintenance
and repair costs for producing assets are expensed to the
Statement of Operations when they occur. Proceeds from the
sale or farm-out of oil and gas concessions in the exploration
stage are o set against the related capitalized costs of each
cost center with any excess of net proceeds over all costs
capitalized included in the income statement.
Depreciation, depletion and amortization (“DD&A”)
Producing oil and gas properties are depleted on a unit-of-
production basis over the proved and probable reserves of the
field. In accordance with the unit of production method, net
capitalized costs to reporting date, together with anticipated
future capital costs for the development of the proved and
probable reserves determined at the balance sheet date price
levels, are depleted based on the year’s production in relation
to estimated total proved and probable reserves of oil and
gas. The impact of potential changes in estimated proved and
probable reserves is dealt with prospectively by depleting
the remaining carrying value of the asset over the expected
future production. Depletion of a field area is charged to
the Statement of Operations once commercial production
commences, under depletion, depreciation and amortization.
Proved reserves are those quantities of petroleum which, by
analysis of geological and engineering data, can be estimated
with reasonable certainty to be commercially recoverable,
from a given date forward, from known reservoirs and
under current economic conditions, operating methods and
governmental regulations. Proved reserves can be categorized
as developed or undeveloped. If deterministic methods are
used, the term reasonable certainty is intended to express a
high degree of confidence that the quantities will be recovered.
If probabilistic methods are used, there should be at least a
90 percent probability that the quantities actually recovered
will equal or exceed the estimates.
Probable reserves are those unproved reserves which analysis
of geological and engineering data suggests are more likely
than not to be recoverable. In this context, when probabilistic
methods are used, there should be at least a 50 percent
probability that the quantities actually recovered will equal
or exceed the sum of estimated proved plus probable reserves.
Exploration and evaluation assets (“E&E”)
Pre-license costs are recognized as an expense when incurred.
Exploration and evaluation costs, including the costs of
acquiring licenses, exploratory drilling and completion costs,
and directly attributable general and administrative costs are
initially capitalized as intangible E&E assets according to the
nature of the asset acquired. These costs are accumulated in
cost centers by field or exploration area pending determination
of technical feasibility and commercial viability. Ongoing
carrying costs including the costs of non-producing lease
rentals are capitalized to E&E assets. Proceeds received from
the sale of E&E assets are recorded as a reduction to the
carrying value of the asset.
The technical feasibility and commercial viability of extracting
a resource is considered to be determinable when proved
reserves are determined to exist and these reserves can be
commercially produced. A review of each exploration license
or area is carried out, at least annually, to assess whether
proved reserves have been discovered. Upon determination
of proved reserves which can be commercially produced,
E&E assets attributable to those reserves are first tested for
impairment and then reclassified from E&E assets to property
and equipment.
Impairment of non-financial assets
Oil and gas properties, E&E assets and Right-of-use (“ROU”)
assets are reviewed separately for indicators of impairment
quarterly or when facts and circumstances suggest that
the carrying amount may exceed its recoverable amount.
If indicators of impairment exist, the recoverable amount of
the asset or cash-generating unit (“CGU”) is estimated as the
greater of value-in- use (“VIU”) and fair value less costs of
disposal (“FVLCOD”). VIU is estimated as the present value of
the future cash flows expected to arise from the continuing
use of a CGU or an asset. FVLCOD is the amount that would
be realized from the disposition of an asset or CGU in an arm’s
length transaction between knowledgeable and willing parties.
For the Company, FVLCOD is based on the discounted aer-
tax cash flows of reserves and resources using forward prices
and costs, consistent with independent qualified reserves
evaluators and may consider an evaluation of comparable
asset transactions.
E&E assets are allocated to a related CGU containing
development and production assets for the purposes of testing
for impairment. ROU assets may be tested as part of a CGU,
as a separate CGU or as an individual asset.
If the recoverable amount of the CGU is less than the carrying
amount, an impairment loss is recognized. Impairment losses
on PP&E and ROU assets are recognized in the Consolidated
Statements of Operations as additional DD&A or as an E&E
asset impairment expense.
Impairment losses recognized in prior periods are assessed
at each reporting date for any indicators that the impairment
losses may no longer exist or may have decreased. In the event
that an impairment loss reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the carrying amount does
not exceed the amount that would have been determined
had no impairment loss been recognized on the asset in
prior periods. The amount of the reversal is recognized in
net earnings.
Other tangible assets
Other tangible assets that include oce furniture, fixtures,
leasehold improvements, machinery and vehicles are stated
at cost less accumulated depreciation. Depreciation is based
on cost and is calculated on a straight-line basis over the
estimated economic life of the assets, which range from two to
five years for oce furniture, fixtures, vehicles and leasehold
improvements. Materials and spare parts in the LAK field are
assessed annually for the conditions and obsolescence and,
if used, the related costs are transferred to the exploration
costs of the property.
Additional costs to existing assets are included in the
assets’ net book value or recognized as a separate asset, as
appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Company
and the cost of the item can be measured reliably. The net
book value of any replaced parts is written o. Other additional
expenses are deemed to be repair and maintenance costs and
are charged to the Statement of Operations when they are
incurred. The net book value is written down immediately to
its recoverable amount when the net book value is higher.
The recoverable amount is the higher of an asset’s fair value
less cost to sell and value in use.
Leases
The Company assesses whether a contract is a lease based
on whether the contract conveys the right to control the use
of an underlying asset for a period of time in exchange for
consideration. The Company allocates the consideration in
the contract to each lease component based on their relative
stand-alone prices.
Leases are recognized as a ROU asset as part of the property,
plant and equipment and a corresponding lease liability at
the date on which the leased asset is available for use by the
Company. Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of fixed payments, variable lease payments
that are based on an index or a rate, amounts expected to
be paid by the lessee under residual value guarantees, the
exercise price of purchase options if the lessee is reasonably
certain to exercise that option, and payments of penalties for
terminating the lease, less any lease incentives receivable.
These payments are discounted using the Company’s
incremental borrowing rate when the rate implicit in the
lease is not readily available.
Lease payments are allocated between the liability and finance
costs. The finance cost is charged to net earnings over the
lease term.
The lease liability is measured at amortized cost using the
eective interest rate method. It is remeasured when there is
a change in the future lease payments arising from a change
in an index or rate, if there is a change in the amount expected
to be payable under a residual value guarantee or if there
is a change in the assessment of whether the Company
will exercise a purchase, extension or termination option
that is within the control of the Company. When the lease
liability is remeasured, a corresponding adjustment is made
to the carrying amount of the ROU asset or is recorded in the
consolidated statement of earnings if the carrying amount of
the ROU asset has been reduced to zero.
The ROU asset is initially measured at cost, which comprises
the initial amount of the lease liability any initial direct costs
incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or site on
which it is located less any lease payments made at or before
the commencement date. The ROU asset is depreciated, on a
straight-line basis, over the shorter of the estimated useful
life of the asset or the lease term. The ROU asset may be
adjusted for certain remeasurements of the lease liability and
impairment losses. Leases that have terms of less than twelve
months or leases on which the underlying asset is of low value
are recognized as an expense in the consolidated statement
of earnings on a straight-line basis over the lease term.
A lease modification will be accounted for as a separate
lease if the modification increases the scope of the lease
and if the consideration for the lease increases by an amount
commensurate with the stand-alone price for the increase
in scope. For a modification that is not a separate lease or
where the increase in consideration is not commensurate, at
the eective date of the lease modification, the Company will
remeasure the lease liability using the Company’s incremental
borrowing rate, when the rate implicit to the lease is not
readily available, with a corresponding adjustment to the ROU
asset. A modification that decreases the scope of the lease
will be accounted for by decreasing the carrying amount of
the ROU asset, and recognizing a gain or loss in net earnings
that reflects the proportionate decrease in scope.
Financial assets and liabilities
The Company’s financial assets include cash, accounts
receivable, net investment in finance leases, and long-term
receivables. The Company’s financial liabilities include accounts
payable and accrued liabilities, short-term borrowings, lease
liabilities, and long-term debt. Financial assets and financial
liabilities are recognized on the Consolidated Statements
of Financial Position initially at fair value plus transaction
costs on initial recognition and subsequently measured at
amortised cost unless stated otherwise. Financial assets are
derecognized when the rights to receive cash flows from
the investment have expired or have been transferred and
the Group has transferred substantially all risks and rewards
of ownership. Financial liability is derecognized when the
obligation is discharged, cancelled, or expired.
The Company characterizes its fair value measurements into
a three-level hierarchy depending on the degree to which the
inputs are observable, as follows:
»
Level 1 inputs are quoted prices in active markets for
identical assets and liabilities.
»
Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for the asset
or liability either directly or indirectly: and
» Level 3 inputs are unobservable inputs for the asset or
liability.
The Company recognises the following financial assets and
liabilities:
Financial Assets at amortized cost
Assets that are held for collection of contractual cash
flows where those cash flows represent solely payments of
61
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MAHA ENERGY 2021 ANNUAL REPORT
principal and interest are measured at amortized cost. The
Company classifies its cash and cash equivalents and accounts
receivables at amortized cost. The Company’s intent is to hold
the receivables until cash flows are collected.
Financial Assets through other comprehensive income
(“FVOCI”)
Financial assets measured at FVOCI includes assets that are
held for contractual cash flows and selling the financial assets,
where its contractual terms give rise on specific dates to cash
flows that represent solely payments of principal and interest.
Financial Assets at fair value through profit or loss (“FVTPL”)
Financial assets measured at FVTPL are assets which do not
qualify as financial assets at amortized cost or FVOCI and are
measured at fair value though profit or loss. The Company
classifies its derivative financial instruments as FVTPL.
Financial Liabilities at amortized cost
Financial liabilities are measured at amortized cost, unless
they are required to be measured at FVTPL, or the Company
has opted to measure them at FVTPL. Borrowings and
accounts payable are recognized initially at fair value, net of
any transaction costs incurred, and subsequently at amortized
cost using the eective interest method.
Financial Liabilities at FVTPL
Financial liabilities measured at FVTPL are liabilities which
include embedded derivatives and cannot be classified as
amortized cost.
Impairment of Financial Assets
The measurement of impairment of financial assets is based
on the expected credit losses (“ECL”). Accounts receivable are
due within one year or less; therefore, these financial assets
are not considered to have a significant financing component.
For the other receivables, the Company applies the simplified
approach which requires the use of the lifetime expected loss
provision for all trade receivables. In estimating the lifetime
expected loss, the Company considers the anticipated credit
losses from all possible default events over the expected life
of a financial asset and also historical default rates and credit
ratings of major customers. For the ECL allowances for cash
and cash equivalents, the Company considers credit ratings
of the major banks that is holds its cash with.
Derivative Financial Instruments
Derivatives are initially recognized at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value. The method of recognizing
the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Company designates certain
derivatives as either hedges of a particular risk associated with
a recognized asset or liability or a highly probable forecasted
transaction, hedges of the fair value of recognized assets and
liabilities or a firm commitment, or hedges of a net investment
in a foreign operation.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand,
including osetting bank overdras, short-term deposits,
money market funds and commercial paper that have a
maturity of three months or less at the date of acquisition.
Inventories
Product inventories are valued at the lower of cost and net
realizable value, cost being determined on a weighted average
cost basis. The cost of inventory includes all costs incurred
in the normal course of business to bring each product to its
present location and condition. Net realizable value is the
estimated selling price in the ordinary course of business less
any expected selling costs. If the carrying amount exceeds net
realizable value, a write-down is recognized. The write-down
may be reversed in a subsequent period if circumstances
which caused it no longer exist and the inventory is still on
hand. Inventories of hydrocarbons are stated at the lower of
cost and net realisable value.
Equity
Share capital consists of the registered share capital for
the Parent Company. Share issue costs associated with the
issuance of new equity are treated as a direct reduction of
proceeds. Excess contribution in relation to the issuance of
shares is accounted for in the item contributed surplus. The
currency translation reserve contains unrealized translation
dierences due to the conversion of the functional currencies
into the presentation currency. Retained earnings contain
the accumulated results attributable to the shareholders of
the Parent Company.
Share-based compensation
The Company has granted warrants to purchase common
stock to directors, officers, employees, and consultants
under Warrants Incentive Program. Share-based payments
are measured at the fair value of the instruments issued and
amortized over the vesting periods. The amount recognized
as a stock-based payment expense during a reporting period
is adjusted to reflect the number of awards expected to vest.
The oset to this recorded cost is contribute surplus.
The fair value of warrants is measured using the Black-
Scholes option pricing model. Measurement inputs include
share price on measurement date, exercise price of the
instrument, expected volatility, weighted average expected
life of the instrument (based on historical experience and
general option holder behavior), expected dividends, and
the risk-free interest rate (based on short-term government
bonds). A forfeiture rate is estimated on the grant date and is
subsequently adjusted to reflect the actual number of options
that vest.
Earnings per share
Basic earning (loss) per share is computed by dividing the net
income or loss applicable to common stock of the Company by
the weighted average number of common shares outstanding
for the relevant period.
Diluted earnings (loss) per common share is computed by
dividing the net income or loss applicable to common shares
by the sum of the weighted average number of common
shares issued and outstanding and all additional common
shares that would have been outstanding, if potentially dilutive
instruments were converted using the treasury method.
Provisions
A provision is reported when the Company has a legal or
constructive obligation as a consequence of an event and
when it is more likely than not that an outflow of resources
is required to settle the obligation and a reliable estimate
can be made of the amount. Provisions are measured at the
present value of the expenditures expected to be required
to settle the obligation using a discount rate that reflects
current market assessments of the time value of money
and the risks specific to the obligation. The increase in the
provision due to passage of time is recognized as finance
costs. On fields where the Group is required to contribute to
site restoration costs, a provision is recorded to recognize
the future commitment. An asset is created, as part of the
oil and gas property, to represent the discounted value of the
anticipated site restoration liability and depleted over the life
of the field on a unit of production basis. The corresponding
accounting entry to the creation of the asset recognizes the
discounted value of the future liability. The discount applied
to the anticipated site restoration liability is subsequently
released over the life of the field and is charged to financial
expenses. Changes in decommissioning costs and reserves
are treated prospectively and consistent with the treatment
applied upon initial recognition.
Onerous contract provisions are recognized when the
unavoidable costs of meeting the obligation exceed the
economic benefit derived from the contract. The provision
for onerous contracts is measured at the present value of
estimated future cash flows underlying the obligations less
any estimated recoveries, discounted at the credit-adjusted
risk-free rate. Changes in the underlying assumptions are
recognized in the Consolidated Statements of operations.
Borrowings
Borrowings are recognized initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
stated at amortized costs using the eective interest method,
with interest expense recognized on an eective yield basis.
The eective interest method is a method of calculating the
amortized cost of a financial liability and of allocating interest
expense over the relevant period. The eective interest rate
is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability,
or a shorter period where appropriate.
Revenue
The Company’s revenue relates to oil and natural gas sales in
Brazil and the USA. The Company recognizes revenue when
it transfers control of the product or service to a customer,
which is generally when title passes from the Company to its
customer. The Company satisfies its performance obligations
in contracts with customers upon the delivery of crude oil
and natural gas, which is generally at a point in time and
the amounts of revenue recognized relating to performance
obligations satisfies over time are not significant. Revenue is
recognized based on the consideration specified in contracts
with customers. Revenue represents the Company’s share and
is recorded net of other mineral interest owners. The Company
evaluates its arrangement with third parties and partners to
determine if the Company acts as a principal or an agent. In
making this evaluation, management considers if the Company
obtains control of the product delivered, which is indicated
by the Company having the primary responsibility for the
delivery of the product, having ability to establish prices or
having inventory risk. If the Company acts in the capacity of
an agent rather than as a principal in transaction, then the
revenue is recognized on a net-basis, only reflecting the fee
or commission realized by the Company from the transaction.
Maha’s revenue transactions do not contain any financing
components and payments are typically due within 30 days
of revenue recognition. The Company does not disclose
information about remaining performance obligations that
have an original expected duration of one year or less and
it does not have any long-term contracts with unfulfilled
performance obligations.
Proceeds from sale of crude oil and natural gas prior to the
commencement of commercial production are oset against
capitalized costs for Company operations that are at the
pre-production stage (Note 9). The disclosure of significant
accounting judgements, estimates and assumptions relating
to revenue from contracts with customers are provided in
Note 2 section Critical accounting estimates and judgements.
Royalties
The fiscal regime in the area of operations defines whether
royalties are payable in cash or in kind. Royalties payable
in cash are accrued in the accounting period in which the
liability arises. The Company pays cash royalties to respective
government agencies and to private land owners as a
percentage of the revenue that is generated through the
sale of oil and gas production.
Exploration costs
Costs incurred prior to obtaining the legal right to explore
(pre-exploration costs) are expensed in the period in which
they are incurred as exploration expense. Costs incurred aer
the legal right to explore is obtained are initially capitalized. If
it is determined that the field/project/area is not technically
feasible and commercially viable or if the Company decides
not to continue the exploration and evaluation activity, the
unrecoverable accumulated costs are expensed as exploration
expense.
Income taxes
Income tax expense is comprised of current and deferred
income taxes. Income tax expense is recognized in profit and
loss except to the extent that it relates to items recognized
in other comprehensive income or directly in equity.
The Company utilizes the liability method of accounting for
income taxes. Under the liability method, deferred income tax
assets and liabilities are recognized to reflect the expected
deferred tax consequences arising from temporary dierences
between the carrying value and the tax bases of the assets
and liabilities. Deferred tax assets and liabilities are measured
using the enacted or substantively enacted tax rates expected
to apply when the asset is realized or the liability settled.
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64
MAHA ENERGY 2021 ANNUAL REPORT
Deferred income tax assets are recognized to the extent that
it is more likely than not that the asset will be realized. Maha
has recognized deferred tax assets on tax losses in Brazil only
on the basis that they are more likely than not to be realized.
Deferred tax assets and liabilities are oset when there is a
legally enforceable right to set o current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a
net basis.
Parent Company’s accounting policies
The Parent Company prepares its annual accounts in
accordance with the Annual Accounts Act (1995:1554) and
the Financial Accounting Standards Council’s recommendation
RFR 2 Accounting for Legal Entities. Under RFR 2, the Parent
Company, in preparing the annual financial statements for the
legal entity, applies all EU-approved IFRSs and statements
insofar as this is possible within the fram¬ework of the Annual
Accounts Act and with respect to the connection between
accounting and taxation. The recommendations specify which
exceptions and additions are to be made from and to IFRS.
The Parent Company’s accounting policies do not in any
material respect deviate from the Group policies and have
been con¬sistently applied in all periods presented in the
financial statements of the Parent Company. The dierences
between the accoun¬ting policies of the Group and the Parent
Company are stated below.
Shares and participations
Shares and participations in Group companies are recognized
at cost, including transaction costs, and sub¬ject to impairment
testing each year. Dividends are recognized in profit or loss.
Shareholders’ contributions
Unconditional shareholders’ contributions are recognized
directly in shareholders’ equity at the recipient and capitalized
in shares and participations at the giver, to the extent that
impairment is not required.
Group contributions
The parent company uses the alternative method in accounting
for group contributions and records paid as well as received
contributions as appropriations in the income statement.
Critical accounting estimates and judgments
The Company makes estimates and assumptions about the
future that aect the reported amounts of assets and liabilities.
Estimates and judgments are continually evaluated based on
historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Any revisions to accounting estimates are
recorded in the period in which the estimates are revised.
The following are the key assumptions about the future and
other key sources of estimation at the end of the reporting
period that, if changed, could result in a material adjustment
to the carrying amount of assets and liabilities within the
next financial year.
Estimates in oil and gas reserves
Estimates of oil and gas reserves are used in the calculations
for impairment tests and accounting for depletion,
decommissioning provisions and business acquisitions.
Standard recognized evaluation techniques are used to
estimate the proved and probable reserves. Estimates of
the proved and probable reserves require the application of
judgement and are subject to annual revisions based on new
information such as changes in economic factors, including
product prices, contract lease terms or development plans.
These techniques consider the future level of development
required to produce the reserves. An independent reserves
auditor reviews these estimates. Changes in estimates of oil and
gas reserves, resulting in dierent future production profiles,
will aect the discounted cash flows used in impairment
testing, the anticipated date of site decommissioning and
restoration and the depletion charges in accordance with
the unit of production method. Changes in estimates in oil
and gas reserves could for example result from additional
drilling, observation of long-term reservoir performance or
changes in economic factors such as oil price and inflation
rates. Information about the carrying amounts of the oil
and gas properties and the amounts charged to income,
including depletion, exploration costs, and impairment costs
is presented in Note 8.
The Tartaruga concession agreement expires in 2025 but
provides mechanisms for extension based on the continued
productivity of the field and submission of a development
plan. In estimating the oil and gas reserves of the Tartaruga
Block the Company used judgement in determining that such
extension should be approved. The reserves as well as current
and expected volumes assume that the extension will be
granted. The net carrying amounts of the Tartaruga oil and
gas assets are USD 24.9 million (2020: USD 26.2 million) as
of 31 December 2021.
Impairment of oil and gas properties
For purposes of impairment testing, PPE are aggregated
into CGUs, based on separately identifiable and largely
independent cash inflows. The determination of the
Company’s CGUs is subject to judgment. Key assumptions
in the impairment models relates to prices and costs that
are based on forward curves and the long-term corporate
assumptions. The recoverable amount of the Company’s
CGUs is determined using estimate of the future cash flows
based on future oil and gas prices and expected production
volumes. These calculations require the use of estimates and
assumptions, including the discount rate. It is possible that
the commodity price assumptions may change, which may
impact the estimated life of the field and economical reserves
recoverable and may require an adjustment to the carrying
value of developed and producing assets. The Company
monitors internal and external indicators of impairment
relating to its assets and records adjustments, if necessary,
at each reporting period date.
Decommissioning provisions
These provisions have been created based on the Company’s
internal estimates. Assumptions, based on the current
economic environment, have been made which management
believes are a reasonable basis upon which to estimate the
future liability. These estimates take into account any material
changes to the assumptions that occur and are reviewed
regularly by management.
Estimates such as discount rates, timing of the abandonment
and the abandonment costs itself are reviewed every reporting
period and are based on current regulatory requirements.
Significant changes in estimates of contamination, restoration
standards and techniques will result in changes to provisions
from period to period. Actual rehabilitation costs will ultimately
depend on future market prices for the rehabilitation costs
which will reflect the market conditions at the time the
rehabilitation costs are actually incurred. The final cost of
the currently recognized rehabilitation provisions may be
higher or lower than currently provided for.
Expenditures on exploration and evaluation assets
The application of the Company’s accounting policy for
expenditures on exploration and evaluation assets requires
judgment in determining whether it is likely that future
economic benefits will flow to the Company, which may be
based on assumptions about future events or circumstances.
Factors such as drilling results, future capital programs,
future operating expenses, as well as estimated reserves
and resources are considered. In addition, Management uses
judgment to determine when exploration and evaluation
assets are reclassified to Producing properties. In making this
determination, various factors are considered, including the
existence of reserves, and whether the appropriate approvals
have been received from regulatory bodies and the Company’s
internal approval process. The Company’s LAK field in the
USA and Block 70 in Oman are considered exploration and
evaluation properties. Even though the LAK field has been
suspended, the Company intends to deploy future capital once
the field is considered economic to develop again.
Exploration and evaluation assets impairment assessment
requires management judgement, as these assets are subject
to ongoing internal reviews to establish the technical feasibility
and commercial viability of a project. Indicators of impairment
or impairment reversals are based on management’s
assessments of the future recoverable value of the exploration
and evaluation assets. Exploration and evaluation assets are
aggregated into CGUs when assessing the recoverability.
Determination of a CGU’s recoverable amount is described
above in impairment of oil and gas properties.
Deferred income tax assets
The Company accounts for dierences that arise between the
carrying amount of assets and liabilities and their tax bases in
accordance with IAS 12, Income Taxes, which requires deferred
income tax assets only to be recognized to the extent that is
probable that future taxable profits will be available against
which the temporary dierences can be utilized. Management
estimates future taxable profits based on the financial models
used to value its oil and gas properties. Any change to the
estimates and assumptions used for the key operational and
financial variables used within the business models could
aect the amount of deferred income tax assets recognized.
The eects of changes in estimates do not give rise to prior
year adjustments and are treated prospectively over the
estimated remaining commercial reserves of each field. While
the Company uses its best estimates and judgement, actual
results could dier from these estimates.
Contingencies
The Company accrues a potential loss if the Company believes
a loss is probable and can be reasonably estimated, based on
information that is available at the time. The determination
of whether a loss is probable from litigation and whether an
outflow of resources is likely requires judgment.
Determining the lease term contracts with renewal and
termination options
The Company determines the lease term as the non-
cancellable term of the lease, together with any periods
covered by an option to extend the lease if it reasonably
certain to be exercised or any periods covered by an option
to terminate the lease, if it reasonably certain not to be
exercised. The Company has several lease contracts that
include extension and termination options. The Company
applies judgement in evaluating whether it is reasonably
certain whether or not to exercise the option to renew or
terminate the lease. The assessment is reviewed if a significant
event or a significant change in circumstances occurs which
aects this assessment.
Ongoing COVID-19 crisis
The Company has maintained a proactive approach in
safeguarding the well being of Company’s employees and
consultants and ensuring that the pandemic has minimal
impact on its operations. To date there have been minimal
interruptions to operations due to the COVID-19 and the
Company has successfully managed to continue with
restrictions imposed in various jurisdictions. The Company’s
Oman project was delayed by a few months due to restrictions
placed in Oman; however, the Company commenced the
project as soon as the restrictions were lied.
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MAHA ENERGY 2021 ANNUAL REPORT
3. Segment Information
Operating segments are based on a geographic perspective
and reported in a manner consistent with the internal reporting
provided to the executive management. All prior period
operating segment results have been adjusted to reflect the
current presentation of the operating segments.
i) Brazil: Includes all oil and gas activities in Tie Field and
Tartaruga Field in Brazil.
ii) USA: Includes all oil and gas activities in the LAK Field
and Illinois Basin in the USA.
iii) Corporate: The Corporate segment aggregates costs
incurred at the Company’s corporate oce in Sweden and
the technical and support oce in Canada as well as costs
related to exploration activities in Oman. These operating
segments have similar economic characteristics as they do
not currently generate revenue.
Adjustments segment primarily includes consolidation
adjustments and eliminations between segments.
The following tables present the operating result for each segment. Revenue and income relate to external (non-intra
group) transactions.
(TUSD) Brazil USA Corporate Adjustments Consolidated
2021
Revenue 62,574 5,732 – – 68,306
Royalties (8,043) (1,341) – – (9,384)
Production and operating (11,353) (1,509) – – (12,862)
Depletion, depreciation and amortization (7,202) (1,270) (63) – (8,535)
General and administration (945) (147) (4,425) – (5,517)
Stock-based compensation – – (419) – (419)
Exploration and business development cost – – (6) – (6)
Foreign currency exchange (loss) gain 21 76 189 (256) 30
Other income 2,443 – – – 2,443
Other gains 5,164 – – – 5,164
Operating results 42,659 1,541 (4,724) (256) 39,220
Net finance costs (2,420) (20) (7,523) – (9,963)
Current tax (2,311) – – – (2,311)
Deferred tax (4,359) – – (1,000) (5,359)
Net results 33,569 1,521 (12,247) (1,256) 21,587
(TUSD) Brazil USA Corporate Adjustments Consolidated
31 December 2020
Revenue 37,518 1,500 – – 39,018
Royalties (5,465) (364) – – (5,829)
Production and operating (8,824) (842) – – (9,666)
Depletion, depreciation and amortization (5,009) (578) (37) – (5,624)
General and administration (811) (302) (4,826) – (5,939)
Stock-based compensation – – (338) – (338)
Exploration and business development cost – (40) (168) – (208)
Impairment – (21,000) – – (21,000)
Foreign currency exchange loss (gain) 61 (63) (4,367) 4,124 (245)
Other income 1,066 – – – 1,066
Operating results 18,536 (21,689) (9,736) 4,124 (8,765)
Net finance costs (2,266) (20) (2,696) – (4,982)
Current tax (1,106) – – – (1,106)
Deferred tax 8,194 – – (3,600) 4,594
Net results 23,358 (21,709) (12,432) 524 (10,259)
(TUSD)
Assets Liabilities
2021 2020 2021 2020
Brazil 124,647 103,130 53,132 59,469
USA 17,618 9,075 44,753 37,259
Corporate 118,695 91,566 71,650 51,487
Intercompany balance elimination (92,846) (79,748) 92,846 79,748
Total Assets/Liabilities 168,114 124,023 76,689 68,467
Shareholder’s equity – – 91,425 55,556
Total equity – – 91,425 55,556
Total consolidated 168,114 124,023 168,114 124,023
For detailed information for the oil and gas properties, see also Note 8 and Note 9.
Joint operations
The Company, jointly with one other participant, owns the
Tartaruga block oil and gas production assets in Brazil. The
Company’s share is 75% in the joint operations. The Company
is entitled to a proportionate share of the oil and gas revenue
and bears a proportionate share of the expenses. This joint
operations results have been included in the Brazil segment.
4. Revenue
The Company derives revenue from the transfer of goods at a
point in time in the following major commodities from oil and
gas production in the geographic regions of Brazil and the USA:
(TUSD) 2021 2020
Brazil
Crude oil 61,986 37,104
Natural gas 588 414
Brazil oil and gas sales 62,574 37,518
United States oil sales 5,732 1,500
Total revenue from contracts
with customers
68,306 39,018
The Company had two main customers during 2021 (2020:
two) that individually accounted for more than 10 percent of
the Company’s consolidated gross sales. Total sales to these
customers for 2021 were approximately USD $51.9 million and
USD $9.7, respectively (2020: $37.0 million), which are included
in the Company’s Brazil operating segment. Approximately,
76% (2020: 70%) of the total revenue is contracted with one
customer in the Brazil segment. There were no intercompany
sales or purchases of oil and gas during the period.
The Company had no contract asset or liability balances during
the period presented. As at 31 December 2021, accounts
receivable included $2.1 million of accrued sales revenue
which related to the December 2021 production.
5. General and Administrative Expenses
TUSD Parent TSEK
2021 2020 2021 2020
Personnel costs 4,059 3,538 3,674 6,173
Rent & oce costs 900 500 144 96
Insurance 151 83 – –
Listing costs 186 648 2,656 2,984
Costs of external services 909 1,566 1,530 1,530
Soware & Information technology 285 295 225 164
Travel related costs 221 168 23 2
Non recoverable taxes & other costs 96 260 848 2,411
Allocated to Operating expenses (1,290) (1,119) – –
5,517 5,939 9,365 13,360
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MAHA ENERGY 2021 ANNUAL REPORT
6. Net Finance Costs
TUSD Parent TSEK
2021 2020 2021 2020
Interest on bonds payable 1,463 3,909 12,300 36,000
Accretion of bonds payable (Note 14) 497 1,063 4,176 9,787
Accretion of decommissioning provision 122 108 – –
Amortisation of deferred financing fees
(Note 15)
1,233 – 10,772 –
Financing transaction cost 505 – 4,613 –
Foreign currency exchange loss 784 – 34,200 –
Interest expense (Note 15) 5,456 21 45,934 –
Interest income
5
(97) (119) (32,134) (20,959)
9,963 4,982 79,861 24,828
7. Income Taxes
TUSD Parent TSEK
2021 2020 2021 2020
Current tax expense 2,311 1,106 – –
Deferred tax expense (income) 5,359 (4,594) – –
7,670 (3,488) – –
Current taxes are in respect of the Company’s operations in Brazil. The statutory income tax rate in Brazil is 34%; however,
following application of tax incentives available to the Company in Brazil, the resulting tax rate is 15.25% for 2021 and 2020.
The Brazil tax incentives begin to expire in 2029.
The applicable tax rate reflects the statutory tax rate of the company’s head oce in Sweden. The tax on the Company’s
profit before tax dierent from the theoretical amount that would arise using the tax rate of Sweden as follows:
TUSD Parent TSEK
2021 2020 2021 2020
Result before tax 29,257 (13,747) (126,461) (258,342)
Applicable tax rate 20.6% 21.4% 20.6% 21.4%
Expected tax expense (income) 6,027 (2,942) (26,051) (55,285)
Eect of dierent tax rates (1,748) (1,075) – –
Non-deductible items 2,015 1,492 22,801 44,408
Recognition of year-end deferred tax
assets
– (5,333) –
Changes in unrecognized deferred tax
assets and other
1,376 4,370 3,250 10,877
Income tax expense (income) 7,670 (3,488) – –
Current tax expense 2,311 1,106 – –
Deferred tax expense (income) 5,359 (4,594) – –
Total 7,670 (3,488) – –
Specification of deferred tax assets:
(TUSD) 2021 2020
Unused tax loss carry-forwards 4,926 8,801
Other deductible temporary dierences (1,343) 1,177
Deferred tax assets 3,583 9,978
The deferred tax asset of TUSD 3,583 (2020: 9,978) represents estimated tax losses and other temporary dierences in Brazil
of TUSD 10,447 (2020: TUSD 30,459) which has been fully recognized, as the probability of realization is more likely than not
due to expected taxable income in Brazil. The Company has not recognized any deferred tax assets on any other tax losses
or other temporary deductible dierences in any other jurisdiction within the Group.
A summary of Maha’s estimated tax losses by country is as follows:
Loss carry-forwards
(TUSD) 2021 Expiry
Sweden 17,564 Indefinite
Brazil 14,487 Indefinite
Canada 3,102 Beginning in 2033
United States 23,752 Beginning in 2033
Luxembourg 9,514 Beginning in 2034
68,420
Loss carry forwards in Brazil are limited to a maximum of 30% of taxable income in the year that they are applied.
(TUSD)
Oil and gas
properties
Equipment and
Other
Right-of-use
assets
Total
Cost
31 December 2019 83,917 2,163 813 86,893
Additions 26,967 114 5,510 32,591
Acquisition 4,538 – – 4,538
Change in decommissioning cost 614 – – 614
Currency translation adjustment (19,290) (120) (305) (19,715)
31 December 2020 96,746 2,157 6,018 104,921
Additions 41,161 214 – 41,375
Disposition – – (30) (30)
Change in decommissioning cost (360) – – (360)
Currency translation adjustment (7,000) (190) (14) (7,204)
31 December 2021 130,547 2,181 5,974 138,702
Accumulated depletion, depreciation and
amortization
31 December 2019 (9,751) (697) (202) (10,650)
DD&A (5,033) (68) (475) (5,576)
Currency translation adjustment 2,271 14 65 2,350
31 December 2020 (12,513) (751) (612) (13,876)
DD&A (7,000) (142) (1,267) (8,409)
Currency translation adjustment 951 19 24 994
31 December 2021 (18,562) (874) (1,855) (21,291)
Carrying amount
31 December 2020 84,233 1,406 5,406 91,045
31 December 2021 111,985 1,307 4,119 117,411
8. Property, Plant and Equipment
5
The Parent Company interest income mainly represents
intra group loans interest income.
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MAHA ENERGY 2021 ANNUAL REPORT
(TUSD) Brazil USA Corporate Consolidated
Oil and gas properties 98,230 13,757 – 111,987
Other tangible assets 251 962 96 1,309
Right-of-use assets 3,943 – 172 4,115
31 December 2021 102,424 14,719 268 117,411
Oil and gas properties 78,223 6,010 – 84,233
Other tangible assets 171 1,224 11 1,406
Right-of-use assets 5,176 – 230 5,406
31 December 2020 83,570 7,234 241 91,045
The oil and gas properties relate to the producing oil and gas
cost pools in the Brazil and USA segments. The Corporate
segment includes other tangible assets of all corporate
companies including Oman. Depletion and depreciation
amounted to TUSD 8,535 (2020: TUSD 5,624) for 2021 and
is included with the DD&A costs line in the Consolidated
Statement of Operations.
At 31 December 2021, the Company assessed its property,
plant and equipment for indicators of potential impairment
and the Company noted indicators of impairment for the
Brazil properties due to a decrease in reserves volumes and
net present value. The Company performed impairment tests
and determined that there were no impairment to record.
Dome AB Inc Acquisition
On 31 March 2020, the Company acquired certain oil producing
assets in the Illinois Basin, USA, through the purchase of all
outstanding shares in Dome AB Inc. (“Dome Acquisition”)
for a cash consideration of USD $4.0 million and assumption
of TUSD 319 in net current liabilities. In addition, Maha
capitalized TUSD 151 in the transaction costs. The acquisition
resulted in an increase PP&E of approximately TUSD 4,538,
the assumption of TUSD 68 in decommissioning liabilities and
TUSD 319 in working capital deficiency. The Company applied
the optional IFRS 3 concentration test to this acquisition which
resulted in the acquired assets being accounted for as an
asset acquisition.
(TUSD)
31 December 2019 21,216
Additions in the period 400
Oman acquisition 10,350
Impairment (21,000)
Change in estimates 48
31 December 2020 11,014
Additions in the period 2,646
31 December 2021 13,660
Exploration and evaluation assets relate to non-producing oil
and gas properties in the LAK Ranch block, USA and Oman
Block 70 and by nature are intangible costs. No depletion was
charged to these E&E assets. Of the total additions during the
current year, additions related to Oman Block 70 amounted to
TUSD 1,886 and additions related to the LAK Ranch amounted
to TUSD 760. At year-end 2020, the carrying value of the
LAK Ranch was written down to the estimated recoverable
amount, resulting in a non-cash impairment charge of USD
$21.0 million.
On 5 October 2020, the Company entered into an Exploration
and Production Sharing Agreement (“EPSA”) with the
government of the Sultanate of Oman, for Block 70, an onshore
block that includes the shallow undeveloped Mafraq heavy
oil field in Oman. The Company paid USD 10.4 million for the
acquisition of Block 70.
9. Exploration and Evaluation Assets
Impairment of E&E assets
E&E assets are tested for impairment both at the time of
any triggering fact and circumstances as well as upon their
eventual reclassification to oil and gas properties in PP&E.
At 31 December 2021, the Company assessed its E&E assets
for indicators of potential impairment. As a result of this
assessment, the Company concluded that no impairment
indicators existed.
At 31 December 2020, the Company assessed that the
carrying amount of the exploration and evaluation asset of
the LAK Ranch was unlikely to be recovered in full as a result
of decreases in forecasted commodity oil prices at year-
end 2020. This triggered an indicator of impairment. As a
result, impairment testing was performed and the carrying
value of the LAK Ranch was written down to the estimated
recoverable amount, resulting in a non-cash impairment
charge of $21.0 million
10. Accounts Receivables
11. Cash and Cash Equivalents
12. Share Capital
TUSD Parent TSEK
2021 2020 2021 2020
Oil and gas sales 2,658 1,600 – –
Tax credits and other receivables 3,290 1,492 – 116
5,948 3,092 – 116
The majority of the Company’s oil and gas sales receivables are with Petrobras, the Brazilian national oil company and
Dax, an independent refinery. The Company’s policy to mitigate credit risk associated with these balances is to establish
marketing relationships with creditworthy purchasers. Under the marketing agreement with the refinery, most of the oil
sales are prepaid prior to delivery with occasional credit granted during long weekends or public holidays to maintain daily
deliveries while banks are closed. As at 31 December 2021, the Company determined that the average expected credit loss on
the Company’s accounts receivable was nil (2020: nil) as the Company has no history of collection issues with the customers
which are mainly of high credit ratings or has no default history.
(TUSD) 2021 2020
Cash 17,532 6,681
Short term investment 8,003 –
25,535 6,681
Shares outstanding A B Total
31 December 2019 92,456,550 7,960,318 100,416,868
Exercise of bond warrants 949,853 – 949,853
Conversion of convertible B shares 7,476,952 (7,476,952) –
Exercise of incentive warrants 263,330 – 263,330
31 December 2020 101,146,685 483,366 101,630,051
Exercise of bond warrants 10,134,916 – 10,134,916
Exercise of incentive warrants 480,238 – 480,238
Share subscription 7,470,491 – 7,470,791
Conversion of convertible B shares 483,366 (483,366) –
31 December 2021 119,715,696 – 119,715,696
During 2021, a total of 10,134,916 bond warrants were
exercised at a strike price of SEK 7.45 prior to their expiration
on 30 June 2021 and the same number of new class A shares
were issued. The remainder of the bond warrants are now
expired. The total proceeds from this transaction were SEK
75.5 million (approximately USD 9.0 million) before issuance
costs. In addition, 300,000 incentive warrants were exercised
and converted to class A shares during the year and additional
180,238 incentive warrants that were exercised at year-end
2020 were registered as class A shares. Also, all outstanding
class B shares (483,366) were converted to Class A shares
during 2021.
As part of the Term Loan financing during the second quarter
of 2021, Maha received an equity contribution of USD 10
million through a private placement issuance of 7,470,491
new class A shares, at a price of SEK 11.59 per share (See
Note 15 for further details).
The Company has detailed the conversion of class B shares
to Class A shares in its previously published prospectus and
is available on the Company’s website.
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MAHA ENERGY 2021 ANNUAL REPORT
Maha AB share purchase warrants outstanding
As at 31 December 2021, the Company had no Maha A TO2 share purchase warrants outstanding. Following table details the
exercise of the Maha A TO2 warrants:
Number of Warrants Exercise Price Exercise Price
# SEK USD
31 December 2019 11,352,182 7.45 0.80
Exercised – Q1 (827,500) 7.45 0.78
Exercised – Q2 (6,446) 7.45 0.74
Exercised – Q4 (5,684) 7.45 0.82
Exercised – Q4 (110,223) 7.45 0.86
31 December 2020 10,402,329 7.45 0.91
Exercised – Q1 (136,963) 7.45 0.90
Exercised – Q2
6
(9,997,953) 7.45 0.88
Expired (267,413) 7.45 0.88
31 December 2021 – – –
Warrant Incentive Program
The Company has long term incentive program (LTIP) to issue incentive warrants as part of the remuneration package for
management and employees. The annual 2021 incentive warrants were issued during the second quarter 2021. Issued but not
allocated warrants are held by the Company. As at 31 December 2021 Maha incentive warrants outstanding were as follows:
Warrants
incentive
programme
Exercise period
Exercise
price, SEK
1 Jan 2021 Issued 2021
Exercised
2021
Expired or
Cancelled
2021
31 December
2021
2018 LTIP-2
1 May 2021 – 30
November 2021
9.20 750,000 – 300,000 450,000 –
2019 LTIP-3
1 June 2022 – 28
February 2023
28.10 500,000 – – – 500,000
2020 LTIP-4
1 June 2023 – 29
February 2024
10.90 460,000 – – – 460,000
2021 LTIP-5
1 June 2024 – 28
February 2025
12.40 – 1,048,286 – – 1,048,286
2021 LTIP-6
1 June 2023 – 29
February 2024
12.40 – 524,143 – – 524,143
Total 1,710,000 1,572,429 (300,000) 450,000 2,532,429
Each warrant shall entitle the warrant holder to subscribe for one new Share in the Company at the subscription price per
share. The fair value of the warrants granted under the warrant incentive program has been estimated on the grant date
using the Black & Scholes model.
Weighted average assumptions and resultant fair values are as follows:
2021
Incentive Programme
2020
Incentive Programme
Risk free interest rate (%) -0.03 0.00
Expected term (years) 3.25 3.75
Expected volatility (%) 55 74
Forfeiture rate (%) 10.0 5.0
Weighted average fair value (SEK) 4.32 5.75
Total share-based compensation expense for 2021 was TUSD 419 (2020: TUSD 338).
13. Earnings Per Share
14. Bonds Payable
15. Bank Debt
Basic earnings per share are based on net result attributable to the common shareholders and is calculated based upon the
weighted-average number of common shares outstanding during the periods presented.
2021 2020
Net result attributable to shareholders of the Parent Company
(TUSD)
21,587 (10,259)
Weighted average number of shares for the year 112,912,781 101,357,757
Earnings per share, USD 0.19 (0.10)
Weighted average diluted number of shares for the year 113,080,714 106,478,943
Earnings per share fully diluted, USD 0.19 (0.10)
TUSD TSEK
31 December 2019 30,621 286,037
Accretion of bond liability 1,063 9,787
Eect of currency translation 4,338 –
31 December 2020 36,022 295,824
Accretion of bond liability 497 4,176
Repayment of bonds (35,919) (300,000)
Eect of currency translation (600) –
31 December 2021 – –
The bonds were set to mature on 29 May 2021; however, on May 5, 2021, the Company early redeemed the outstanding
Bonds. The Bonds redeemed at an amount equal to 100.00 per cent of the nominal amount (i.e., SEK 100,000 per Bond) plus,
as at May 5, 2021, accrued interest of TSEK 15,600 was disbursed to the Bondholders. No early redemption premiums were
paid as the Bonds were redeemed at 100 percent of their nominal amount.
TUSD TSEK
Bank debt 60,000 504,276
Eect of currency translation – 43,524
Deferred financing costs (4,516) (32,758)
31 December 2021 55,484 515,042
Less: Current portion 11,250 102,078
Non current 44,234 412,964
On 30 March 2021, the Company entered into a credit
agreement for a senior secured term loan of USD 60 million
(the “Term Loan”), maturing 31 March 2025. The proceeds
were used to redeem the outstanding SEK 300 million bond
and to fund the Company’s oil and gas production expansion
program.
The Term Loan bears interest at a step-rate increasing from
12.75% to 13.5% as nearing maturity time, payable quarterly in
arrears and secured by substantially all the assets and shares
of Maha Energy and its subsidiaries. The principal amount is to
be repaid in quarterly instalments over the four (4) year period,
commencing 15 months from the credit agreement date. From
the date of the credit agreement and up to disbursement on
23 April 2021 a commitment fee equal to an annual rate of
12.60% was payable. Following disbursement, the Company
redeemed the Senior Secured Bond on 5 May 2021 for a total
amount of SEK 315.6 million, including accrued interest (see
Note 14).
The Term Loan requires the Company to maintain certain
covenants including a Net interest bearing debt to trailing
twelve months EBITDA ratio not greater than 3.0 at the end
of each quarter. Under the terms of the loan, the Company
6
Q2 exercised warrants include 2,881,345 warrants exercised
during Q1 for which shares were issued in Q2.
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MAHA ENERGY 2021 ANNUAL REPORT
is subject to certain restrictions in its ability to make certain
payments and distributions to persons outside of the Maha
Group, as well as other customary provisions applicable for
similar credit agreements.
As part of the closing of the financing transaction, Maha also
received an equity contribution of USD 10 million through the
Private Placement issuance of 7,470,491 new shares to the
same bank, at a price of SEK 11.59 per share, representing a
10% discount to the last 15 days volume weighted average
share price prior to the closing. This discount amounted to
USD $1.1 million and was proportionately allocated to deferred
financing cost and equity issuance cost.
The Company recorded directly attributable transaction costs
of USD 5.2 million as deferred financing costs which also
includes part of the 10% discount on the Private Placement of
Maha shares. Deferred financing costs will be amortized over
the life of the Term loan. Other transactions costs of USD 0.5
million incurred as a result of the refinancing activities and
which were not directly attributable to the actual financing
that took place have been expensed.
16. Decommissioning Provision
17. Lease Liability
18. Other long-term Liabilities and Provisions
19. Accounts Payable and Accrued Liabilities
The decommissioning provision represents the present value of the expected future costs associated with the Company’s
costs to abandon and reclaim its oil and gas wells and facilities.
The following table presents the reconciliation of the opening and closing decommissioning provision:
(TUSD)
31 December 2019 2,175
Accretion expense 108
Additions 168
Dome Acquisition (Note 8) 68
Change in estimate 378
Foreign exchange movement (300)
31 December 2020 2,597
Accretion expense 122
Additions 251
Change in estimate (611)
Foreign exchange movement (95)
31 December 2021 2,264
(TUSD)
31 December 2019 611
Accretion expense 4,974
Interest expense 21
Lease payments (450)
Foreign currency translation (463)
31 December 2020 4,693
Additions –
Interest expense 122
Lease payments (1,235)
Foreign currency translation (123)
31 December 2021 3,457
Less current portion 1,072
Lease liability – non current 2,385
TUSD
2021 2020
Labour and contractors
claims provision
651 1,228
Minimum work
commitments provision
– 3,597
651 4,825
Group (TUSD) Parent (TSEK)
2021 2020 2021 2020
Trade payable 8,135 9,931 119 2,075
Accrued liabilities 5,188 9,600 1,287 2,283
Interest payable – 402 – 3,300
Taxes payable (see Note 7) 1,510 397 – –
14,833 20,330 1,406 7,658
The total undiscounted amount of estimated future cash flows
required to settle the obligations at 31 December 2021 was
approximately TUSD 7,648 (2020: TUSD 3,531). In calculating
the present value of the decommissioning provision for the
Brazil assets, an inflation rate of 5.5 percent (2020: 4.3 percent)
and a discount rate of 11.5 percent (2020: 7.8 percent) was
used, which represents an estimated rate for Brazil’s long
term government treasury bonds for a period of over 20
years, the approximate weighted-average remaining years
to abandonment. In calculating the present value of the
decommissioning provision for the USA assets, an inflation
rate of 2.0 percent (2020: 2.0 percent) and a discount rate
of average 2.0 percent (2020: 1.5 percent) was used, which
represents a long-term risk-free interest rate projection in
the United States of America.
Based on the estimates used in calculating the decommissioning
provision as at 31 December 2021, approximately 100 percent
of the total amount of this provision is expected to be settled
between 15 years and 20 years.
The Company has lease liabilities for contracts related to
oce space, equipment and gas compressors. Lease terms
are negotiated on an individual basis and contain wide range
of dierent terms and conditions. The total payments made
for short-term and low value leases were not significant for
the year 2021 and are not included in the lease liability. The
Company’s lease liabilities are for periods of one to five years
but may have extension options. The undiscounted cash flows
relating to the lease liabilities are detailed in Note 20.
Provisions for labour and contractors claims represents the
Company’s best estimate at year-end for the pre-existing
legal matters. During the year, the Company reversed the
long-term provisions for the minimum work commitments’
penalties for the Blocks 117 and 118 in Brazil, as the Company
was granted extensions until November 2024 on these blocks
and these contracts are no longer considered onerous
contracts. At year-end 2020, the Company was still in the
process of filing for the extensions and there was significant
uncertainty on Company’s ability to obtain further extension
to fulfill the minimum work commitment.
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MAHA ENERGY 2021 ANNUAL REPORT
20. Changes in Liabilities with Cash Flow Movements from Financing Activities
The changes in liabilities whose cash flow movements are disclosed as part of financing activities in the cash flow statements
are as follows:
Non-cash changes
At 1 January
2021
Cash Flows
Lease adds
under IFRS 16
Amortization
of deferred
financing fees
Foreign
exchange
movement
At 31 December
2021
Lease Liability 4,693 (1,235) 122 – (123) 3,457
Bank debt – 54,252 – 1,232 55,484
Bonds Payable 36,022 (35,919) – 497 (600) –
Non-cash changes
At 1 January
2020
Cash Flows
Lease adds
under IFRS 16
Amortization
of deferred
financing fees
Foreign
exchange
movement
At 31 December
2020
Lease Liability 611 (450) 4,735 – (203) 4,693
Bonds Payable 30,621 – – 1,063 4,338 36,022
21. Financial Assets and Liabilities
22. Management of Financial Risk
The Company’s financial assets and financial liabilities consist
of cash and cash equivalents, restricted cash, accounts
receivable, performance bonds, finance leases, accounts
payable and accrued liabilities, lease liabilities, long-term
liabilities and bank debt.
For financial instruments measured at fair value in the balance
sheet, the following fair value measurement hierarchy is used:
» Level 1: based on quoted prices in active markets;
» Level 2: based on inputs other than quoted prices as
within level 1, that are either directly or indirectly
observable;
» Level 3: based on inputs which are not based on
observable market data.
The Company thoroughly examines the various risks to
which it is exposed, and assesses the impact and likelihood
of those risks. The Company’s risk management policies
are established to identify and analyze the risks faced by
the Company, to set appropriate risk limits and to monitor
market conditions and the Company’s activities. The Board
of Directors has overall responsibility for establishment and
oversight of the Company’s risk management; however, the
Board of Directors delegates execution responsibility to the
Company’s management.
The types of risk exposures and the objectives and policies for
managing these risks exposures is described below:
a) Currency risk
Maha is a Swedish company which is operating globally and
therefore attracts substantial foreign exchange exposure, both
on transactions as well as on the translation from functional
currency for entities to the Company’s presentation currency
of the US Dollar. As of July 1, 2021, Maha Energy AB (“the
Parent Company”) changed its functional currency from
Swedish Krona to US Dollars to better reflect the Company’s
business activities. The change in functional currency was
accounted for prospectively from 1 July 2021. In accordance
with the Swedish Annual Accounts Act (1995:1554), the
presentation currency of the Parent Company’s financial
statements continues to be Swedish Krona.
The main functional currency of the Company’s subsidiary in
Brazil and Luxembourg is Brazilian Reals (BRL). For all other
subsidiaries in Canada, USA and Cyprus and its Oman branch,
US Dollars is the functional currency. The Company’s oil sales
in Brazil are denominated in BRL based on a USD oil price and
all operational, administrative and capital activities related
to the Brazil properties are transacted primarily in BRL. In
Sweden the Company’s expenditures are in SEK currency,
however, the bank debt is denominated in US Dollars therefore
not impacted by the currency fluctuations. Further, with
regards to BRL, there is a risk of inflation or hyper-inflation.
To minimize foreign currency risk, the Company’s cash
balances are held primarily in USD funds in Cayman and
Sweden, in BRL within Brazil and USD within Canada and
Oman. In Canada and Oman, USD funds are converted to CAD
and OMR respectively, on an as-needed basis. The Company
funds Brazil operating expenses and capital projects with
the cash generated from Brazil operations, to minimize the
foreign currency risk.
The following table summarizes the eect that a change in
these currencies against the US Dollar would have on operating
profit through the conversion of the income statement of
the Company’s subsidiaries from functional currency to the
presentation US Dollar for the year-ended 31 December 2021.
Average Rate
2021
10% USD
weakening
10% USD
strengthening
BRL/USD 5.3961 4.8565 5.9357
Total eect
on net result,
TUSD
3,971 -3,249
The net foreign currency exchange gain for the year amounted
to TUSD 30 (TUSD 245 loss). Foreign exchange movements
occur on settlement of transactions denominated in foreign
currencies and the revaluation of working capital to the
prevailing exchange rate at the balance sheet date where
those monetary assets and liabilities are held in currencies
other than the functional currencies of the Company’s
reporting entities. Foreign exchange exposures related to the
transactions denominated in foreign currencies are minimal
both in Brazil and Sweden as the majority of the transactions
are in the local functional currencies.
b) Credit risk
The exposure to credit risk arises through the failure of a
customer or another third party to meet its contractual
obligations to the Corporation. The Company’s policy is to
limit credit risk by limiting the counterparties to major banks
and oil and gas companies. Where it is determined that there
is a credit risk for oil and gas sales, the policy is to require
an irrevocable letter of credit (or equivalent instrument) for
the full value of the sale or prepayment. The policy on joint
operations parties is to rely on the provisions of the underlying
joint operating agreements to take possession of the licence
or the joint operations partner’s share of production for non-
payment of cash calls or other amounts due.
As at 31 December 2021, the Company’s trade receivables
amounted to TUSD 5,948 (TUSD 3,092). The majority of
the Company’s oil and gas sales receivables were with
Petrobras, the Brazilian national oil company and Dax, a
small independent refinery in Brazil. Substantially, all of the
Company’s accounts receivable in Brazil is outstanding for
less than 30 days. Under the marketing agreement with the
refinery, most of the oil sales are prepaid prior to delivery
with occasional credit granted during long weekends or public
holidays to maintain daily deliveries while banks are closed.
In the USA, the Company markets and sells its oil through
marketing companies and payments are received in 30 days.
There is no recent history of default and expected credit loss
associated with these receivables is not significant. Other
short-term receivables are considered recoverable as they
are mainly related to taxes and employee advances. The
Company’s cash and cash equivalents are primarily held at
large Canadian, Brazilian and Swedish financial institutions.
c) Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. Liquidity risk
also includes the risk of not being able to liquidate assets
in a timely manner at a reasonable price. The Company has
since inception been equity and debt financed through share
and Bonds issues. The Company has in place a planning and
forecasting process to help determine the funds required
to support the Company’s normal operating requirements
on an ongoing basis. The Company ensures that there is
sucient available capital to meet its short-term business
requirements, taking into account its anticipated cash flows
from operations and its holdings of cash and cash equivalents.
The Company manages its liquidity risk by ensuring it has
access to multiple sources of capital including: cash, cash
from operating activities, as well as available capital markets.
As at 31 December 2021, the Company had current assets
of $33.0 million, positive cash flow from operating activities
and current liabilities of $27.2 million. On 30 March 2021, the
Company entered into a loan agreement (the “Term Loan”) and
equity financing subscription with Brazilian Investment Bank
BTG Pactual S.A. for total proceeds of USD 70 million before
customary fees and expenses. The proceeds were used to
redeem the SEK 300 million bonds payable during the second
quarter. The remaining funds are being used to finance capital
expenditures across Maha’s portfolio and general corporate
purposes. The Company’s bond holders also exercised the
bond warrants during the year, prior to warrants expiration,
which provided additional approximately USD 9.0 million cash
for the Company. The Company does not have any externally
imposed material capital requirements to which it is subject
except for the loan covenants (See Note 15).
Fair value of financial assets and liabilities
The Company’s cash and cash equivalents, accounts receivable,
and accounts payable and accrued liabilities are assessed on
fair value hierarchy described above. The fair value of cash
and cash equivalents, restricted cash, accounts receivable,
and accounts payable and accrued liabilities approximate
their carrying value due to the short term to maturity of these
instruments.
The fair value of finance leases approximates their carrying
amount due to the specific non-tradeable nature of these
instrument. The bank debt is carried at amortized cost and
which approximates the fair value.
Total < 1 Year 1 – 2 years 2 – 5 Years
2021
Accounts payable and accrued liabilities 13,324 13,324 –
–
Taxes payable 1,509 1,509 – –
Lease liabilities 3,457 1,072 2,385 –
Other Long-term liabilities 651 – – 651
Bank debt 55,484 11,250 19,500 24,734
74,425 27,154 21,885 25,385
2020
Accounts payable and accrued liabilities 20,330 20,330 – –
Lease liabilities 4,693 1,224 1,135 2,334
Other Long-term liabilities 4,825 – 3,597 1,228
Bonds payable 36,022 36,022 – –
65,870 57,576 4,732 3,562
The maturity dates for the Company’s undiscounted cash outflows related to financial liabilities are as follows:
77
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MAHA ENERGY 2021 ANNUAL REPORT
d) Interest Rate Risk
Interest rate risk is the risk that changes in the market interest
rates may aect earnings and cash flows. The Company is
exposed to interest rate risk through the Term loan. The
Company redeemed the bonds payable during the current
year.
The total interest expense for 2021 amounted to TUSD 6,797
which included TUSD 1,463 of interest related to bonds payable.
During the year, the Company borrowed USD 60.0 million in
the Term loan and used the net proceeds to repay SEK 300
million of bonds payable. The Term Loan bears interest at a
step-rate increasing from 12.75% to 13.5% as nearing maturity
time, payable quarterly in arrears. The Company’s exposure
to interest rate risk is low as the Company holds no floating
rate debt and no other interest rate financial instrument.
e) Commodity Price risk
The Company is subject to price risk associated with
fluctuation in the market prices for oil and gas. Prices of oil
and gas are impacted by the normal economic drivers of
supply and demand as well as the financial investors and
market uncertainty which are generally beyond the Company’s
control. Factors that influence these include operational
decisions, natural disasters, economic conditions, political
instability or conflicts and actions by major oil exporting
countries.
Changes in crude oil prices may significantly affect the
Company’s results of operations, cash generated from
operating activities, capital spending and the Company’s
ability to meet its obligations. The majority of the Company’s
production is sold under short-term contracts; consequently,
the Company is at risk to near term price movements. The
Company manages this risk by constantly monitoring
commodity prices and factoring them into operational
decisions, such as contracting or expanding its capital
expenditures program. For 2021, natural gas production
represented 11% of the Company’s total production and, as
a result, any fluctuation in natural gas prices would have a
nominal eect on current revenues.
From time to time, the Company enters into certain risk
management contracts to manage the exposure to market
risks from fluctuations in commodity prices. These risk
management contracts are not used for trading or speculative
purposes. All risk management contracts are recorded at
fair value at each reporting period with the change in fair
value being recognized as an unrealized gain or loss on the
consolidated statement of operations. Maha entered into no
risk management contracts during the year 2021.
The table below summaries the eect that a change in the
realized oil prices would have had on the net result and equity
at 31 December 2021:
Net result of the year, TUSD 21,587 21,587
Possible shi -10% +10%
Total eect on net result,
TUSD
(5,842) 5,842
23. Management of Capital
The Company manages its capital structure to support the
Company’s strategic growth. The Company’s objectives
when managing its capital structure are to maintain
financial flexibility, preserve access to capital markets,
ensure its ability to finance internally generated growth and
to fund potential acquisitions while maintaining the ability
to meet the Company’s financial obligations as they come
due. The Company considers its capital structure to include
shareholders’ equity of USD $91.4 million (31 December 2020:
USD $55.6 million) plus net debt of USD $29.9 million (31
December 2020: USD $29.3 million). At 31 December 2021,
the Company’s working capital surplus was USD $5.8 million
(31 December 2020: Deficit of USD $10.0 million), which
includes USD $25.5 million of cash (31 December 2020: USD
$6.7 million).
The Company may adjust its capital structure by issuing new
equity or debt and adjusting its capital expenditure program,
within its contracted work commitments. To facilitate the
management of its capital requirements, the Company
prepares annual expenditure budgets that are updated as
necessary depending on various factors, including successful
capital deployment and general market and industry
conditions. The annual budget and subsequent updates are
approved by the Board of Directors.
The Company entered into a loan agreement and equity
financing subscription with Brazilian Investment Bank BTG
Pactual S.A. for total proceeds of USD 70 million before
customary fees and expenses. The proceeds were used to
redeem the SEK 300 million bonds payable during the second
quarter. The remaining funds are being used to finance capital
expenditures across Maha’s portfolio and general corporate
purposes. The Company’s bond holders also exercised the
bond warrants during the year, prior to warrants expiration,
which provided additional approximately USD 9.0 million cash
for the Company. The Company does not have any externally
imposed material capital requirements to which it is subject
except for the loan covenants (See Note 15).
24. Changes in Non-cash Working Capital
(TUSD) 31 December 2021 31 December 2020
Change in:
Accounts receivable (2,898) 1,625
Inventory 61 (9)
Prepaid expenses and deposits 195 (176)
Accounts payable and accrued liabilities (74) 5,030
Total (2,716) 6,470
25. Pledged Assets
27. Related Party Transactions
28. Related Party Transactions
As at 31 December 2021, the Company has pledged assets in relation to the security of the Term Loan whereby the Parent
Company has pledged shares of all its subsidiaries and concessions rights and other assets in Brazil with a book value for
the Group of USD 63.5 million and MSEK 8.0 for the parent company, including adjustments for the consolidation purposes.
The Company also has guarantees in relation to its work commitments in Brazil and has contractual commitments in the
USA and Oman (See Note 26).
Kvalitena AB has an ownership in terms of voting rights of 18.0% and holds two seats at the board of directors. As such,
Kvalitena AB can exercise significant influence over the Company and is deemed to be a related party in accordance with
IAS 24. The Company leases its oce space from Kvalitena AB in Sweden. The terms of the lease are equivalent to those that
prevail in arm’s length transactions. As at 31 December 2021, Maha had no amounts outstanding as payable or receivable
to or from Kvalitena AB.
In relation to the Parent Company, the subsidiaries are considered related parties. The Parent Company has provided
subsidiaries with intragroup loans and receives interest income on a loan from one of the subsidiaries.
Board members, except for Jonas Lindvall, are not included in table. There are no women on the Board.
26. Commitments and Contingencies
The Company has 7 concession agreements with the National
Agency of Petroleum, Natural Gas and Biofuels in Brazil (“ANP”).
Certain of these blocks are subject to exploration work and
abandonment commitments in relation to these exploration
blocks which are guaranteed with certain credit instruments.
These exploration commitments are in the normal course
of the Company’s exploration business and the Company
plans to fund any related work or penalty, if necessary, with
existing cash balances, cash flow from operations and available
financing sources.
During the fourth quarter 2021, the Company was granted
a full waiver on the related work commitments on Block
224 minimum work. Additionally, the Company was granted
extensions until November 2024 on its minimum work
commitments for Blocks 117 and 118. This allows the Company
to work towards a waiver application for the minimum work
obligations related to these blocks.
In the Illinois Basin, the Company completed its commitment
to drill and complete four gross wells (3 net wells) during 2021.
For 2022, the Company has commitments to drill one operated
and one non-operated well. Subsequent to the year-end,
the Company signed a 463 acres land lease in Indiana, USA.
The new land lease requires the Company to drill at least
one well during the first three years of the lease and then
at least one well every year thereaer to retain the land. In
addition, a future contingent consideration of USD 3.0 million
is possible if certain oil prices and production level milestones
are met before 2023. Maha and its subsidiaries are under
no obligation to reach the production level set out for the
production milestone. The company had not recorded this
contingent consideration.
With the acquisition of the Block 70 in Oman, the Company
will undertake minimum work obligations during the initial
exploration period of three years which include interpretation
and reprocessing of 3D seismic and drilling 10 (ten) shallow
wells. Costs for these activities are estimated at USD 20 MUSD.
(TUSD) Canada USA Brazil Sweden Company
Employees (2021)
(of which men)
13
9
4
3
62
51
1
0
80
63
Employees (2020)
(of which men)
13
9
3
3
55
45
2
0
73
57
79
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MAHA ENERGY 2021 ANNUAL REPORT
29. Remuneration to the Board of Directors, Senior Management and Other Employees
Salaries and other remuneration for the Board members and the Company Management:
2021 2020
Salaries, other remuneration
and social security costs
(TUSD)
Salaries
and other
remuneration
Social security
costs
Salaries
and other
remuneration
Social security
costs
Parent Company in Sweden
Board members 236 59 184 51
Employees 109 32 64 17
Subsidiaries abroad
Canada 2,524 48 2,300 37
USA 295 22 323 30
Brazil 2,335 457 2,335 497
Total 5,499 618 5,206 632
2021
(TUSD)
Board Fee /
Base salary
Other
benefits
7
Short-term
variable
remuneration
Remuneration
for Committee
work
Option Based
Award
Total 2021
Parent Company in
Sweden
Victoria Berg
8
59 4 – – 6 69
Board members
Jonas Lindvall
9
– – – – – –
Harald Pousette 48 – – 7 – 55
Anders Ehrenblad 35 – – 10 – 45
Nicholas Walker 35 – – 12 – 47
Seth Lieberman 35 – – 10 – 45
Fredrik Cappelen 35 – – 9 – 44
Total 247 4 – 48 6 305
Subsidiaries abroad
Management
Jonas Lindvall 403 22 – – 11 436
Other
10
767 36 16 – 241 1,060
Total Management 1,170 58 16 – 252 1,496
2021
(TUSD)
Board Fee /
Base salary
Other benefits
7
Short-term
variable
remuneration
Remuneration
for Committee
work
Option Based
Award
Total 2021
Parent Company in
Sweden
Victoria Berg 40 3 – – 4 47
Board members
Jonas Lindvall
8
– – – – – –
Harald Pousette 32 – – 15 – 47
Anders Ehrenblad 33 – – 17 – 50
Nicholas Walker 26 – – 21 – 47
Seth Lieberman 16 – – 4 – 20
Fredrik Cappelen 16 – – 4 – 20
Total 163 3 – 61 4 231
Subsidiaries abroad
Management
Jonas Lindvall 403 19 – – 27 449
Other
11
647 44 176 867
Total Management 1,050 63 – – 203 1,316
Salaries, Benefits and Social Security Costs
Under the terms of the Employment Contracts, in the event
of termination without cause or a change of control event,
the CEO and the other executive ocers could be entitled to
compensation between 3 – 12 months base salary plus benefits
and any earned but unpaid bonuses. A change of control
event is defined as: (i) the acquisition of 30 percent or more
of existing shares concurrent with a majority of the board of
directors being changed, (ii) the sale of all or substantially all
the assets of the Company or (iii) a resolution of the board
of directors to liquidate the assets or wind up the Company.
The Company has not set aside or accrued amount to provide
pension, retirement or similar benefits upon termination of
employment or assignment.
Incentive Programs
As of the date of this Annual Report, Maha has 2,532,429
Warrants under the Long-Term Incentive Plan as follows:
Long Term Incentive Plan
In 2017, the Company implemented a long-term incentive
plan which provides for an annual grant of warrants. Each
annual grant has a three-year duration and will vest equally in
three tranches annually. The warrants currently outstanding
were issued following the AGMs in 2018, 2019, 2020 and
2021. During 2021, 1,048,286 warrants were issued to
certain executives and employees of Maha as part of the
LTIP 5 program and 524,143 warrants were issued to certain
executives of Maha as part of the LTIP 6 program following
their approval at the AGM. Issued but not allocated warrants
are held by the Company.
The complete terms and conditions of the Warrants under
the Long-Term Incentive Plan are available on the Company’s
website – www.mahaenergy.ca.
7
Other benefits include health insurance and pension for
the management.
8
Victoria Berg transitioned from a part-time employee to a
full-time employee during the current year.
9
Jonas Lindvall was not compensated in the capacity as a
Board member.
10
Other represents the following members of the
management for 2021: CFO, COO, VP Exploration and Sub-
surface Manager.
11
Other represents the following members of the management
for 2020: CFO, VP Operations and VP Exploration.
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MAHA ENERGY 2021 ANNUAL REPORT
30. Shares in Subsidiaries – Parent Company
31. Loans to Subsidiaries – Parent Company
Subsidiary Registration number Registered oce
Share
%
2021
(TSEK)
2020
(TSEK)
Maha Energy Inc. 2017256518 Calgary, AB, Canada 100 7,314 3,688
Maha Energy I (Brazil) AB 559058-0907 Stockholm, Sweden 100 – –
Maha Energy II (Brazil) AB 559058-0899 Stockholm, Sweden 100 680 680
Maha Energy Finance
(Luxembourg) S.A.R.L
B163089
Grand Duchy,
Luxembourg
100 – –
Mana Energy Services LLC 2020-002241022 Newcastle, WY, USA 100 – –
Maha Energy (Oman) Ltd 259894 Cyprus 100 9 –
8,003 4,368
Participation in subsidiaries (TSEK)
2021 2020
Opening value 4,368 192,468
Acquisition – –
Disposition – –
Write-o of investment (25,915) (195,726)
Paid shareholders’ contribution 29,550 7,626
8,003 4,368
Loans to subsidiaries (TSEK)
2021 2020
Opening value 471,839 372,497
Impairment of loan to subsidiaries (43,389) 7,022
New lending to subsidiaries 170,354 163,859
Loan repayment by subsidiaries (17,396) (57,494)
Interest income from subsidiaries 32,134 –
Currency translation 30,502 –
644,044 471,839
Loans to subsidiaries – current – –
Loans to subsidiaries – long term 644,044 471,839
Subsidiary (TSEK) 2021 2020
Maha Energy Inc. 140,271 99,900
Maha Energy (US) Inc. 93,890 77,448
Maha Energy Services LLC – 19,574
Maha Energy I (Brazil) AB (742) (742)
Maha Energy II (Brazil) AB 46 46
Maha Energy Finance (Luxembourg) S.A.R.L 212,947 178,351
Mana Energy (Indiana) Inc. 70,592 7,699
Maha Energy (Oman) Ltd. 127,040 89,563
644,044 471,839
The Parent Company loans to subsidiaries is mainly denominated in US dollars.
32. Auditor’s Fees
33. Proposed Distribution of Earnings
34. Subsequent Events
TUSD Parent TSEK
2021 2020 2021 2020
Deloitte
Audit assignment 232 196 653 710
Audit related 24 11 220 140
Tax advisory services 27 50 – 75
Other services 1 119 – 1,000
284 376 873 1,925
Audit assignments refers to the examination of the annual
accounts, the accounting records and the administration of
the Board and CEO, other tasks incumbent on the company’s
auditor to perform as well as advice or other assistance
resul¬ting from observations made during an audit or the
conduct of such other duties. Audit activities other than
the audit assignment, pertain to quality assurance services,
The Board of Directors proposes no dividends to be paid for the
year. Furthermore, the board of Directors proposes that the
unrestricted equity of the Parent Company of SEK 222,501,540
including the net result for the year of SEK (126,461,609) be
brought forward as follows:
Key Financial Data and Ratios
The selected key ratios presented below include alternative key
ratios or key ratios that are not defined in accordance with IFRS,
and are thus not necessarily comparable to key ratios under
similar names used by other companies. Those financial key
ratios that are not defined in accordance with IFRS are, together
with key ratios that are defined in accordance with IFRS, used
to facilitate the managements and other stakeholders’ analysis
of the Group.
including assistance regarding observations made during such
a review, which is carried out in accordance with ordinances,
the Articles of Association, By-laws or agreements, and which
result in a report that is also intended for others than the client.
Advice on tax questions is reported separately. Everything else
comprises other services including listing upgrade readiness
review.
SEK
Dividend –
Carried forward 222,501,540
Total (SEK) 222,501,540
See the heading “Definitions of alternative key ratios” for
definitions and objective of alternative key ratios, and the
heading “Reconciliation of alternative key ratios” below for
reconciliations of abovementioned key ratios. All alternative
key rations have been taken from the Group’s audited financial
reports as per and for the financial years ended 31 December
2020 and 2021, unless stated otherwise.
The conflict between Russia and Ukraine can have a significant impact on the oil and gas industry, however, it is not possible
to assess the consequences of this volatility on the Company.
(TUSD) 2021 2020
Revenue 68,306 39,018
Operating netback 46,060 23,523
EBITDA 47,725 18,104
Net result 21,587 (10,259)
Cash flow from operations 31,005 18,984
Free cash Flow (15,990) (14,596)
Net debt (TUSD) 29,949 29,341
Financial data
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MAHA ENERGY 2021 ANNUAL REPORT
2021 2020
Return on equity (%) 24 -18
Equity ratio (%) 54 45
NIBD/EBITDA 0.63 1.62
TIBD/EBITDA 1.16 1.99
2021 2020
Weighted number of shares (before dilution) 112,912,781 101,357,757
Weighted number of shares (aer dilution) 113,080,714 106,478,943
NIBD/EBITDA Earnings per share before dilution, USD 0.19 (0.10)
TIBD/EBITDA Earnings per share aer dilution, USD 0.19 (0.10)
Dividends paid per share n/a n/a
(TUSD) 2021 2020
Revenue 68,306 39,018
Royalties (9,384) (5,829)
Operating Expenses (12,862) (9,666)
Operating netback 46,060 23,523
(TUSD) 2021 2020
Operating results
11
39,220 (8,765)
Depletion, depreciation and amortization 8,535 5,624
Impairment on E&E assets – 21,000
Foreign currency exchange loss / (gain) (30) 245
EBITDA 47,725 18,104
(TUSD) 2021 2020
Cash flow from operating activities 31,005 18,984
Less: cash used in investing activities (46,995) (33,580)
Free cash flow (15,990) (14,596)
2021 2020
Net result for the period (TUSD) 21,587 (10,259)
Ending equity balance (TUSD) 91,425 55,556
Return on equity, % 24 -18
2021 2020
Total equity (TUSD) 91,425 55,556
Total assets (TUSD) 168,114 124,023
Equity ratio, % 54 45
(TUSD) 2021 2020
Bank debt 54,484 –
Bonds payable – 36,022
Less: cash and cash equivalents (25,535) (6,681)
Net debt 29,949 29,341
Key ratios
Data per share
Operating Netback
EBITDA
Free cash flow
Return on equity
Equity ratio
Net debt
Relevant reconciliation of alternative key ratios:
The tables below reflect a reconciliation of alternative key ratios based on items, subtotals or total amounts included in the
Group’s audited financial reports for the financial years ended on 31 December 2021 and 2020, unless stated otherwise. The
alternative key ratios are not audited.
For definitions of alternative key ratios which has not been calculated in accordance with IFRS, see the section “Definitions of
alternative key ratios”.
Definitions of alternative key ratios
Definitions of key ratios that are not defined in IFRS (alternative
key ratios) are included in the presentation of definitions below.
Alternative key ratios measure historical or future financial
performance, financial position or cash flows, but excludes or
includes amounts that would not be adjusted correspondingly by
the most comparable key ratio that has been defined in accordance
with the Group’s accounting principles. The Group management
uses alternative key ratios to follow the underlying development
of the Company’s operations and believes that the alternative
key ratios, together with key ratios defined in IFRS, help investors
to understand the Company’s development from period to period
and may facilitate comparisons with similar companies, but are
not necessarily comparable to key ratios under similar names
that are used by other companies. The Company believes that the
alternative key ratios provide useful and supplementary information
to the investors. As these key figures are not more suitable than
key ratios defined in IFRS, they should be used together with these
with a supplementary rather than a substitutional purpose. The
alternative key ratios are not audited. Investors are urged not to
attach undue reliance to the alternative key ratios, and are also
urged to review these together with the Group’s audited financial
reports for the financial years ended 31 December 2021 and 2020.
See the heading “Reconciliation of alternative key ratios” below
for reconciliations of alternative key ratios.
Cash flow from operations: Cash flow from operating activities
in accordance with the consolidated statement of cash flow.
EBITDA (Earnings before interest, taxes, depreciation, and
amortization and impairment): Operating profit before depletion
of oil and gas properties, depreciation of tangible assets,
impairment, foreign currency exchange adjustments, interest and
taxes. EBITDA is used as a measure of the financial performance
of the Company.
Earnings per share: Net result attributable to shareholders of
the Parent Company divided by the weighted average number
of shares for the year.
Earnings per share fully diluted: Net result attributable to
shareholders of the Parent Company divided by the weighted
average number of shares aer considering any dilution eect
for the year.
Equity ratio: Total equity divided by the balance sheet total assets.
Equity ratio is a measure that provides information in order to
enable investors to assess the financial stability of the Company
and the Company’s ability to cope with in the long term.
Free cash flow: Cash flow from operating activities less cash flow
from investing activities in accordance with the consolidated
statement of cash flow. Free cash flow demonstrates the amounts
of cash and cash equivalents remaining in the Company aer
deductions for investments made.
Net debt: Interest bearing bonds less cash and cash equivalents.
Net debt demonstrates the company’s total debt arrangements.
Net debt to EBITDA ratio (NIBD/EBITDA): Net interest-bearing
debt divided by trailing 4 quarters EBITDA. NIBD/EBITDA is
relevant for assessing the company’s ability to carry out strategic
investments and to live up to its financial commitments.
Net result: Net result demonstrates the Company’s earnings or
loss for the relevant period.
Operating netback: Operating netback is defined as revenue less
royalties and operating expenses. Operating netback is a common
measure within the oil and gas industry, with the objective to
illustrate the Company’s operational eciency to enable internal
comparisons and comparisons with competitors.
Return on equity: Net result divided by ending equity balance.
Return on equity demonstrates in the accounts total return of
the owner’s capital.
Revenue: Revenue shows the Company’s revenues from oil and
gas sales before deductions for royalties.
Total debt to EBITDA ratio (TIBD/EBITDA): Total interest-bearing
debt divided by trailing 4 quarters EBITDA. TIBD/EBITDA is
relevant for assessing the company’s ability to carry out strategic
investments and to live up to its financial commitments.
Weighted average number of shares for the year: The number of
shares at the beginning of the year with changes in the number
of shares weighted for the proportion of the year they are in
issue. The key ratio provides information to investors on average
number of outstanding shares in the Company, not taking into
account any dilution eect.
Weighted average number of shares for the year fully diluted:
The number of shares at the beginning of the year with changes
in the number of shares weighted for the proportion of the year
they are in issue aer considering any dilution eect.
11
2021 operating result includes TUSD 5,164 of provision
reversal gains (non-cash).
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MAHA ENERGY 2021 ANNUAL REPORT
Board Assurance
The board of directors and the managing director declare that
the consolidated financial statements have been prepared
in accordance with IFRS as adopted by the EU and give a
true and fair view of the Company’s financial position and
results of operations. The financial statements of the Parent
Company have been prepared in accordance with generally
accepted accounting principles in Sweden and give a true
and fair view of the Parent Company’s financial position and
results of operations. The statutory Administration Report of
the Company and the Parent Company provides a fair review of
the development of the Company’s and the Parent Company’s
operations, financial position and results of operations and
describes material risks and uncertainties facing the Parent
Company and the companies included in the Company.
Stockholm,
11 April 2022
Harald Pousette,
Chairman of the Board
Nicholas Walker,
Director
Anders Ehrenblad,
Director
Seth Lieberman,
Director
Fredrik Cappelen,
Director
Jonas Lindvall,
Managing Director
Our audit report was submitted on April 11, 2022
Deloitte AB
Signature on the Swedish original
Fredrik Jonsson
Authorized public accountant
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MAHA ENERGY 2021 ANNUAL REPORT
Auditor’s Report
To the general meeting of the shareholders of Maha Energy
AB (publ) corporate identity number 559018-9543
Report on the annual accounts and
consolidated accounts
Opinions
We have audited the annual accounts and consolidated
accounts of Maha Energy AB (publ) for the financial year 2021-
01-01 - 2021-12-31. The annual accounts and consolidated
accounts of the company are included on pages 32-87 in
this document.
In our opinion, the annual accounts have been prepared in
accordance with the Annual Accounts Act and present fairly,
in all material respects, the financial position of the parent
company as of 31 December 2021 and its financial performance
and cash flow for the year then ended in accordance with the
Annual Accounts Act. The consolidated accounts have been
prepared in accordance with the Annual Accounts Act and
present fairly, in all material respects, the financial position
of the group as of 31 December 2021 and their financial
performance and cash flow for the year then ended in
accordance with International Financial Reporting Standards
(IFRS), as adopted by the EU, and the Annual Accounts Act.
The statutory administration report is consistent with the
other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of
shareholders adopts the income statement and balance sheet
for the parent company and the group.
Our opinions in this report on the annual accounts and
consolidated accounts are consistent with the content of
the additional report that has been submitted to the parent
company’s audit committee in accordance with the Audit
Regulation (537/2014) Article 11.
Basis for Opinions
We conducted our audit in accordance with International
Standards on Auditing (ISA) and generally accepted auditing
standards in Sweden. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities section.
We are independent of the parent company and the group
in accordance with professional ethics for accountants in
Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements. This includes that,
based on the best of our knowledge and belief, no prohibited
services referred to in the Audit Regulation (537/2014) Article
5.1 have been provided to the audited company or, where
applicable, its parent company or its controlled companies
within the EU.
We believe that the audit evidence we have obtained is
sucient and appropriate to provide a basis for our opinions.
Key Audit Matters
Key audit matters of the audit are those matters that, in
our professional judgment, were of most significance in our
audit of the annual accounts and consolidated accounts of
the current period. These matters were addressed in the
context of our audit of, and in forming our opinion thereon,
the annual accounts and consolidated accounts as a whole,
but we do not provide a separate opinion on these matters.
Valuation of oil and gas assets
The carrying value of oil and gas assets represents the majority
of the assets in the balance sheet in the Group and amounted
to US$125.6 million as of December 31, 2021. Oil and gas
assets are comprised of oil and gas properties (US$112 million)
and exploration and evaluation assets (US$13.6 million).
Information on accounting principles and critical estimates are
disclosed in note 2 in the annual report. Further information
on the oil and gas assets is disclosed in note 8 and 9 in the
annual report.
Oil and gas properties and exploration and evaluation assets
are assessed for impairment indicators at period-end and
whether or not an indication exists, the Company would be
required to calculate the recoverable amount of the asset or
cash generating unit and compare to the carrying amount.
The assessment to identify potential impairment indicators
and to perform potential impairment tests requires
management to exercise significant judgement. There is a
risk that the valuation of oil and gas properties and exploration
and evaluation assets and any potential impairment charge
may be incorrect. Based on the assessment of impairment
indicators, management concluded there were impairment
indicators identified for the Brazilian properties (oil and gas
properties) and an impairment test was performed which
resulted in no need for impairment.
We focus on the valuation of oil and gas assets due to the
significant management judgement and estimates involved,
such as the determination of indicators of impairment,
assessment of oil and gas reserves, future cash flows and
discount rate. The estimation of oil and gas reserves is a
significant area of judgement and the estimates are important
to the impairment assessment as well as for determining the
depletion charges.
Our audit procedures included, but were not limited to:
»
We evaluated the design and implementation of relevant
internal controls to identify indicators of impairment.
» We obtained management’s assessment of impairment
indicators for oil and gas properties and evaluation and
exploration assets as of December 31, 2021 and assessed
and challenged the reasonableness of the assumptions
used by management to assess the impairment indicators.
»
We obtained management’s impairment test for the
Tie and Tartaruga fields in Brazil and assessed the
reasonableness of the recoverable amount considering
among other management’s estimates of future cash
flows and the risk profile of the asset.
» As part of our assessment of impairment indicators and
our audit of the impairment test, we considered the
reserve estimates prepared by the Company’s external
reserve auditor, Chapman Petroleum Engineering, Ltd.
We assessed the competence and objectivity of Chapman
as expert, to satisfy ourselves they were appropriately
qualified to prepare such reserve estimates.
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MAHA ENERGY 2021 ANNUAL REPORT
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MAHA ENERGY 2021 ANNUAL REPORT
Other information than the annual accounts
and consolidated accounts
»
This document also contains other information than the
annual accounts and consolidated accounts and is found
on pages 1-32, 43-48 and 92. The Board of Directors and
the Managing Director are responsible for this other
information.
»
Our opinion on the annual accounts and consolidated
accounts does not cover this other information and we do
not express any form of assurance conclusion regarding
this other information.
» In connection with our audit of the annual accounts and
consolidated accounts, our responsibility is to read the
information identified above and consider whether the
information is materially inconsistent with the annual
accounts and consolidated accounts. In this procedure
we also take into account our knowledge otherwise
obtained in the audit and assess whether the information
otherwise appears to be materially misstated.
»
If we, based on the work performed concerning
this information, conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report in this
regard.
Responsibilities of the Board of Directors and
the Managing Director
The Board of Directors and the Managing Director are
responsible for the preparation of the annual accounts and
consolidated accounts and that they give a fair presentation
in accordance with the Annual Accounts Act and, concerning
the consolidated accounts, in accordance with IFRS as adopted
by the EU. The Board of Directors and the Managing Director
are also responsible for such internal control as they determine
is necessary to enable the preparation of annual accounts
and consolidated accounts that are free from material
misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts,
The Board of Directors and the Managing Director are
responsible for the assessment of the company’s and the
group’s ability to continue as a going concern. They disclose,
as applicable, matters related to going concern and using the
going concern basis of accounting. The going concern basis
of accounting is however not applied if the Board of Directors
and the Managing Director intends to liquidate the company,
to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of
Director’s responsibilities and tasks in general, among other
things oversee the company’s financial reporting process.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about
whether the annual accounts and consolidated accounts as
a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our
opinions. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance
with ISAs and generally accepted auditing standards in
Sweden will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these annual accounts
and consolidated accounts.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
» Identify and assess the risks of material misstatement
of the annual accounts and consolidated accounts,
whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit
evidence that is sucient and appropriate to provide a
basis for our opinions. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or
the override of internal control.
»
Obtain an understanding of the company’s internal
control relevant to our audit in order to design audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
eectiveness of the company’s internal control.
»
Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made by the Board of Directors and
the Managing Director.
»
Conclude on the appropriateness of the Board of
Directors’ and the Managing Director’s use of the going
concern basis of accounting in preparing the annual
accounts and consolidated accounts. We also draw a
conclusion, based on the audit evidence obtained, as
to whether any material uncertainty exists related to
events or conditions that may cast significant doubt on
the company’s and the group’s ability to continue as a
going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
report to the related disclosures in the annual accounts
and consolidated accounts or, if such disclosures are
inadequate, to modify our opinion about the annual
accounts and consolidated accounts. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions
may cause a company and a group to cease to continue
as a going concern.
»
Evaluate the overall presentation, structure and content
of the annual accounts and consolidated accounts,
including the disclosures, and whether the annual
accounts and consolidated accounts represent the
underlying transactions and events in a manner that
achieves fair presentation.
»
Obtain sufficient and appropriate audit evidence
regarding the financial information of the entities or
business activities within the group to express an opinion
on the consolidated accounts. We are responsible for
the direction, supervision and performance of the group
audit. We remain solely responsible for our opinions.
We must inform the Board of Directors of, among other
matters, the planned scope and timing of the audit. We must
also inform of significant audit findings during our audit,
including any significant deficiencies in internal control that
we identified.
We must also provide the Board of Directors with a statement
that we have complied with relevant ethical requirements
regarding independence, and to communicate with them
all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable,
actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Board of Directors,
we determine those matters that were of most significance in
the audit of the annual accounts and consolidated accounts,
including the most important assessed risks for material
misstatement, and are therefore the key audit matters. We
describe these matters in the auditor’s report unless law or
regulation precludes disclosure about the matter.
Report on other legal and regulatory
requirements
Opinions
In addition to our audit of the annual accounts and consolidated
accounts, we have also audited the administration of the Board
of Directors and the Managing Director of Maha Energy AB
(publ) for the financial year 2021-01-01 - 2021-12-31 and
the proposed appropriations of the company’s profit or loss.
We recommend to the general meeting of shareholders
that the profit to be appropriated in accordance with the
proposal in the statutory administration report and that the
members of the Board of Directors and the Managing Director
be discharged from liability for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally
accepted auditing standards in Sweden. Our responsibilities
under those standards are further described in the Auditor’s
Responsibilities section. We are independent of the parent
company and the group in accordance with professional ethics
for accountants in Sweden and have otherwise fulfilled our
ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sucient and appropriate to provide a basis for our opinions.
Responsibilities of Board of Directors and the
Managing Director
The Board of Directors is responsible for the proposal for
appropriations of the company’s profit or loss. At the proposal
of a dividend, this includes an assessment of whether the
dividend is justifiable considering the requirements which the
company’s and the group’s type of operations, size and risks
place on the size of the parent company’s and the group’s
equity, consolidation requirements, liquidity and position
in general.
The Board of Directors is responsible for the company’s
organization and the administration of the company’s aairs.
This includes among other things continuous assessment
of the company’s and the group’s financial situation and
ensuring that the company’s organization is designed so that
the accounting, management of assets and the company’s
financial aairs otherwise are controlled in a reassuring
manner. The Managing Director shall manage the ongoing
administration according to the Board of Directors’ guidelines
and instructions and among other matters take measures
that are necessary to fulfill the company’s accounting in
accordance with law and handle the management of assets
in a reassuring manner.
Auditor’s responsibility
Our objective concerning the audit of the administration, and
thereby our opinion about discharge from liability, is to obtain
audit evidence to assess with a reasonable degree of assurance
whether any member of the Board of Directors or the Managing
Director in any material respect:
» has undertaken any action or been guilty of any omission
which can give rise to liability to the company, or
»
in any other way has acted in contravention of the Companies
Act, the Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriations
of the company’s profit or loss, and thereby our opinion about
this, is to assess with reasonable degree of assurance whether
the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with generally
accepted auditing standards in Sweden will always detect actions
or omissions that can give rise to liability to the company, or that
the proposed appropriations of the company’s profit or loss are
not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted
auditing standards in Sweden, we exercise professional
judgment and maintain professional scepticism throughout the
audit. The examination of the administration and the proposed
appropriations of the company’s profit or loss is based primarily on
the audit of the accounts. Additional audit procedures performed
are based on our professional judgment with starting point in
risk and materiality. This means that we focus the examination
on such actions, areas and relationships that are material for
the operations and where deviations and violations would have
particular importance for the company’s situation. We examine
and test decisions undertaken, support for decisions, actions
taken and other circumstances that are relevant to our opinion
concerning discharge from liability. As a basis for our opinion on
the Board of Directors’ proposed appropriations of the company’s
profit or loss we examined whether the proposal is in accordance
with the Companies Act.
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MAHA ENERGY 2021 ANNUAL REPORT
The auditor’s examination of the Esef
report
Opinion
In addition to our audit of the annual accounts and consolidated
accounts, we have also examined that the Board of Directors and
the Managing Director have prepared the annual accounts and
consolidated accounts in a format that enables uniform electronic
reporting (the Esef report) pursuant to Chapter 16, Section 4 a of
the Swedish Securities Market Act (2007:528) for Maha Energy
AB (publ) for the financial year 2021.
Our examination and our opinion relate only to the statutory
requirements.
In our opinion, the Esef report #[checksum] has been prepared in
a format that, in all material respects, enables uniform electronic
reporting.
Basis for opinion
We have performed the examination in accordance with FAR’s
recommendation RevR 18 Examination of the Esef report. Our
responsibility under this recommendation is described in more
detail in the Auditors’ responsibility section. We are independent
of Maha Energy AB (publ) in accordance with professional ethics
for accountants in Sweden and have otherwise fulfilled our ethical
responsibilities in accordance with these requirements.
We believe that the evidence we have obtained is sucient and
appropriate to provide a basis for our opinion.
Responsibilities of the Board of Directors and
the Managing Director
The Board of Directors and the Managing Director are responsible
for the preparation of the Esef report in accordance with the
Chapter 16, Section 4 a of the Swedish Securities Market Act
(2007:528), and for such internal control that the Board of
Directors and the Managing Director determine is necessary to
prepare the Esef report without material misstatements, whether
due to fraud or error.
Auditor’s responsibility
Our responsibility is to obtain reasonable assurance whether the
Esef report is in all material respects prepared in a format that
meets the requirements of Chapter 16, Section 4(a) of the Swedish
Securities Market Act (2007:528), based on the procedures
performed.
RevR 18 requires us to plan and execute procedures to achieve
reasonable assurance that the Esef report is prepared in a format
that meets these requirements.
Reasonable assurance is a high level of assurance, but it is not a
guarantee that an engagement carried out according to RevR 18
and generally accepted auditing standards in Sweden will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis
of the Esef report.
The audit firm applies ISQC 1 Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and other
Assurance and Related Services Engagements and accordingly
maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with
professional ethical requirements, professional standards and
legal and regulatory requirements.
The examination involves obtaining evidence, through various
procedures, that the Esef report has been prepared in a format
that enables uniform electronic reporting of the annual accounts
and consolidated accounts. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of
material misstatement in the report, whether due to fraud or
error. In carrying out this risk assessment, and in order to design
audit procedures that are appropriate in the circumstances, the
auditor considers those elements of internal control that are
relevant to the preparation of the Esef report by the Board of
Directors and the Managing Director, but not for the purpose
of expressing an opinion on the eectiveness of those internal
controls. The examination also includes an evaluation of the
appropriateness and reasonableness of assumptions made by
the Board of Directors and the Managing Director.
The procedures mainly include a technical validation of the Esef
report, i.e., if the file containing the Esef report meets the technical
specification set out in the Commission’s Delegated Regulation
(EU) 2019/815 and a reconciliation of the Esef report with the
audited annual accounts and consolidated accounts.
Furthermore, the procedures also include an assessment of
whether the Esef report has been marked with iXBRL which
enables a fair and complete machine-readable version of the
consolidated statement of financial performance, financial
position, changes in equity and cash flow.
Deloitte AB, was appointed auditor of Maha Energy AB by the
general meeting of the shareholders on the 2021-05-27 and
has been the company’s auditor since 2016-04-22.
Gothenburg 11 April 2022
Deloitte AB
Fredrik Jonsson
Authorized Public Accountant
Abbreviations
CAD Canadian Dollar
SEK Swedish Krona
BRL Brazilian Real
USD US Dollar
TSEK Thousand SEK
TUSD Thousand USD
MSEK Million SEK
MUSD Million USD
OMR Omani Rial
EPSA Exploration and Production
Sharing Agreement
Oil related terms and measurements
BOE or boe Barrels of oil equivalent
BBL or bbl Barrel
BOEPD Barrels of oil equivalent per day
BOPD Barrels of oil per day
SCF or scf Standard cubic foot
Mbbl Thousand of barrels
MMbbl Million of barrels
Mboe Thousands of barrels of oil equivalent
MMboe Million of barrels of oil equivalent
Mboepd Thousands of barrels of oil equivalent per day
Mbopd Thousands of barrels of oil per day
MCF Thousand cubic feet
MSCFD Thousand cubic feet per day
MMSCF Million cubic feet
MMSCFPD Million cubic feet per day
BWPD Barrels of water per day
Gas to oil 6,000 cubic feet = 1 barrel of oil equivalent
conversion
DEFINITIONS
