Antrim Energy Inc.
LSE : AEY

March 28, 2014 03:00 ET

Antrim Energy Annual Report 2013

FOR:  ANTRIM ENERGY INC.

TSX SYMBOL:  AEN
AIM SYMBOL:  AEY

March 28, 2014

Antrim Energy Annual Report 2013

CALGARY, ALBERTA--(Marketwired - March 28, 2014) - Antrim Energy Inc. (TSX:AEN)(AIM:AEY) -

This management's discussion and analysis ("MD&A") provides a detailed explanation of Antrim Energy Inc.'s (the
"Company" or "Antrim") operating results for the fourth quarter and year ended

December 31, 2013 compared to the fourth quarter and year ended December 31, 2012 and should be read in conjunction with
the audited consolidated financial statements of Antrim. This MD&A has been prepared using information available up to
March 27, 2014. The audited consolidated financial statements of the Company have been prepared in accordance with
International Financial Reporting

Standards ("IFRS"). Unless otherwise noted all amounts are reported in United States dollars.

Going Concern

The audited consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") on a going concern basis, which contemplates that assets will be realized and liabilities discharged
in the normal course of business as they come due. Should the Company be unable to continue as a going concern, it may
be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

There are a number of material uncertainties that raise significant doubts as to the Company's ability to continue as a
going concern, including compliance with debt covenants, the performance of producing wells and related infrastructure,
oil prices, ability to finish the planned development program for Causeway within budget, ability to secure additional
financing and settlement of contingencies. If the assumption in respect to the ability of the Company to continue as a
going concern is not appropriate, adjustments to the carrying amounts of assets and liabilities, revenues and expenses
and the statement of financial position classifications used may be necessary. Such adjustments could be material.

In January 2013, the Company entered into a $30 million Payment and Oil Swap transaction to fund increased capital
requirements of the Causeway project which is subject to a number of financial and operating covenants as well as
restrictions on various cash balances. The Company is in breach of certain covenants and had insufficient cumulative
production to remove restrictions related to the use of proceeds from oil sales. In addition, the Company continues to
experience higher than expected capital costs to complete the Causeway development for which the Company is subject to
requirements to place additional funds into a reserve account with the lender. Failure to fund capital costs or meet
financial and operating covenants could result in the loss of the asset.

On February 7, 2014 the Company announced that it entered into an agreement (the "Agreement") with First Oil Expro
Limited ("FOE") pursuant to which, subject to the terms and conditions of the Agreement, FOE has agreed to purchase from
the Company (the "Transaction") all of the issued and outstanding shares in the capital of Antrim s UK subsidiary,
Antrim Resources (N.I.) Limited ("ARNIL") for $53 million in cash, plus the assumption of certain liabilities and
adjusted working capital, from which Antrim will settle on closing all outstanding obligations under its Payment and Oil
Swap agreements. The economic date of the proposed transaction is January 1, 2014 and a $5 million deposit was received
from FOE to be applied towards the purchase price. Antrim will retain its interest in P077 Block 21/28a (the "Fyne
Licence") and P1875 Block 21/29d (the "Erne Licence"), as well as FEL 1- 13 in the Porcupine Basin offshore Ireland. The
Transaction is subject to customary "fiduciary out" provisions, and is conditional upon, among other things, the
approval of Antrim shareholders and the receipt of applicable regulatory approvals. The Agreement includes provision for
payment of a Liquidated Damages fee of $5.3 million payable by either party under certain circumstances if the
Transaction is not completed.

The Board of Directors of Antrim, after consultation with its financial and legal advisors, has unanimously approved
entering into the Agreement and recommend that Antrim shareholders approve the Transaction at a special meeting of
shareholders to be held on April 4, 2014 (the "Meeting"). Full details of the Transaction are included in a management
information circular (the "Circular") mailed to Antrim shareholders on February 28, 2014.

The Board of Directors' recommendation follows an extensive process by the Company to secure additional viable financing
needed to meet higher than expected capital costs to complete the Causeway development as well as meet its ongoing
Payment and Oil Swap obligations. This process was hindered by production interruptions caused by platform shutdowns and
ongoing delays in completion of the Causeway electric submersible pump ("ESP") and water injection facilities. These
delays further negatively impacted available cash balances as hedged production volumes under the Oil Swap no longer
matched actual production volumes.

On March 17, 2014 the Payment and Oil Swap was amended to allow for completion of the Transaction. Under the amendment,
the Transaction is to be completed by April 15, 2014. Nevertheless, there is no assurance that these initiatives will be
successful. Pursuant to the terms of the Payment and Oil Swap, following an event of default by Antrim, Antrim s lender
may demand payment of their inde btedness (together with accrued interest), or alternatively, may realize on their
security at any time. If the Transaction is not approved by Antrim Shareholders, or is delayed or not completed for any
other reason or if the Meeting is adjourned or otherwise delayed, and as a result Antrim is declared to be in default of
its obligations, the lender may apply to a court to appoint a receiver or administrator for an order to sell certain of
Antrim's assets to generate sufficient proceeds to repay the debt owed. If the lender chose to realize on their
security, Antrim may no longer be able to carry on business as a going concern.

As a result of the decision to divest, the majority of the Company's UK segment assets and liabilities have been
reclassified as held for sale and the operations have been accounted for as discontinued operations. Comparative figures
have been reclassified to conform with this presentation (see note 4 of the consolidated audited financial statements).

Non-IFRS Measures

Cash flow from operations, cash flow from operations per share and netback do not have standard meanings under IFRS and
may not be comparable to those reported by other companies. Antrim utilizes cash flow from operations and netback to
assess operational and financial performance to allocate capital among alternative projects and to assess the Company s
capacity to fund future capital programs.

Cash flow from operations is defined as cash flow from operating activities before changes in working capital. Cash flow
from operations per share is calculated as cash flow from operations divided by the weighted-average number of
outstanding shares. Reconciliation of cash flow from operations to its nearest measure prescribed by IFRS is provided
below. Netback is the per unit of production amount of revenue less operating costs and the financial derivative and is
used in capital allocation decisions and to economically assess projects.

Calculation of Cash Flow from Continuing Operations

 

                                                       Three Months Ended        Year Ended
                                                          December 31,          December 31,
                                                           2013       2012       2013       2012
-------------------------------------------------------------------------------------------------
($000 s)
Cash flow provided by (used in) operating activities        (51)     3,496    (17,474)    (8,671)
Less: changes in non-cash working capital                 1,785     11,633     (8,948)     4,717
-------------------------------------------------------------------------------------------------
Cash flow used in operations                             (1,836)    (8,137)    (8,526)   (13,388)
-------------------------------------------------------------------------------------------------

 

Overview of Continuing Operations

Fyne Licence

P077 Block 21/28a - Fyne, Antrim 100%

In late March 2013 the Company announced that it would not proceed with development of the Fyne Field with an FPSO
following a significant escalation of expected future development costs. The Company subsequently signed a joint
development agreement with Enegi Oil Plc ("Enegi") and Advanced Buoy Technology ("ABTechnology") to undertake
engineering studies and preparation of a Field Development Plan ("FDP") using buoy technology. The terms of the
agreement include that there will be no costs to the Company prior to FDP approval. During the second half of 2013 
Enegi-
ABTechnology worked with contractors to engineer the production facility for Fyne. The environmental statement is now
due to be submitted during March 2014. Engineering work is now expected to continue during the summer with FDP approval
to be sought prior to August 31, 2014. Upon approval of the FDP by DECC, Enegi-ABTechnology will earn the right to
acquire 50% working interest in the licence. Antrim will remain operator.

DECC has agreed to amend the terms of the Fyne Licence to allow for a FDP for the Fyne Field to be submitted no later
than August 31, 2014. DECCs consent to the amendment includes conditions, amongst other things, that the FDP submission
is in its final form, the environmental statement is cleared, the Company is approved as a production operator, there is
satisfactory evidence of project financing, and first production is achieved prior to November 25, 2016. If these
conditions are not met, or if extensions from DECC are not obtained, potential consequences to Antrim could include the
expiry of the Fyne Licence in accordance with its terms.

The independent evaluation of Antrim s oil and gas properties for the year ended December 31, 2013 prepared by McDaniel
& Associates Consultants Ltd. and dated March 22, 2014 (the "McDaniel Report") did not assign any reserves to the Fyne
Field compared to 11.8 million barrels proved plus probable reserves assigned to the Fyne and Crinan fields at December
31, 2012. The decrease is attributed to relinquishment in July 2013 of the Crinan Prospective Area and uncertainty as to
the development of the Fyne Field.

Erne Licence

P1875 Block 21/29d - Erne, Antrim 50%

The Erne Licence started in January 2011 and is a Promote Licence with a drill-or-drop commitment. The Erne well 
(21/29d-
11 and 11z) drilled in late 2011 met all the commitments on the Licence. A discovery was made with the 21/29d-11 well
and also in the up-dip side-track 21/29d-11z well. These discoveries are not commercial on their own, but may be
economic to develop as tie-backs to an adjacent production facility if that transpires. The initial four year term of
the Licence expires in January 2015 at which time there is a requirement to relinquish 50% of the Licence area. Erne has
never been assigned any proved, probable or possible reserves or contingent resources.

Ireland

Frontier Exploration Licence 1-13, Antrim 25%

Antrim acquired a Licensing Option in the 2011 Atlantic Margin Licensing Round which included Blocks 44/4, 44/5 (part),
44/9, 44/10, 44/14 and 44/15 covering an area of 1,409 km2 (the "Skellig Block"). Antrim licensed, reprocessed and
interpreted 2D seismic data over the blocks and identified a Cretaceous deep sea fan complex similar in seismic
character to many of the recent Cretaceous discoveries offshore West Africa.

In April 2013, the Company farmed out a 75% interest in, and operatorship, of the Licensing Option to Kosmos Energy Ltd.
("Kosmos") in exchange for Kosmos carrying the full costs of a planned 3D seismic program within the licence area and 
re-
imbursement to Antrim of a portion of the exploration costs incurred on the blocks to date. Antrim retained a 25%
interest. The transaction was approved by the Department of Communications, Energy and Natural Resources of Ireland
("DCENR").

On July 15, 2013, DCENR approved the conversion of the Licensing Option to a Frontier Exploration Licence ("FEL"). FEL 
1-
13 has a 15 year term, with an initial three-year term followed by three four-year terms, following a mandatory 25%
relinquishment of the Licensing Option area. The remaining licence area is 1,051.75 km2.

The approved work programme for the initial three year term of the FEL involves acquisition of 3D seismic over the FEL
area followed by seismic processing, interpretation and geological studies. Seismic acquisition commenced on July 10,
2013 and was completed by the end of September 2013. Processing and interpretation of the seismic data is in progress.

Tanzania

Production Sharing Agreement - Pemba and Zanzibar

In July 2013, the Company sold its option to acquire up to a 30% interest in the production sharing agreement for the
Pemba- Zanzibar exploration licence offshore and onshore Tanzania. Cash consideration paid to the Company was $7.5
million. There were no wells, production, reserves or resources associated with the transaction.

Corporate

In May 2013, Antrim disclosed that there were a number of material uncertainties that raised significant doubt as to
Antrim's ability to continue as a going concern, including the performance of the producing wells, oil prices, ability
to finish the planned development program for the Causeway Field within budget, ability to secure additional financing,
relinquishment of commitments on certain licences and settlement of contingencies. Antrim further disclosed that the
availability of equity or debt financing is affected by many factors, many of which are outside of Antrim's control.

On February 7, 2014 the Company announced that it entered into an agreement to sell, subject to shareholder and
regulatory approval, all of the issued and outstanding shares in the capital of ARNIL for $53 million in cash, plus the
assumption of certain liabilities and adjusted working capital, from which Antrim will settle on closing all outstanding
obligations under its Payment and Oil Swap agreements. See Going Concern on page 1 of Management's Discussion and
Analysis for additional information.

Overview of Discontinued Operations

Causeway Licences

Licence P201 Block 211/22a South East Area and P1383 Block 211/23d, Antrim 35.5%

Production from the Causeway Field averaged 2,178 gross barrels of oil per day ("bopd") (Antrim net 637 bopd) in 2013
compared to an average of 4,081 gross bopd (Antrim net 1,194 bopd) from November to December 31, 2012. In 2013
production was interrupted for 11.5 weeks due to platform shutdowns and well tie- in operations related to another
field. Production averaged 1,714 gross bopd (Antrim net 501 bopd) for the three months ended December 31, 2013 compared
to 1,439 gross bopd (Antrim net 421 bopd) in the third quarter of 2013. Scheduled maintenance of the North Cormorant
platform interrupted oil production for 21 days in the fourth quarter compared to 33 days in the third quarter. Oil
production is transported by pipeline to the North Cormorant production platform where it is processed before being
exported to the Sullom Voe terminal via the Brent Pipeline System for sale.

Anticipated startup of the downhole ESP and water injection well is now scheduled by the operator for late April 2014
following ongoing delays in completing required platform mod ification and water injection riser installation work.
Until startup of the ESP oil is being produced in cycles to allow for sufficient pressure buildup between cycles.

As part of the sale of a 30% working interest in the Causeway Licences to the operator in October 2011, Antrim entered
into a Differential Lifting Agreement ("DLA") giving the operator a temporary right to 6.25% of Antrim s share of
produced oil. Antrim's share of oil produced will be reduced to 29.25% until a cumulative value of $8.9 million after-
tax is received by the operator. Once satisfied, Antrim's working interest in production will revert back to 35.5% from
29.25%.

In February 2013, Antrim announced that it had elected to opt out of participating in further development of the Fionn
Field and formally withdrew from the Fionn Field subarea in September 2013. The Company retained liability for the
decommissioning or well abandonment liabilities of two wells and has been released by the operator of any further
obligations with respect to decommissioning of two other suspended wells in the Fionn Field subarea.

Delays in completing the Causeway ESP and water injection facilities together with additional significant capital cost
overruns on the project caused the Company to record a $12.1 million impairment charge in the third quarter of 2013.
Following the agreement to sell all of the issued and outstanding shares in ARNIL, the Company recorded a $14.6 million
impairment charge in the fourth quarter of 2013.

The McDaniel Report effective December 31, 2013 assigned the Causeway Field gross proved plus probable reserves of 4.957
million barrels (1.76 million net to Antrim) representing a 14% decrease from December 31, 2012 due to 2013 production.

Contender Licence

P201 Block 211/22a Contender Area, Antrim 8.4%

On January 14, 2013, Antrim announced that first oil production had been achieved from the Cormorant East Field 85 days
after discovery of the field. Production is processed through the North Cormorant platform before being exported to the
Sullom Voe terminal. The Cormorant East Field is initially being produced under primary depletion with a single
production well (the "Contender well"), with the potential to run an electrical submersible pump and to install a water
injection scheme and/or additional production wells at a later date. A future drilling location has been identified and
is scheduled to be drilled mid 2014.

Under the terms of the farm-out agreement with the operator, 100% of the drilling, completion and tie in costs of the
Contender Well were funded by the operator. Antrim will receive its share of production after Antrim's working interest
share of the completion and tie in costs plus 10% are recovered from production revenue.

Production from the Cormorant East Field has been constrained for mechanical reasons and averaged 457 gross bopd (Antrim
net 38 bopd) in 2013 compared to nil in 2012. Production from the Cormorant East Field averaged 377 gross bopd (Antrim
net 32 bopd) for the three months ended December 31, 2013 compared to 508 bopd (Antrim net 43 bopd) in the third quarter
of 2013.

The McDaniel Report effective December 31, 2013 assigned the Cormorant East Field gross proved plus probable reserves of
7.1 million barrels (0.6 million net to Antrim) representing a 2% decrease from December 31, 2012 due to 2013
production.

Financial Discussion of Continuing Operations

All amounts reported in this MD&A related to the three month periods ended December 31, 201 3 and 2012 are unaudited.

 

                                                       Three Months Ended          Year Ended
                                                          December 31,            December 31,
                                                           2013        2012        2013        2012
----------------------------------------------------------------------------------------------------
Financial Results ($000 s except per share amounts)
----------------------------------------------------
Cash flow used in operations (1)                         (1,836)     (8,137)     (8,526)    (13,388)
Cash flow used in operations per share (1)                (0.01)      (0.04)      (0.05)      (0.07)
Net loss - continuing operations                         (2,377)    (67,131)     (9,445)   (134,805)
Net loss per share - basic, continuing operations         (0.01)      (0.36)      (0.05)      (0.73)
Net loss                                                (21,212)    (67,155)    (39,202)   (134,544)
Net loss per share - basic                                (0.11)      (0.36)      (0.21)      (0.73)
Total assets                                             91,836      96,520      91,836      96,520
Working capital (deficiency)                                788     (10,734)        788     (10,734)
Capital expenditures - continuing operations                239        (582)        616       9,074

Common shares outstanding (000s)
----------------------------------------------------
End of period                                           184,731     184,731     184,731     184,731
Weighted average - basic                                184,731     184,848     184,731     184,388
Weighted average - diluted                              184,731     185,681     184,731     185,528
(1) Cash flow from operations and cash flow from operations per share are Non-IFRS Measures. Refer
    to "Non-IFRS Measures" in Management s Discussion and Analysis.

 

Revenue

With the classification of Causeway to discontinued operations the Company did not have any revenue in 2013 or 2012.

General and Administrative

General and administrative ("G&A") costs decreased to $4.8 million in 2013 compared to $5.8 million in 2012. The
decrease in G&A is primarily due to reduced employee compensation. In 2013 Antrim capitalized $0.4 million (2012 - $0.58
million) of G&A costs.

G&A costs decreased to $1.2 million for the quarter ended December 31, 2013 compared to $1.6 million for the
corresponding period in 2012 due to reduced employee compensation in the period.

Exploration & Evaluation Expenditures

Exploration and evaluation ("E&E") expenditures decreased to $3.4 million in 2013 compared to $7.6 million in 2012. The
decrease in E&E expenditures is primarily related to less work on the development plan for the Fyne Licence.

E&E expenditures decreased to $1.3 million for the quarter ended December 31, 2013 compared to $6.3 million for the
corresponding period in 2012.

Impairment

The Company recognized an impairment charge in 2013 of $7.0 million relating to the West Causeway licence which expired
during the year. In 2012 the Company recognized an impairment charge of $122.7 million relating to the Fyne, Fionn,
Cyclone, Cara, Erne and West Teal blocks.

Finance Costs

Finance costs were $1.1 million in 2013 compared to $0.2 million in 2012. The increase in finance costs is primarily
related to fees sourcing debt financing.

Income Taxes

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities. The Company did not pay or recover any taxes during the quarter and year ended December 31, 2013
(2012 - nil and nil, respectively).

The Company follows the liability method of accounting for income taxes. As at December 31, 2013, no deferred income tax
assets were recorded due to uncertainty with respect to the ability of Antrim to generate sufficient taxable income to
utilize the unrecognized losses.

Cash Flow and Net Loss from Continuing Operations

In 2013, Antrim generated a cash deficiency from continuing operations of $8. 5 million ($0.05 per share) compared to a
cash deficiency from continuing operations of $13.4 million ($0.07 per share) in 2012. The cash flow deficiency
decreased in 2013 due to lower general and administrative costs and E&E expenditures.

In the quarter ended December 31, 2013, Antrim generated a cash deficiency from continuing operations of $1.8 million
($0.01 per share) compared to a cash deficiency from continuing operations of $8.1 million ($0.04 per share) in the
corresponding period in 2012. The cash flow deficiency decreased due to lower general and administrative costs and E&E
expenditures.

In 2013 Antrim had a net loss from continuing operations of $9.4 million compared to a net loss from continuing
operations of $134.8 million in 2012. The net loss decreased due to a gain in 2013 of $7.5 million on the disposal of
the Tanzania option, higher impairment costs recorded in 2012 and a reduction in 2012 in the fair value of financial
assets.

In the fourth quarter of 2013, Antrim had a net loss from continuing operations of $2.4 million compared to a net loss
from continuing operations of $67.1 million for the corresponding period in 2012. Net loss decreased due to higher E&E
and impairment costs recorded in 2012.

Foreign Exchange and Comprehensive Income

The reporting currency of the Company is the US dollar. Effective January 1, 2013, the Company's UK operations has been
accounted for as a US functional currency entity. A significant portion of the Company s activities are transacted in or
referenced to US dollars, Canadian dollars or British pounds sterling. The Company's operating costs and certain of the
Company's payments in order to maintain property interests are made in the local currency of the jurisdiction where the
applicable property is located. As a result of these factors, fluctuations in the Canadian dollar, British pounds
sterling and US dollar could result in unanticipated fluctuations in the Company's financial results.

The Company incurred a foreign exchange gain of $39 thousand in 2013 compared to a loss of $0. 5 million in 2012. The
Company recognized other comprehensive income of $17 thousand in 2013, compared to other comprehensive income of $10.6
million in 2012 related to foreign currency translation adjustments.

Financial Discussion of Discontinued Operations

Revenue

The Company recorded revenue of $25. 2 million in 2013 (2012 - nil) and $2.7 million for the quarter ended December 31,
2013 (2012 - nil). Revenue increased as the Company had no liftings in 2012. Revenue is recognized when title and risk
transfer to the purchaser, w hich occurs at the time of lifting into a tanker at the Sullom Voe terminal. Under the
contract with the sole UK purchaser, Antrim invoices and receives payment for its oil in the month after production;
however, the purchaser retains certain rights impacting the timing of liftings which may result in no sales in a
particular month resulting in deferred revenue.

Antrim's oil sales prices, before adjusting for Antrim s oil price commodity swaps, averaged $110.05 for the year ended
December 31, 2013 (2012 - nil) and $107. 59 for the quarter ended December 31, 2013 (2012 - nil). The sales price for
Causeway oil is calculated based on the monthly average price for Brent Ninian Blend, in the month subsequent to the
month of production.

Production

The following table provides oil production and sales from the Causeway Field for the quarter and years ended December
31, 2013 and 2012.

 

                                    Three Months Ended             Year Ended
                                       December 31,               December 31,
(Barrels)                               2013          2012         2013          2012
-------------------------------------------------------------------------------------
Opening inventory (1)                 55,489             -       74,000             -
Net production (2)                    46,117        74,000      232,528        74,000
Net sales                            (25,000)            -     (228,970)            -
Processing and shrinkage              (1,370)            -       (2,321)            -
-------------------------------------------------------------------------------------
Ending inventory (1)                  75,236        74,000       75,236        74,000
-------------------------------------------------------------------------------------
(1) Included in inventory is linefill and deadstock of 31,050 barrels
(2) Per the DLA, Antrim s share of oil produced is reduced to 29.25% until a
    cumulative value of $8.9 million after tax is received by Valiant

 

Daily oil production from the Causeway Field averaged gross 2,178 bopd (Antrim net 637 bopd) in 2013 compared to an
average of 4,081 gross bopd (Antrim net 1,194 bopd) from November to December 31, 2012. Oil production in the quarter
ended December 31, 2013 decreased to average gross 1,714 bopd (Antrim net 501 bopd) compared to an average of 2,793 bopd
(Antrim net 817 bopd) in the first half of 2013 due to natural decline and scheduled maintenance of the North Cormorant
platform.

Netbacks

The following table provides a comparative analysis of field netbacks, based on sales, for the quarter and year ended
December 31, 2013 and 2012:

 

                                          Three Months Ended         Year Ended
                                             December 31,           December 31,
                                               2013       2012        2013       2012
-------------------------------------------------------------------------------------
$/bbl
Sales price                                  107.59          -      110.05          -
Financial derivative                          (9.60)         -       (4.24)         -
Direct production and operating              (30.61)         -      (20.73)         -
 expenses
-------------------------------------------------------------------------------------
Netback                                       67.38          -       85.09          -
-------------------------------------------------------------------------------------

 

Direct production and operating expenses consist of operator, production platform and export terminal costs. Direct
production and operating expenses increased to $4.75 million (2012 - $nil) primarily due to the commencement of
production from the Causeway Field. Direct production and operating expenses were $0.76 million for the quarter ended
December 31, 2013 compared to $1.67 million for the previous quarter. Direct production and operating expenses were
$30.61 per barrel for the quarter ended December 31, 2013 from $32.78 per barrel for the previous quarter.

Depletion

Depletion expense was $12.7 million in 2013 compared to $nil in 2012 due to the recognition of depletion as a result of
production from Causeway. Depletion expense was $0.82 million for the quarter ended December 31, 2013 compared to $nil
for the corresponding period in 2012. The depletion rate in 2013 was $55.61 per barrel compared to $nil in 2012.

Impairment

Further delays in completing the Causeway ESP and water injection facilities together with additional significant
capital cost overruns on the project caused the Company to record a $12.1 million impairment charge in the third quarter
of 2013. Following the agreement to sell all of the issued and outstanding shares in ARNIL, the Company recorded a $14.6
million impairment charge in the fourth quarter of 2013.

Financial Derivative

The following table summarizes the commodity hedge outstanding as at December 31, 2013:

 

                                                               Volume     Fixed price
Derivative          Term                                          bbl           $/bbl
-------------------------------------------------------------------------------------
Oil Swaps           February 2014 - December 2016             494,652          $81.21

 

The Company recorded a $3.8 million and a $4.2 million loss on the financial derivative for the quarter and year ended
December 31, 2013 (2012 - $nil and $nil, respectively). The loss for 2013 was predominantly due to a reduction in the
fixed swap price from $89.37 per barrel to $81.21 per barrel in exchange for amendments to the Payment and Oil Swap.

Finance Costs

Finance costs were $5.8 million in 2013 compared to $0.1 million in 2012. The increase in finance costs is primarily
related to interest expense of $4.7 million and non-recurring costs of $0.9 million relating to the debt financing.

Finance costs were $1.3 million for the quarter ended December 31, 2013 compared to $0.0 million for the corresponding
period in 2012. The increase in finance costs is primarily related to interest expense.

Cash Flow and Net Loss from Discontinued Operations

In 2013, Antrim generated cash flow from discontinued operations of $18.6 million ($0.09 per share) compared to a cash
deficiency from operations of $0.4 million ($0.00 per share) in 2012. Cash flow from operations increased due to the
recognition of revenue from Causeway production.

In the quarter ended December 31, 2013, Antrim generated cash flow from discontinued operations of $2. 0 million ($0.01
per share) compared to a cash deficiency from operations of $nil ($0.00 per share) in the corresponding period in 2012.
Cash flow from operations increased due to the recognition of revenue from Causeway production.

In 2013 Antrim had a net loss from discontinued operations of $29.8 million compared to net income from discontinued
operations of $0. 3 million in 2012. The net loss increased primarily due to higher impairment costs recorded in 2013
and finance costs partially offset by revenue from Causeway production.

In the fourth quarter of 2013, Antrim had a net loss from discontinued operations of $18.8 million compared to a net
loss from continuing operations of $0.0 million for the corresponding period in 2012. Net loss increased due to higher
impairment and finance costs in 2013 partially offset by revenue from Causeway production.

Capital Expenditures Related to Discontinued Operations

Antrim incurred capital expenditures related to discontinued operations of $23.4 million and $55. 1 million in 2013 and
2012, respectively. Capital expenditures in 2013 primarily relate to ongoing development costs of the Causeway Licence.
See Contractual Obligations, Commitments and Contingencies for anticipated additional capital expenditures.

Financial Resources, Liquidity and Going Concern

There are a number of material uncertainties that raise significant doubts as to the Company's ability to continue as a
going concern, including compliance with debt covenants, the performance of producing wells and related infrastructure,
oil prices, ability to finish the planned development program for Causeway within budget, ability to secure additional
financing, relinquishment of commitments on certain licences and settlement of contingencies. See Going Concern on page
1 and Risk Factors on page 16 of Management's Discussion and Analysis for additional information.

The reported bank debt and financial derivative amounts on the balance sheet at December 31, 2013 are after discount.
The actual principal amount of bank debt outstanding at December 31, 2013 is $24.7 million compared to a balance sheet
amount of $20. 2 million. If the Company were to have settled the financial derivative at December 31, 2013 the payment
amount would have been $10.6 million compared to a balance sheet amount of $8.2 million.

Antrim had a working capital surplus at December 31, 2013 of $0.8 million compared to a working capital deficiency of
$10.7 million as at December 31, 2012. Without the reclassification of assets and liabilities held for sale, Antrim had
a working capital deficiency at December 31, 2013 of $24.0 million, including bank debt (after discount) of $20.2
million and financial derivative (after discount) of $8.2 million. Should the Transaction be completed in April 2014,
Antrim expects to have approximately $17 - $18 million in working capital after repayment of the Payment and Oil Swap.

Contractual Obligations, Commitments and Contingencies

Antrim has several commitments in respect of its petroleum and natural gas properties and operating leases as at
December 31, 2013 as follows:

 

                                 2014        2015        2016        2017        2018     Thereafter
----------------------------------------------------------------------------------------------------
($000's)
Office Leases                     240         251         251         233          10              -
Ireland                           350           -           -           -           -              -
United Kingdom
Continuing operations:
Fyne (1)                           34          34          34           -           -              -
Erne                               14           -           -           -           -              -
Assets held for sale:
Causeway (2)                    4,734          27          29          32          32             32
Cormorant East                  1,804           8           8           8           8              8
----------------------------------------------------------------------------------------------------
Total                           7,176         320         322         273          50             40
----------------------------------------------------------------------------------------------------
(1) In March 2013, the Company decided not to proceed with development of the Fyne Field using an
    FPSO. The Company continues to hold the licence pending further evaluation using buoy
    technology. The Dandy Prospective Area was relinquished in March 2013 and the Crinan Prospective
    Area was relinquished in July 2013.
(2) Relates to Antrim's 35.5% interest in the Causeway Licences.

 

In 2011, the Company entered into a variation to an existing contract for drilling management services in the UK North
Sea which required the drilling of two wells, estimated to take 50 days in a letter of intent preceding the contract
variation. The Company contends that it met its contractual obligations under this variation through the drilling of the
Erne pilot well (21/29d-11) and the Erne sidetrack well (21/29d-11Z). The drilling of these two wells took place over a
period of 58 days. Subsequent to releasing the rig, the Company received an invoice from the drilling management
services contractor charging the Company for approximately $5 million in additional costs as the contractor claims all
conditions of the contract had not yet been satisfied.

In July 2012, the drilling management services contractor filed a claim against the Company for the additional invoice
costs plus interest and lost management time. The Company has filed a defense against this claim in the High Court of
England and Wales and believes it is more likely than not that it will not have to pay. As a result, a contingent
liability has not been recorded. Under the Transaction the claim is to remain with ARNIL.

Outlook

Antrim believes that certain factors necessitate Antrim monetizing its interest in ARNIL at the present time and without
delay. Antrim is or expects to be in breach of certain covenants under its Payment and Oil Swap agreements. To date,
Antrim's counterparties to these agreements have not been willing to assume additional risk that would result from
granting Antrim more time to meet the covenants which are or are expected to be in breach. In the event that Antrim is
unable to remedy these covenant breaches and expected covenant breaches in a manner satisfactory to Credit Suisse,
Credit Suisse may declare that Antrim is in breach of its obligations and they may become due and payable in full. If
this result were to occur, it would likely have serious financial consequences for Antrim. Antrim believes that the
ARNIL sale delivers an attractive price for the ARNIL assets and is a fair offer. Antrim thoroughly and exhaustively
considered numer ous alternatives generated in conjunction with Antrim's financial advisor, Carlingford. See the
Circular filed on SEDAR at www.sedar.com for further details.

If the ARNIL sale is completed, Antrim will have no debt and will be able to continue to operate as a going concern,
engaged in the oil and gas business, with greater financial resources and an opportunity to further develop Antrim's
remaining assets as well as greater opportunities to raise capital or seek other strategic alternatives, including a
possible business combination, to maximize shareholder value. It is possible that following completion of the ARNIL
Sale, Antrim will no longer meet the minimum listing requirements of the TSX, specifically the requirement that the
Company have proved developed reserves associated with one or more of its oil and gas properties. Accordingly, the
Company has applied for a listing on the TSXV to be effective on or about the Completion Date (in the event that the
Company no longer meets the minimum listing requirements of the TSX). In addition to further development of its
remaining properties, Antrim continues to consider various international exploration opportunities where Antrim believes
such opportunities will create value for Antrim Shareholders.

 

Summary of Quarterly Results

                                                                                         Net Income
                                   Revenue, Net of   Cash Flow Used      Net Income      (Loss) Per
($000, except per share amounts)         Royalties    in Operations          (Loss)   Share - Basic
                                   -----------------------------------------------------------------
                                           (note 1)         (note 1)
2013
Fourth quarter                                   -           (1,836)        (21,212)          (0.11)
Third quarter                                    -           (1,506)        (16,067)          (0.09)
Second quarter                                   -           (1,816)            930            0.01
First quarter                                    -           (3,368)         (2,853)          (0.02)
                                   -----------------------------------------------------------------
                                                 -           (8,526)        (39,202)          (0.21)
                                   -----------------------------------------------------------------

2012
Fourth quarter                                   -           (8,137)        (67,155)          (0.36)
Third quarter                                    -             (472)         (5,396)          (0.03)
Second quarter                                   -           (3,178)         (6,572)          (0.04)
First quarter                                    -           (1,601)        (55,421)          (0.30)
                                   -----------------------------------------------------------------
                                                 -          (13,388)       (134,544)          (0.73)
                                   -----------------------------------------------------------------
1. Continuing operations only

 

Key factors relating to the comparison of net income (loss) for the fourth quarter of 2013 to previous quarters are as
follows:

 

--  In the fourth quarter of 2013, the Company recognized a $14.6 million
    impairment charge on assets to be disposed of (subject to shareholder
    approval);
--  In the third quarter of 2013, the Company recognized a $12.1 million
    impairment charge with respect to delays and cost overruns for the
    Causeway Field;
--  In the fourth quarter of 2012, the Company recognized a $50.4 million
    impairment charge related to the decision not to participate in further
    development of its 35. 5% working interest in the Fionn Field, a $5.9
    million impairment charge related to the abandonment of the Cyclone well
    21/7b-4 and a $1.8 million impairment charge related to the West Teal
    Licence;
--  In the third quarter of 2012, the Company recognized a $2.3 million
    impairment charge related to the planned relinquishment of Carra Licence
    P1563 Blocks 21/28b & 21/29c;
--  The second quarter 2012 net loss was impacted by a $10 million reduction
    in the fair value of the Crown Point shares partially offset by a $5.9
    million gain on the disposal of the Argentina assets;
--  During the first quarter of 2012, net loss included $54.7 million in
    impairment costs related to the Fyne Licence, the Erne discovery well
    and the Erne sidetrack well;

 

Disclosure Controls and Procedures and Internal Controls Over Financial Reporting

Antrim has established disclosure controls, procedures and corporate policies so that its consolidated financial results
are presented accurately, fairly and on a timely basis. The Chief Executive Officer and Chief Financial Officer have
designed or have caused such internal controls over financial reporting to be designed under their supervision to
provide reasonable assurance regarding the reliability of financial reporting and preparation of the Company's financial
statements in accordance with IFRS. The Company tested and evaluated the effectiveness of its disclosure controls and
procedures and internal controls over financial reporting as at December 31, 2013. During this evaluation the
Corporation identified a weakness due to the limited number of f inance and accounting personnel at the Corporation
dealing with complex and non-routine accounting transactions that may arise.

There were no changes in the Company's internal controls over financial reporting that occurred in 2013 that have
materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial
reporting except for further limited segregation of duties which occurred in the fourth quarter.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, these systems provide
reasonable but not absolute assurance that financial information is accurate and complete.

Risks and Uncertainties

The oil and gas industry involves a wide range of risks which include but are not limited to the uncertainty of finding
new commercial fields, securing markets for existing reserves, commodity price fluctuations, exchange and interest rate
costs and changes to government regulations, including regulations relating to prices, taxes, royalties, land tenure,
allowable production and environmental protection and access to off-shore production facilities in the UK. The oil and
natural gas industry is intensely competitive and the Company competes with a large number of co mpanies that have
greater resources.

Substantial Capital Requirements

The Company's ability to increase reserves in the future will depend not only on its ability to develop its present
properties but also on its ability to select and acquire suitable exploration or producing properties or prospects. The
acquisition and development of properties also requires that sufficient funds, including funds from outside sources,
will be available in a timely manner. The availability of equity or debt financing is affected by many factors, many of
which are outside the control of the Company. Recent world financial market events and the resultant negative impact on
economic conditions have increased the risk and uncertainty of the availability of equity or debt financing.

In January 2013, Antrim entered into a payment swap for $30 million and a forward sale of 657,350 barrels of Brent crude
oil. At December 31, 2013 the Company had outstanding principal of $24.7 million and undelivered 494,652 barrels of
crude oil. If the proposed Transaction is not completed, the Company's anticipated revenue for 2014, as well as the
Company's ability to repay the payment swap, is dependent upon the future production rates from the Causeway and
Cormorant East Fields as well as oil prices. See also "Financial Resources, Liquidity and Going Concern".

Failure to Complete the ARNIL Sale

As described under "Going Concern", Antrim currently is or expects to be in breach of certain covenants, including its
capex reserve and debt service cover ratio covenants, under the agreements governing the Payment and Oil Swap due to
significant increases in actual and estimated capital expenditures necessary to complete development of the Causeway
Field. The capex reserve ac count covenant requires Antrim to maintain a minimum amount of funds in a restricted account
sufficient to cover certain estimated future development expenditures of Antrim relating to the Causeway Field. The debt
service cover ratio covenant requires Antrim to maintain a ratio of cash flow to debt service costs of greater than
1.40:1. In the event that Antrim is unable to remedy these covenant breaches in a manner satisfactory to its lender, the
lender may declare that Antrim is in breach of its obligations under the agreements and the Payment and Oil Swap
Obligations may become due and payable in full. In the event of such circumstances, there can be no assurances that
Antrim would be able to repay these debts when due which could result in the appointment of a receiver or administrator.

This risk factor in its entirety may also be applicable to Antrim in the event that the Meeting is delayed or adjourned
for any reason, or in the event that completion of the ARNIL Sale takes significantly more time than currently
anticipated by Antrim.

Foreign Operations

A number of risks are associated with conducting foreign operations over which the Company has no control, including
currency instability, potential and actual civil disturbances, restriction of funds movement outside of these countries,
the ability of joint venture partners to fund their obligations, changes of laws affecting foreign ownership and
existing contracts, environmental requirements, crude oil and natural gas price and production regulation, royalty
rates, OPEC quotas, potential expropriation of property without fair compensation, retroactive tax changes and possible
interruption of oil deliveries.

Further discussions regarding the Company's risks and uncertainties, can be found in the Company's Annual Information
Form dated March 27, 2014 which is filed on SEDAR at www.sedar.com.

Forward-Looking and Cautionary Statements

This MD&A and any documents incorporated by reference herein contain certain forward- looking statements and forward-
looking information which are based on Antrim's internal reasonable expectations, estimates, projections, assumptions
and beliefs as at the date of such statements or information. Forward-looking statements often, but not always, are
identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "expect", "targeting",
"forecast", "achieve" and "intend" and statements that an event or result "may", "will", "should", "could" or "might"
occur or be achieved and other similar expressions. These statements are not guarantees of future performance and
involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results or events to
differ materially from those anticipated in such forward-looking statements and information. Antrim believes that the
expectations reflected in those forward-looking statements and information are reasonable but no assurance can be given
that these expectations will prove to be correct and such forward-looking statements and information included in this
MD&A and any documents incorporated by reference herein should not be unduly relied upon. Such forward-looking
statements and information speak only as of the date of this MD&A or the particular document incorporated by reference
herein and Antrim does not undertake any obligation to publicly update or revise any forward-looking statements or
information, except as required by applicable laws.

In particular, this MD&A and any documents incorporated by reference herein, contain specific forward-looking statements
and information pertaining to t he quantity of and future net revenues from Antrim's reserves of oil, natural gas
liquids ("NGL") and natural gas production levels. This MD&A may also contain specific forward-looking statements and
information pertaining to Antrim's plans for exploring and developing its licences, including exploration of the Skellig
block, future development plans with respect to Causeway and Cormorant East properties, factors affecting production
processed at the North Cormorant platform, commodity prices, foreign currency exchange rates and interest rates, capital
expenditure programs and other expenditures, Antrim's financing arrangements, the proposed Transaction for the sale of
ARNIL, supply and demand for oil, NGLs and natural gas, expectations regarding Antrim's ability to raise capital, to
continually add to reserves through acquisitions and development, the schedules and timing of certain pro jects,
Antrim's strategy for growth, Antrim's future operating and financial results, treatment under governmental and other
regulatory regimes and tax, environmental and other laws.

With respect to forward-looking statements contained in this MD&A and any documents incorporated by reference herein,
Antrim has made assumptions regarding Antrim's ability to obtain additional drilling rigs and other equipment in a
timely manner, obtain regulatory approvals, future oil and natural gas production levels from Antrim's properties and
the price obtained from the sales of such production, the level of future capital expenditure required to exploit and
develop reserves, the ability of Antrim's partners to meet their commitments as they relate to the Company and Antrim's
reliance on industry partners for the development of some of its properties, Antrim's ability to meet its obligations
under the Payment and Oil Swap and the forward sale of Brent oil crude, the general stability of the economic and
political environment in which Antrim operates and the future of oil and natural gas pricing. In respect to these
assumptions, the reader is cautioned that assumptions used in the preparation of such information may prove to be
incorrect.

Antrim's actual results could differ materially from those anticipated in these forward-looking statements and
information as a result of assumptions proving inaccurate and of both known and unknown risks, including the risk that
the proposed ARNIL Sale is delayed or not completed for any reason, the consideration to be received pursuant to the
ARNIL Sale, the anticipated benefits of the ARNIL sale, risks associated with the exploration for and development of oil
and natural gas reserves such as the risk that drilling operations may not be successful, unanticipated delays with
respect to the development of Antrim's properties, platform shutdowns affecting production levels, operational risks and
liabilities that are not covered by insurance, volatility in market prices for oil, NGLs and natural gas, changes or
fluctuations in oil, NGLs and natural gas production levels, changes in foreign currency exchange rates and interest
rates, the ability of Antrim to fund its substantial capital requirements and operations and to repay its obligations
under the Payment and Oil Swap, Antrim's reliance on industry partners for the development of some of its properties,
risks associated with ensuring title to the Company's properties, liabilities and unexpected events inherent in oil and
gas operations, including geological, technical, drilling and processing problems, the risk of adverse results from
litigation, the accuracy of oil and gas reserve estimates and estimated production levels as they are affected by the
Antrim's exploration and development drilling and estimated decline rates, in particular the future production rates at
the Causeway and Cormorant East Fields in the UK North Sea. Additional risks include the ability to effectively compete
for, among other things, capital, acquisitions of reserves, undeveloped lands and skilled personnel, incorrect
assessments of the value of acquisitions, Antrim's success at acquisition, exploitation and development of reserves,
changes in general economic, market and business conditions in Canada, North America, the United Kingdom, Europe and
worldwide, actions by governmental or regulatory authorities including changes in income tax laws or changes in tax
laws, royalty rates and incentive programs relating to the oil and gas industry and more specifically, changes in
environmental or other legislation applicable to Antrim's operations, and Antrim's ability to comply with current and
future environmental and other laws, adverse regulatory rulings, order and decisions and risks associated with the
nature of the Common Shares.

Many of these risk factors, other specific risks, uncertainties and material assumptions are discussed in further detail
throughout this MD&A and in Antrim's Annual Information Form for the year ended December 31, 2013. Readers are
specifically referred to the risk factors described in this MD&A under "Risk Factors" and in other documents Antrim
files from time to time with securities regulatory authorities. Copies of these documents are available without charge
from Antrim or electronic ally on the internet on Antrim's SEDAR profile at www.sedar.com. Readers are cautioned that
this list of risk factors should not be construed as exhaustive.

The calculation of barrels of oil equivalent ("boe") is based on a conversion rate of six thousand cubic feet of natural
gas ("mcf") to one barrel of crude oil ("bbl"). Boe's may be misleading, particularly if used in isolation. A boe
conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.

In accordance with AIM guidelines, Mr. Kerry Fulton, P. Eng and Vice President, Operations for Antrim, is the qualified
person that has reviewed the technical information contained in this MD&A. Mr. Fulton has over 30 years operating
experience in the upstream oil and gas industry.

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements are the responsibility of management. The consolidated financial
statements have been prepared by management in accordance with International Financial Reporting Standards outlined in
the notes to the consolidated financial statements. The consolidated financial statements include certain estimates that
reflect the management's best judgments. Management has determined such amounts on a reasonable basis in order to ensure
that the consolidated financial statements are presented fairly, in all material respects. In the op inion of
management, the consolidated financial statements have been prepared within acceptable limits of materiality and are in
accordance with International Financial Reporting Standards. The financial information contained in the annual report is
consistent with that in the consolidated financial statements.

Management is also responsible for establishing and maintaining appropriate systems of internal control over the
company's financial reporting. The internal control system was designed to provide reasonable assurance to management
regarding the preparation and presentation of the consolidated financial statements. Management tested and evaluated the
effectiveness of its disclosure controls and procedures and internal controls over financial reporting as at December
31, 2013. During this evaluation Management identified a weakness due to the limited number of finance and accounting
personnel at the Corporation dealing with complex and non-routine accounting transactions that may arise. All internal
control systems, no matter how well designed, have inherent limitations. Therefore, these systems provide reasonable but
not absolute assurance that financial information is accurate and complete.

PricewaterhouseCoopers LLP, an independent firm of Chartered Accountants, has been engaged, as approved by a vote of the
shareholders at the Company's most recent annual general meeting, to examine the consolidated financial statements in
accordance with Canadian generally accepted auditing standards and provide an independent professional opinion.

The audit committee of the Board of Directors with all of its members being independent directors, have reviewed the
consolidated financial statements including notes thereto, with management and PricewaterhouseCoopers LLP. The
consolidated financial statements have been approved by the Board of Directors on the recommendation of the audit
committee.

Stephen Greer, President & Chief Executive Officer

Anthony J. Potter, Chief Financial Officer

Independent Auditor's Report

To the Shareholders of Antrim Energy Inc.

We have audited the accompanying consolidated financial statements of Antrim Energy Inc. (the "Company"), which comprise
the consolidated balance sheets as at December 31, 2013 and December 31, 2012 and the consolidated statements of
comprehensive loss, changes in equity and cash flows for the years then ended, and the related notes, which comprise a
summary of significant accounting policies.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.

PricewaterhouseCoopers LLP

111 5th Avenue SW, Suite 3100, Calgary, Alberta, Canada T2P 5L3 T: +1 403 509 7500, F: +1 403 781 1825, www.pwc.com/ca

"PwC" refers to Pricewaterhouse Coopers LLP, an Ontario limited liability partnership.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Antrim Energy Inc. as at December 31, 2013 and December 31, 2012 and its financial performance and its cash flows for
the years then ended in accordance with International Financial Reporting Standards.

Emphasis of matter

Without qualifying our opinion, we draw attention to note 1 in the financial statements which describes matters and
conditions that indicate the existence of a material uncertainty that may cast significant doubt about the Company's
ability to continue as a going concern.

Chartered Accountants

 

Antrim Energy Inc.
Consolidated Balance Sheets
As at December 31, 2013 and 2012
(Amounts in US$thousands)
-------------------------------------------------------------------------------------

                                                         December 31     December 31
                                                 Note           2013            2012
                                                     --------------------------------
Assets
Current assets
  Cash and cash equivalents                                    1,082           1,503
  Restricted cash                                   5              -             808
  Accounts receivable                                            184             332
  Inventory and prepaid expenses                    6            539           5,877
                                                     --------------------------------
                                                               1,805           8,520

Assets held for sale                                4         88,842               -

Property, plant and equipment                       7             64          81,069
Exploration and evaluation assets                   8          1,125           6,931
                                                     --------------------------------

                                                              91,836          96,520
                                                     --------------------------------

Liabilities
Current liabilities
  Accounts payable and accrued liabilities                     1,017          18,165
  Deferred revenue                                                 -           1,089
                                                     --------------------------------
                                                               1,017          19,254
                                                     --------------------------------

Liabilities held for sale                           4         57,977               -

Decommissioning obligations                        11          4,130          10,270
                                                     --------------------------------
                                                              63,124          29,524
                                                     --------------------------------

Shareholders' equity
Share capital                                      12        361,922         361,922
Contributed surplus                                           21,527          20,626
Accumulated other comprehensive income                         4,673           4,656
Deficit                                                     (359,410)       (320,208)
                                                     --------------------------------

                                                              28,712          66,996
                                                     --------------------------------

Total Liabilities and Shareholders' Equity                    91,836          96,520
                                                     --------------------------------

Going concern                                       1
Commitments and contingencies                      22
Subsequent event                                   26

 

The accompanying notes are an integral part of the consolidated financial statements. Approved on behalf of the Board of
Directors of Antrim Energy Inc.:

Gerry Orbell, Director

James Smith, Director

 

Antrim Energy Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 31, 2013 and 2012
(Amounts in US$thousands, except per share data)
------------------------------------------------------------------------------------------

                                                      Note           2013            2012
                                                          --------------------------------
Revenue                                                                 -               -

Expenses
Direct production and operating expenditures                            -               -
General and administrative                                          4,785           5,843
Depletion and depreciation                               7             93              94
Share-based compensation                                13            693             998
Exploration and evaluation                               8          3,352           7,640
Impairment                                            7, 8          7,006         122,698
Reduction in fair value of contingent consideration      8              -          (7,000)
Reduction in the fair value of financial assets         25              -          10,040
Gain on disposal of assets                          14, 25         (7,506)         (5,894)
Finance income                                                         (2)           (276)
Finance costs                                           19          1,063             159
Foreign exchange loss (gain)                                          (39)            503
                                                          --------------------------------
Loss from continuing operations before income taxes                (9,445)       (134,805)
Income tax expense                                      21              -               -
                                                          --------------------------------
Loss from continuing operations after income taxes                 (9,445)       (134,805)
Income (loss) from discontinued operations           4, 25        (29,757)            261
                                                          --------------------------------
Net loss for the year                                             (39,202)       (134,544)
                                                          --------------------------------


Other comprehensive income
Items that may be subsequently reclassified to
 profit or loss:
  Foreign currency translation adjustment                              17           7,414
Items reclassified to profit or loss:
  Foreign currency translation adjustment - disposal                    -           3,213
                                                          --------------------------------
Other comprehensive income for the year                                17          10,627
                                                          --------------------------------
Comprehensive loss for the year                                   (39,185)       (123,917)
                                                          --------------------------------

Net income (loss) per common share
Basic and diluted- continuing operations                15          (0.05)          (0.73)
Basic and diluted - discontinued operations             15          (0.16)          (0.00)

 

The accompanying notes are an integral part of the consolidated financial statements.

 

Antrim Energy Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2013 and 2012
(Amounts in US$thousands)
----------------------------------------------------------------------------------------------------

                                                                Note           2013            2012
                                                                    --------------------------------
Operating Activities
Loss from continuing operations after income taxes                           (9,445)       (134,805)
Items not involving cash:
  Depletion and depreciation                                       7             93              94
  Share-based compensation                                        13            693             998
  Accretion of decommissioning obligations                        11             60              91
  Non-cash items included in exploration and evaluation
   expenditures                                                                 283               -
  Foreign exchange loss                                                         290             390
  Impairment                                                                  7,006         122,698
  Change in the fair value of contingent consideration             8              -          (7,000)
  Reduction in the fair value of financial assets                 25              -          10,040
  Gain on disposal of assets                                  14, 25         (7,506)         (5,894)
Changes in non-cash working capital items - continuing
 operations                                                       20         (8,948)          4,717
                                                                    --------------------------------
Cash used in operating activities - continuing operations                   (17,474)         (8,671)
Cash provided by (used in) operating activities - discontinued
 operations                                                                  18,570            (365)
                                                                    --------------------------------
Cash provided by (used in) operating activities                               1,096          (9,036)
                                                                    --------------------------------

Financing Activities
Issue of common shares                                                            -             186
Proceeds from long-term debt facility                              9         30,000               -
Issuance costs on long-term debt facility                                    (1,423)              -
Payments on long-term debt facility                                9         (5,350)              -
Financial derivative settlements                                  23         (2,225)              -
                                                                    --------------------------------
Cash provided by financing acitivities                                       21,002             186
                                                                    --------------------------------

Investing Activities
Capital expenditures                                                           (616)         (9,074)
Change in restricted cash                                                    (5,879)         16,441
Cash proceeds from disposal of assets                                         7,506           9,976
                                                                    --------------------------------
Cash used in investing activities - continuing operations                     1,011          17,343
Cash used in investing activities - discontinued operations                 (23,443)        (55,081)
                                                                    --------------------------------
Cash used in investing acitivities                                          (22,432)        (37,738)
                                                                    --------------------------------

Effects of foreign exchange on cash and cash equivalents                        (87)            986
                                                                    --------------------------------

Net decrease in cash and cash equivalents                                      (421)        (45,602)
Cash and cash equivalents - beginning of year                                 1,503          47,105
                                                                    --------------------------------
Cash and cash equivalents - end of year                           20          1,082           1,503
                                                                    --------------------------------

 

The accompanying notes are an integral part of the consolidated financial statements.

 

Antrim Energy Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2013 and 2012
(Amounts in US$thousands)
-----------------------------------------------------------------------------------------------------------

                                                                       Accumulated
                                 Number of                                   Other
                                    Common      Share  Contributed   Comprehensive
                          Note      Shares    Capital      Surplus          Income     Deficit       Total
                              -----------------------------------------------------------------------------

Balance, December 31,
 2011                          184,116,078    361,587       19,579          (5,971)   (168,007)    207,188
Net loss for the year                               -            -               -    (134,544)   (134,544)
Capital distribution                                -            -               -     (17,657)    (17,657)
Other comprehensive
 income                                             -            -          10,627           -      10,627
Share-based compensation    13                      -        1,196               -           -       1,196
Stock options exercised            614,998        335         (149)              -           -         186
                              -----------------------------------------------------------------------------
Balance, December 31,
 2012                          184,731,076    361,922       20,626           4,656    (320,208)     66,996
                              -----------------------------------------------------------------------------

Net loss for the year                    -          -            -               -     (39,202)    (39,202)
Other comprehensive
 income                                  -          -            -              17           -          17
Share-based compensation    13           -          -          901               -           -         901
                              -----------------------------------------------------------------------------
Balance, December 31,
 2013                          184,731,076    361,922       21,527           4,673    (359,410)     28,712
                              -----------------------------------------------------------------------------

 

The accompanying notes are an integral part of the consolidated financial statements.

 

Antrim Energy Inc.
Notes to Consolidated Financial Statements
For the years ended December 31, 2013 and 2012
(Amounts in US$thousands)
----------------------------------------------------------------------------------------------------

 

1) Nature of Operations

Antrim Energy Inc. ("Antrim" or the "Company") is a Calgary based oil and natural gas company. Through subsidiaries, the
Company conducts exploration activities in the United Kingdom and Ireland. Antrim Energy Inc. is incorporated and
domiciled in Canada. The Company s common shares are listed on the Toronto Stock Exchange ("TSX") and the London
Alternative Investment Market ("AIM") under the symbols "AEN" and "AEY", respectively. The address of its registered
office is 1600, 333 - 7th Avenue S.W, Calgary, Alberta, Canada.

Going Concern

These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") on a going concern basis, which contemplates that assets will be realized and liabilities discharged
in the normal course of business as they come due. Should the Company be unable to continue as a going concern, it may
be unable to realize the carrying value of its assets and to meet its liabilities as they become due.

There are a number of material uncertainties that raise significant doubts as to the Company's ability to continue as a
going concern, and accordingly, the appropriateness of the use of accounting principles applicable to going concern,
including compliance with debt covenants, the performance of producing we lls and related infrastructure, oil prices,
ability to finish the planned development program for Causeway within budget, ability to secure additional financing and
settlement of contingencies. If the assumption in respect to the ability of the Company to continue as a going concern
is not appropriate, adjustments to the carrying amounts of assets and liabilities, revenues and expenses and the
statement of financial position classifications used may be necessary. Such adjustments could be material.

In January 2013, the Company entered into a $30 million Payment and Oil Swap transaction which is subject to a number of
financial and operating covenants as well as restrictions on various cash balances. The Company is in breach of certain
covenants and had insufficient cumulative production to remove restrictions related to the use of proceeds from oil
sales. In addition, the Company continues to experience higher than expected capital costs to complete the Causeway
development for which the Company is subject to requirements to place additional funds into a reserve account with the
lender. Failure to fund capital costs or meet financial and operating covenants could result in the loss of the asset.
See note 23(b).

On February 7, 2014 the Company announced that it entered into an agreement (the "Agreement") with First Oil Expro
Limited ("FOE") pursuant to which, subject to the terms and conditions of the Agreement, FOE has agreed to purchase from
the Company (the "Transaction") all of the issued and outstanding shares in the capital of Antrim's UK subsidiary,
Antrim Resources (N.I.) Limited ("ARNIL") for $53 million in cash, plus the assumption of certain liabilities and
adjusted working capital, from which Antrim will settle on closing all outstanding obligations under its Payment and Oil
Swap agreements. The economic date of the proposed transaction is January 1, 2014 and a $5 million deposit was received
from FOE to be applied towards the purchase price. Antrim will retain its interest in P077 Block 21/ 28a (the "Fyne
Licence") and P1875 Block 21/29d (the "Erne Licence"), as well as FEL 1-13 in the Porcupine Basin offshore Ireland. The
Transaction is subject to customary "fiduciary out" provisions, and is conditional upon, among other things, the approva
l of Antrim shareholders and the receipt of applicable regulatory approvals. The Agreement includes provision for
payment of a Liquidated Damages fee of $5.3 million payable by either party under certain circumstances if the
Transaction is not completed.

The Board of Directors of Antrim, after consultation with its financial and legal advisors, has unanimously approved
entering into the Agreement and has recommended that Antrim shareholders approve the Transaction at a special meeting of
shareholders to be held on April 4, 2014 (the "Meeting"). On March 17, 2014 the Payment and Oil Swap was amended to
allow for completion of the Transaction. Under the amendment, the Transaction is to be completed by April 15, 2014.
Nevertheless, there is no assurance that these initiatives will be successful.

Pursuant to the terms of the Payment and Oil Swap, following an event of default by Antrim, Antrim's lender may demand
payment of their indebtedness (together with accrued interest), or alternatively, may realize on their security at any
time. If the Transaction is not approved by Antrim Shareholders, or is delayed or not completed for any other reason or
if the Meeting is adjourned or otherwise delayed, and as a result Antrim is declared to be in default of its
obligations, the lender may apply to a court to appoint a receiver or administrator for an order to sell certain of
Antrim's assets to generate sufficient proceeds to repay the debt owed. If the lender chose to realize on their
security, Antrim may no longer be able to carry on business as a going concern.

2) Basis of Presentation

a) Statement of compliance

The consolidated financial statements have been prepared in accordance with IFRS as issued by the
International Accounting Standards Board ("IASB"). The policies applied in these consolidated financial statements are
based on IFRS issued and outstanding as at March 27, 2014, the date the Board of Directors approved the annual
consolidated financial statements.

The consolidated financial statements have been prepared on the historical cost basis, except as explained in note 3,
Summary of Significant Accounting Policies. Historical cost is generally based on the fair value of the consideration
given in exchange for the assets. The accounting policies described in note 3 have been applied consistently to all
periods presented in these financial statements except for, as a result of changes in the composition of revenue and
costs, management has determined that the functional currency of the Company s UK ope rations is more closely linked to
the United States ("US") dollar. Accordingly, effective January 1, 2013, this operation has been accounted for as a US
functional currency entity. As a result, foreign currency translation adjustments remain in accumulated other
comprehensive income until the Company reduces its ownership in its UK subsidiary.

b) Presentation currency

In these consolidated financial statements, unless otherwise indicated, all dollar amounts are expressed in United
States ("US") dollars. The Company has adopted the US dollar as its presentation currency to facilitate a more direct
comparison to North American oil and gas companies with international operations.

c) Critical accounting judgments and key sources of estimation uncertai nty

In the application of the Company's accounting policies, management is required to make judgments, estimates and
assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The
estimates and underlying assumptions are reviewed on an ongoing basis. The estimates and associated assumptions are
based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates.

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

Estimation of reserve quantities

Depletion, impairment and decommissioning charges are dependent on the Company's estimate of oil and gas reserves. The
estimation of reserves is an inherently complex process and involves the exercise of professional judgment. Reserves
have been evaluated at the balance sheet date by an independent qualified reserve evaluator in accordance with National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities and are based on the definitions and guidelines
contained in the Canadian Oil and Gas Evaluation Handbook.

Oil and gas reserve estimates are based on a range of geological, technical and economic factors including projected
future rates of production, estimated commodity prices, engineering data, reserve type and timing and amount of future
expenditures, all of which are subject to uncertainty. Assumptions reflect market and regulatory conditions existing at
the balance sheet date, which could differ significantly from other points in time throughout the year, or future
periods. Changes in market and regulatory conditions and assumptions can materially impact the estimation of net
reserves.

Recoverability of exploration and evaluation costs

Exploration and evaluation costs are initially capitalized with the intent to establish commercially viable reserves.
The Company is required to make estimates and judgments about future events and circumstances regarding the economic
viability of extracting the underlying resources. The costs are subject to technical, commercial and management review
to confirm the continued intent to develop and extract the underlying resources. Fluctuations in future commodity
prices, resource quantities, expected production techniques, drilling results, production costs and required capital
expenditures are important factors when making this determination. If a judgment is made that extraction of the reserves
is not viable, the exploration and evaluation costs will be written off to net earnings. See note 8.

Decommissioning obligations

The Company recognizes liabilities for the future decommissioning and restoration of property, plant and equipment.
These provisions are based on estimated costs, which take into account the anticipated method and extent of restoration
consistent with legal requirements, technological advances and the possible use of the site. Actual costs are uncertain
and estimates can vary as a result of changes to relevant laws and regulations, the emergence of new technology,
operating experience and prices. The actual timing of future decommissioning and restoration is not known and may change
due to certain factors, including reserve life. Changes to assumptions made about future expected costs, discount rates,
inflation and timing may have a material impact on the amounts presented. The Company has chosen to measure
decommissioning obligations using a risk-free discount rate. See note 11.

Impairment of property, plant and equipment

The recoverable amounts of cash-generating units ("CGUs") and individual assets have been determined based on greater of
value-in-use or fair value less cost of disposal calculations. The key assumptions the Company uses in estimating future
cash flows for purposes of calculating value-in use or fair value less cost of disposal are future oil prices, expected
production volumes, future development costs, operating costs and the discount rate applied to reflect the time value of
money. Changes to these assumptions will affect the recoverable amounts of cash- generating units and individual assets
and may the n require a material adjustment to their related carrying value.

The determination of CGUs requires judgement in defining a group of assets that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. CGUs are determined by similar geological
structure, shared infrastructure, geographical proximity, commodity type, similar exposure to market risks and
materiality. See note 7.

Fair value of share-based compensation

The fair value of share-based compensation is calculated using a Black-Scholes option-pricing model. There are a number
of estimates used in the calculation such as future forfeiture rate, expected option life and the future price
volatility of the underlying security which can vary from actual future events. The factors applied in the calculation
are management's best estimates based on historical information and future forecasts. See note 13.

Fair value of financial derivative

The fair value of the financial derivative is estimated based upon market and third party inputs. These estimates are
subject to changes with fluctuations in commodity prices.

Deferred income taxes

Deferred tax assets are recognized when it is considered probable that deductible temporary differences will be
recovered in the foreseeable future. To the extent that future taxable income and the application of existing tax laws
in each jurisdiction differ significantly from the Company s estimate, the ability of the Company to realize the
deferred tax assets could be impacted.

d) Adoption of new accounting policies

On January 1, 2013, the Company adopted new standards with respect to consolidations (IFRS 10), joint arrangements (IFRS
11), disclosure of interests in other entities (IFRS 12), fair value measurements (IFRS 13) and amendments to financial
instrument disc losures (IFRS 7). The adoption of these standards resulted in certain additional disclosure but
otherwise had no impact on the amounts recorded in the financial statements as at January 1, 2013 or on the comparative
periods.

3) Summary of Significant Accounting Policies

The following significant accounting policies have been adopted in the preparation and presentation of the consolidated
financial statements:

a) Basis of consolidation

These consolidated financial statements incorporate the financial statements of the Company and entities controlled by
the Company. Control is achieved where the Company has the power to govern the financial and operating policies of the
entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases. All intra-
company transactions, balances, income and expenses are eliminated on consolidation.

b) Foreign currency translation

Items included in the financial statements of each of the Company's consolidated subsidiaries are measured using the
currency of the primary economic environment in which the subsidiary operates
("the functional currency"). The consolidated financial statements are presented in US dollars ("the presentation
currency").

In preparing the financial statements of the Company's subsidiaries, transactions in currencies other than the entity's
functional currency are recorded at the rates of exchange prevailing on the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated to the appropriate functional currency at foreign exchange
rates at the balance sheet date. Foreign exchange differences arising on translation are recognized in earnings. Non-
monetary assets that are measured at historical cost in a foreign currency are translated using the exchange rate at the
date of the transactions.

The results and financial position of all the Company's consolidated s ubsidiaries that have a functional currency
different from the presentation currency are translated into the presentation currency as follows:

 

i.   assets and liabilities for each balance sheet presented are translated
     at the closing rate at the date of that balance sheet;

ii.  income and expenses for each year are translated at average exchange
     rates; and

iii. all resulting exchange differences are recognized in a separate
     component of equity called 'accumulated other comprehensive income'.

 

When a foreign operation is disposed of, a proportionate share of the cumulative exchange differences previously
recognized in other comprehensive income is recognized in the statement of loss, as part of the gain or loss on sale
where applicable.

c) Jointly controlled operations and jointly controlled assets

A significant portion of the Company's operations are conducted with others and involve jointly controlled assets. The
consolidated financial statements reflect only the Company s interest in such activities and assets or liabilities.

d) Oil and natural gas exploration and evaluation expenditures

Pre -licence costs

Costs incurred prior to obtaining the legal right to explore for hydrocarbon resources are expensed in the period in
which they are incurred.

Exploration and evaluation costs

Exploration and evaluation assets are stated at cost, less accumulated impairment losses.

Once the legal right to explore has been acquired, costs directly associated with an exploration well are capitalized as
exploration and evaluation assets until the drilling of the well is complete and the results have been evaluated. These
costs include licence costs, geological and geophysical costs, employee remuneration, materials and fuel used, rig costs
and payments made to contractors. If no reserves are found, the exploration asset is tested for impairment. If
extractable hydrocarbons are found and, subject to further appraisal activity (e.g. by drilling further wells), are
likely to be developed commercially, the costs continue to be carried as exploration and evaluation assets while
sufficient and continued progress is made in assessing the commerciality of the hydrocarbons. All such costs are subject
to technical, commercial and management review as well as review for impairment indicators at each period end to confirm
the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the
costs are written off. When proved and probable reserves of oil are determined and development is sanctioned, the
relevant expenditure is transferred to oil and gas properties after impairment is assessed and any resulting impairment
loss is recognized.

e) Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses.

The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to
bringing the asset into operation, the initial estimate of the decommissioning obligations and borrowing costs for
qualifying assets. Expenditures on the construction, installation or completion of infrastructure facilities such as
platforms, pipelines and the drilling and completion of development wells, including unsuccessful development or
delineation wells, is capitalized within property, plant and equipment. The purchase price or construction cost is the
aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalized value of
a finance lease is also included within property, plant and equipment.

Depletion and depreciation

Oil and gas assets within property, plant and equipment are depleted on a unit-of-production basis over the proved and
probable reserves of the field concerned. The unit-of-production rate for the amortization of field development costs
takes into account expenditures incurred to date, together with sanctioned future development expenditure.

Other property, plant and equipment are generally depreciated on a straight-line basis over its estimated useful lives,
as follows:

 

Office equipment                        5 years
Computer hardware and software          3 years

 

f) Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any
indication exists the Company estimates the asset s recoverable amount. An asset's recoverable amount is the higher of
an asset's or CGU's fair value less cost of disposal to sell and its value-in-use and is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups
of assets. If the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered
impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. In determining fair value less cost of disposal, recent market
transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Impairment losses are recognized in the consolidated statement of loss and comprehensive loss.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment
losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or cash-
generating unit's recoverable amount. A previously recognized impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset s recoverable amount since the last impairment loss was
recognized.

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the
asset in prior years.

g) Financial assets

Financial assets are measured at fair value on the balance sheet upon initial recognition of the instrument. Subsequent
measurement and changes in fair value will depend on initial classification, as follows:

 

i.   fair value through profit or loss financial assets and liabilities,
     classified as held for trading or designated as fair value through
     profit or loss, are measured at fair value and subsequent changes in
     fair value are recognized in income;
ii.  loans and receivables are non- derivative financial assets with fixed
     or determinable payments that are not quoted in an active market;
iii. available-for-sale financial instruments are measured at fair value
     with changes in fair value recorded in equity until the instrument or a
     portion thereof is derecognized or impa ired at which time the amounts
     would be recognized in income; and
iv.  held to maturity financial assets and loans and receivables are
     initially measured at fair value with subsequent measurement at
     amortized cost using the effective interest rate method. The effective
     interest rate method calculates the amortized cost of a financial asset
     and allocates interest income or expense over the applicable period.
     The rate used discounts the estimated future cash flows over either the
     expected life of the financial asset or liability or a shorter time-
     frame if it's deemed appropriate.

 

Antrim s current classifications are as follows:

 

i.   cash and cash equivalents are designated as loans and receivables;
ii.  restricted cash is designated as loans and receivables; and
iii. accounts receivable are designated as loans and receivables.

 

h) Financial liabilities

Financial liabilities within the scope of IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") are
classified as financial liabilities at fair value through profit or loss or as other financial liabilities at amortized
cost, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value and in the case of loans and borrowings, plus directly
attributable transaction costs. The Company's financial liabilities include accounts payables, debt and financial
derivative and all are classified as other financial liabilities at amortized cost with the exception of the financial
derivative which is a financial liability at fair value through profit or loss.

Derecognition

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires.

i) Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held with banks and other short-term highly liquid investments
with original maturities of three months or less.

j) Inventories

Inventories are stated at the lower of cost and net realizable value. The cost of crude oil is the cost to produce,
including the appropriate proportion of depletion and depreciation and overheads, including all costs incurred in the
normal course of business in bringing each product to its present location and condition, and is accounted on a weighted
average basis. Net realizable value of crude oil and refined products is based on estimated selling price in the
ordinary course of business less any expected selling costs.

k) Assets held for sale

Non-current assets, or disposal groups consisting of assets and liabilities, are classified as held for sale if their
carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is met
when the sale is highly probably and the asset is available for immediate sale in its present condition.

Non-current assets classified as held for sale are measured at the lower of the carrying amount and fair value less
costs to sell, with impairments recognized in net earnings in the period measured.

Non-current assets and disposal groups held for sale are presented in current assets and liabilities within the
consolidated balance sheet. Assets held for sale are not depreciated, depleted or amortized.

Income and expenses related to discontinued operations are classified as income (loss) from discontinued operations
within the consolidated statements of comprehensive loss and the cash flows.

l) Provisions

General

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable est imate can be made of the amount of the obligation. Where the Company expects some or all of a provision to
be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset but only
when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement
net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a
current pre -tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognized as a finance cost.

Decommissioning obligations

Decommissioning obligations are recognized when the Company has a present legal or constructive obligation as a result
of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable
estimate of the amount of obligation can be made. A corresponding amount equivalent to the provision is also recognized
as part of the cost of the relevant asset category to which they relate. The amount recognized is the estimated cost of
decommissioning, discounted to its present value using a risk-free interest rate.

Changes in the estimated timing or cost of decommissioning are dealt with prospectively by recording an adjustment to
the provision, and a corresponding adjustment to the relevant asset category. The unwinding of the discount on the
decommissioning obligations is included as a finance cost.

m) Taxes

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted, by the reporting date, in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognized directly in equity is recognized in equity and not in the income
statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

The Company follows the liability method of accounting for income taxes. Under this method, income tax assets and
liabilities are recognized for the estimated tax consequences attributable to differences between the amounts reported
in the financial statements and their respective tax bases, using enacted or substantially enacted tax rates expected to
apply when the asset is realized or the liability settled. Deferred tax assets are only recognized to the extent it is
more likely than not that sufficient future taxable income will be available to allow the future income tax asset to be
realized.

n) Revenue recognition

Revenue is recognized when it is probable that the economic benefits associated with a transaction will flow to the
Company and the amount of the revenue can be measured reliably and collectability is reasonably assured. In particular,
revenue from the production and sale of crude oil is recognized when the title has been transferred to customers, which
is when risk and rewards pass to the customer. This occurs when product is physically transferred into a shipping
vessel.

Deferred revenue is recognized when cash is received and no crude oil has been lifted from the terminal therefore title
and risk has not been transferred to the buyer.

For all financial instruments measured at amortized cost and interest bearing financial assets classified as available-
for-sale, interest income or expense is recorded using the effective interest rate, which is the rate that exactly
discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a
shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is
included in finance income in the statement of comprehensive loss.

o) Share-based compensation

Equity-settled share-based compensation to directors, employees and others providing similar services are measured at
the fair value of the equity instruments at the gra nt date.

The fair value determined at the grant date of the equity-settled share-based compensation is expensed on a graded basis
over the vesting period, based on the Company's estimate of equity instruments that will eventually vest. At the end of
each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The impact
of the revision of the original estimates, if any, is recognized in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to contributed surplus.

p) Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing the net earnings (loss) available to common shareholders by the
weighted average number of shares outstanding during the reporting year. Diluted earnings (loss) per share is computed
in a similar way to basic earnings (loss) per share except that the weighted average shares outstanding are increased to
include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional
shares is calculated by assuming that outstanding stock options were exercised and that the proceeds from such exercises
were used to acquire common stock at the average market price during the reporting periods.

q) Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized
as a deduction from equity.

r) Standards issued but not yet effective

The following pronouncements and amendments are effective for annual periods beginning on or after January 1, 2014
unless otherwise stated.

IFRS 9 - Financial Instruments: The new standard replaces the current multiple classification and measurement models for
financial assets and liabilities with a single model that has only two classification categories: amortized cost and
fair value. This standard is effective for annual periods beginning on or after January 1, 2015 with different
transitional arrangements depending on the date of initial application. The extent of the impact of the adoption of IFRS
9 has not yet been determined.

IAS 32 - Financial Instruments: Presentation amendment provides clarification on the application of offsetting rules.
The amendments are effective for annual periods beginning on or after January 1, 2014. Adopting this standard is
expected to have minimal or no impact on the consolidated financial statements.

4) Discontinued operations

The Company entered into an agreement (the "Agreement") on February 7, 2014 with First Oil Expro Limited ("FOE")
pursuant to which, subject to the terms and conditions of the Agreement, FOE has agreed to purchase from the Company
(the "Transaction") all of the issued and outstanding shares in the capital of Antrim s UK subsidiary, Antrim Resources
(N.I.) Limited ("ARNIL") for $53 million in cash, plus the assumption of certain liabilities and adjusted working
capital, from which Antrim will settle on closing all outstanding obligations under its Payment and Oil Swap agreements.
The economic date of the proposed transaction is January 1, 2014. Antrim will retain its interest in P077 Block 21/28a
(the "Fyne Licence") and P1875 Block 21/29d (the "Erne Licence"), as well as FEL 1-13 in the Porcupine Basin offshore
Ireland. During the reclassification of operations as held for sale, assets of $14.6 million were identified as being
impaired. See note 7.

This divestiture is conditional upon, among other things, the approval of Antrim shareholders and the receipt of
applicable regulatory approvals. The major classes of assets and liabilities comprising the operations classified as
held for sale at the balance sheet date are as follows:

 

                                                                 December 31
                                                                        2013
                                                      ----------------------
Assets held for sale
Cash and cash equivalents                                                  -
Restricted cash                                                        6,687
Accounts receivable                                                    3,512
Inventory and prepaid expenses                                         6,811
Property, plant and equipment                                         71,832
Exploration and evaluation assets                                          -
                                                      ----------------------
                                                                      88,842
                                                      ----------------------

Liabilities held for sale
Accounts payable and accrued liabilities                              10,472
Debt                                                                  20,159
Financial derivative                                                   8,158
Deferred revenue                                                       2,990
Decommissioning obligations                                           16,198
                                                      ----------------------
                                                                      57,977
                                                      ----------------------
                                                      ----------------------

 

The combined results of the discontinued operations which have been included in the consolidated statement of loss and
comprehensive loss are as follows. The comparative period income and cash flows from discontinued operations have been
reclassified to include those operations classified as discontinued in the current period:

 

                                                      December 31        December 31
                                                             2013               2012
                                               --------------------------------------
Discontinued operations
Revenue                                                    25,199                  -

Expenses
Direct production and operating expenditures                4,745                  -
Depletion and depreciation                                 12,734                  -
Impairment                                                 26,729                  -
Finance costs                                               5,805                 54
Loss on financial derivative                                4,220                  -
Foreign exchange loss                                         723                  -
                                               --------------------------------------
Loss from discontinued operations                         (29,757)               (54)
                                               --------------------------------------
                                               --------------------------------------

 

5) Restricted cash

 

                                                       December 31        December 31
                                                              2013               2012
                                               --------------------------------------
Operating costs standby letter of credit                         -                808
                                               --------------------------------------
Restricted cash                                                  -                808
                                               --------------------------------------
                                               --------------------------------------

 

Restricted cash balances at December 31, 2013 are included in assets held for sa le. Restricted cash at December 31,
2012 relates to a British pounds sterling standby letter of credit issued to the Sullom Voe terminal.

6) Inventory and prepaid expenses

 

                                                       December 31        December 31
                                                              2013               2012
                                               --------------------------------------
Crude oil inventory                                              -              4,498
Prepaids                                                       539              1,379
                                               --------------------------------------
                                                               539              5,877
                                               --------------------------------------
                                               --------------------------------------

 

Inventory represents linefill and oil stocks available for sale . Inventory at December 31, 2013 is included in assets
held for sale. Included within inventory at December 31, 2012 is depletion of $3,372.

7) Property, plant and equipment

 

                                                      December 31        December 31
                                                             2013               2012
                                               --------------------------------------
Opening balance                                            81,069             15,207
Additions                                                  23,590             58,250
Depletion and depreciation                                (13,612)            (3,466)
Impairment                                                (26,540)                 -
Changes in decommissioning estimate                         7,393                158
Transferred from exploration and evaluation
 assets                                                         -              9,347
Foreign currency translation                                   (4)             1,573
Reclassified to assets held for sale                      (71,832)                 -
                                               --------------------------------------
Closing balance                                                64             81,069
                                               --------------------------------------
                                               --------------------------------------

 

During the year, the Company capitalized $207 (2012 - $152) of general and administrative and $142 (2012 - $61) of 
share-
based compensation related to development activity.

In the third quarter of 2013, the Company recognized an impairment charge of $12. 1 million related to Causeway
following further delays in completing the Causeway electric submersible pump and water injection facilities together
with additional significant capital cost overruns on the project. The Causeway CGU was written down to the estimated
recoverable amount based on fair value less cost of disposal. The estimated fair value was determined using future cash
flows adjusted for risks specific to the asset and discounted using an after tax discount rate of 15%.

At December 31, 2013, the Company assessed the carrying amount of its property, plant and equipment assets for
indicators of impairment. For assets to be disposed of, the recoverable amount is fair value less costs of disposal
rather than value in use. In 2014, the Company agreed to the sale of the Company's Causeway, Kerloch and Cormorant East
assets to be structured as a sale of all of the issued and outstanding shares in Antrim s UK subsidiary, Antrim
Resources (N.I.) Limited ("ARNIL") for $53 million in cash, plus the assumption of certain liabilities. In the fourth
quarter of 2013, the Company recognized an impairment charge of $14.6 million with respect to the proposed transaction
and assets to be disposed of.

In November 2012, the Field Development Plan ("FDP") for the Cormorant East Field was approved by the Department of
Energy and Climate Change ("DECC"). As a result, $9,347 of accumulated exploration and evaluation costs were transferred
to property, plant and equipment at that time.

8) Exploration and evaluation assets

 

                                                      December 31        December 31
                                                             2013               2012
                                               --------------------------------------
Opening balance                                             6,931            122,431
Additions                                                     684              9,219
Changes in decommissioning estimate                           475              1,850
Impairment                                                 (7,006)          (122,698)
Transferred to property, plant and equipment                    -             (9,347)
Foreign currency translation                                   41              5,476
                                               --------------------------------------
Closing balance                                             1,125              6,931
                                               --------------------------------------
                                               --------------------------------------

 

Exploration and evaluation assets at December 31, 2013 relate to the Company's Ireland Frontier Exploration Licence.
During the year, the Company capitalized $226 (2012 - $425) of general and administrative costs and $66 (2012 - $137) of
share- based compensation related to exploration and evaluation activity.

In the third quarter of 2013, the Company recognized an impairment charge of $7.0 million relating to the West Causeway
licence as the licence was nearing the end of its exploration term.

In January 2013, the Company elected not to participate in further development work on the Fionn Field. As a result, an
impairment charge of $50,358 in 2012 was recognized, representing the full carrying value relating to the Fionn Field
CGU. Antrim retains a 35.5% interest in the remainder of Licence P201 Block 211/22a South East Area.

In the fourth quarter of 2012 Licence P1625 Block 21/24b ("West Teal") was nearing the end of its initial exploration
term and based on an evaluation performed by management the licence was not considered economically viable. As a result
the Company recognized an impairment charge of $1,840 in 2012 representing the full carrying value of this licence.

In December 2012, the Company announced that the Cyclone exploration well in UK Block 21/7b was plugged and abandoned.
As a result, an impairment charge of $5,939 was recognized in 2012 representing the full carrying value relating to this
licence.

In October 2012, DECC agreed to waive the seismic and contingent well obligations on Licence P1563 Blocks 21/28b &
21/29c ("Carra") which allowed the Company to relinquish the licence in its entirety. The Company recognized an
impairment charge of $2,304 in 2012 representing the full carrying value of this licence.

As at March 31, 2012 management performed an impairment assessment on the carrying value of the Fyne Licence CGU as
there were indications that the recoverable value may be impaired. The facts and circumstances considered included the
abandonment of the East Fyne appraisal well, the expectation that the gross Fyne Field reserves would likely decline by
approximately 36%, the withdrawal of Premier Oil UK Limited ("Premier") and FOE from the Joint Operating Agreement
("JOA"), the risk that Antrim may not obtain approval of an FDP from DECC, the risk of Antrim not finding partners and
the challenge in securing funding for the project in a difficult market. In light of these events management determined
that the carrying value of the Fyne Licence CGU was impaired. The carrying value of the Fyne Licence was written down to
a $nil value with the Company incurring a $60,112 impairment charge in the first quarter of 2012. Contingent
consideration of $10,000 on the acquisition of the Fyne Field is payable to the seller upon approval of an FDP by DECC.
As at March 31, 2012, a reduction in the fair value of contingent consideration from $7,000 to $nil was recorded based
on the impairment assessment performed with respect to the Fyne Licence. Exploration and evaluation expenses in 2013
relate primarily to the Fyne Licence.

The Company recognized an impairment charge in 2012 of $2,144 relating to the Erne discovery well 21/29d- 11 and the
sidetrack well 21/29d-11Z. Post-well analysis of these two wells by the Company's independent reserve evaluation
engineers did not result in any reserves being assigned at this time.

9) Debt

 

                                                       December 31        December 31
                                                              2013               2012
                                                -------------------------------------
Opening balance                                                  -                  -
Additions                                                   21,444                  -
Payments                                                    (5,350)                 -
Interest on long-term debt                                   3,332                  -
Amortization of transaction costs                              733                  -
Reclassified to liabilities held for sale                  (20,159)                 -
                                                -------------------------------------
Closing balance                                                  -                  -
                                                -------------------------------------
                                                -------------------------------------

 

In January 2013, the Company entered into a $30 million payment swap transaction with a major financial institution.
Under the terms of the transaction, $30 million is repayable in 29 instalments commencing September 2013 and concluding
January 2016. To enable the Company to pay amounts under the payment swap the Company also entered into a Brent Oil
Price Commodity Swap to forward sell 657,350 barrels of Brent crude oil at an initial fixed price of $89.37 covering the
period from February 2013 to December 2015 (see note 23). The estimated fair value of the credit-adjusted financial
derivative on inception was $7,133. The payment swap was measured based on the present value of the cash received offset
by the fair value of the financial derivative. The actual principal amount of bank debt outstanding at December 31, 2013
is $24,650. The payment swap will be accreted to its face value through a charge to earnings using the effective
interest method at a discount rate of 24.3%. Transaction costs of $1,423 are amortized over the term of the contract.

The Company is subject to financial and operating covenants related to the payment swap. The Company is in breach of
certain covenants and had insufficient cumulative production to remove restrictions related to the use of proceeds from
oil sales. In addition, the Company now anticipates higher than expected capital costs to complete the Causeway
development for which the Company is subject to requirements to place additional funds into a reserve account with the
lender. Failure to meet the terms of one or more of these covenants may potentially result in accelerated repayment of
the debt obligations and accordingly the full amount of the outstanding debt has been classified as current. On March
17, 2014 the Payment and Oil Swap was amended to allow for completion of the Transaction. Under the amendment, the
Transaction is to be completed by April 15, 2014. Security provided against the loan is in the form of intercompany
guarantees and a floating charge over the Company s UK assets. See note 1.

10) Deferred revenue

 


                                                       December 31        December 31
                                                              2013               2012
                                               --------------------------------------
Deferred revenue                                                 -              1,089
                                               --------------------------------------
                                               --------------------------------------

 

Deferred revenue relates to oil sales which have been invoiced during the year but have not been lifted from the
terminal therefore title and risk has not been transferred to the buyer (see note 16). In 2013, the deferred revenue
balance was reclassified to assets held for sale.

11) Decommissioning obligations

 


                                                      December 31        December 31
                                                             2013               2012
                                               --------------------------------------
Opening balance                                            10,270              3,595
Additions                                                     759              4,259
Accretion                                                     220                145
Change in estimate                                          8,056              3,370
Dispositions                                                    -             (1,362)
Foreign currency translation                                1,023                263
Reclassified to liabilities held for sale                 (16,198)                 -
                                               --------------------------------------
Closing balance                                             4,130             10,270
                                               --------------------------------------
                                               --------------------------------------

 

At December 31, 2013, the estimated undiscounted decommissioning obligations are $ 4,269 (2012 - $11,218). The
undiscounted obligation is forecast to be payable in 2016.

The change in estimate in 2013 is primarily related to increased costs estimates for the reclamation of producing wells
as well as water injection and suspended wells. The change in estimate in 2012 is primarily related to increased costs
estimates for the reclamation of suspended wells, changes in working interest and revision to the timing of future
decommissioning obligation cash flows.

The present value of the decommissioning obligations has been calculated using a risk-free interest rate of 2.17% (2012
- 1. 6%) and an inflation rate of 2.0% (2012 - 2. 0%).

12) Share capital

 


Authorized
Unlimited number of common voting shares

Common shares issued                                     Number of             Amount
                                                            Shares                  $
                                               --------------------------------------
Balance, December 31, 2011                             184,116,078            361,587
Exercise of stock options                                  614,998                186
Transfer from contributed surplus                                -                149
                                               --------------------------------------
Balance, December 31, 2012 and 2013                    184,731,076            361,922
                                               --------------------------------------
                                               --------------------------------------

 

13) Share-based compensation

The Company has a program whereby it may grant options to its directors, officers and employees to purchase up to 10% of
the issued and outstanding number of common shares. The exercise price of each option is no less than the market price
of the Company's stock on the date of grant. Stock option terms are determined by the Company's Board of Directors but
options typically vest evenly over a period of three years from the date of grant and expire five years after the date
of grant.

Share-based compensation for the year was $901 (2012 - $1,196) of which $693 (2012 - $998) was expensed and $208 (2012 -
$198) was capitalized.

The following table illustrates the number and weighted average exercise prices of and movements in share options under
the option program during the year.

 

                                       2013                         2012
                               ------------------------------------------------------
                                                Weighted                     Weighted
                                                 average                      average
                                                exercise                     exercise
                                                   price                        price
                               # of Options        Cdn $    # of Options        Cdn $
                               ------------------------------------------------------
Outstanding at January 1         12,350,065         0.98       9,168,063         2.12
Granted                             500,000         0.20       6,985,000         0.60
Cancelled                                 -            -        (983,338)        2.58
Forfeited                        (3,045,065)        0.83        (451,662)        1.01
Expired                          (2,230,000)        2.08      (1,753,000)        4.57
Exercised                                 -            -        (614,998)        0.30
                               ------------------------------------------------------
Outstanding at December 31        7,575,000         0.67      12,350,065         0.98
                               ------------------------------------------------------
                               ------------------------------------------------------
Exercisable at December 31        3,571,680         0.82       4,581,742         1.56
                               ------------------------------------------------------
                               ------------------------------------------------------

 

The weighted average share price on the exercise date for share options exercised in 2012 was $0.77.

The range of exercise prices of the outstanding options is as follows:

 

                  Options outstanding                               Options exercisable
------------------------------------------------------ ---------------------------------------------
                                             Weighted-                                     Weighted-
               Weighted-         Number        average       Weighted-         Number        average
Range            average    outstanding          years         average    outstanding          years
of
exercise        exercise             at      remaining        exercise             at      remaining
prices             price       December    contractual           price       December    contractual
Cdn $              Cdn $       31, 2013           life           Cdn $       31, 2013           life
----------------------------------------------------------------------------------------------------
0.20 -
 1.00               0.57      5,895,000           3.52            0.61      1,891,680           3.35
1.01 -
 1.11               1.02      1,680,000           1.71            1.02      1,680,000           1.71
                        ---------------                               ---------------
                              7,575,000                                     3,571,680
                        ---------------                               ---------------
                        ---------------                               ---------------

 

The fair values of options granted during the year were calculated using a Black Scholes valuation model. The principal
inputs to the option valuation model were:

 

                                                             2013               2012
                                               --------------------------------------
Weighted average share price                                 0.20               0.60
Weighted average exercise price                              0.20               0.60
Weighted average expected volatility                       83. 63%            80. 54%
Option life                                             4.5 years          4.5 years
Dividend yield                                                Nil                Nil
Weighted average risk- free interest rate                    1.24%              1.19%
Forfeiture rate                                                10%                10%

 

Expected volatility was determined by calculating the historical volatility of the Company s share price over a period
commensurate with the expected lifetime of the options.

14) Gain on disposal of assets

In July 2013, the Company sold its option to acquire up to a 30% interest in the production sharing agreement for the
Pemba-Zanzibar exploration licence offshore and onshore Tanzania. Cash consideration paid to the Company was $7.5
million. There were no wells, production, reserves or resources associated with the transaction and the Company recorded
a gain of $7.5 million associated with the transaction.

15) Earnings per share

 

                                                                            2013               2012
                                                              --------------------------------------

Loss from continuing operations                                           (9,445)          (134,805)
Income (loss) from discontinued operations                               (29,757)               261
                                                              --------------------------------------
Net loss for the year                                                    (39,202)          (134,544)
                                                              --------------------------------------
                                                              --------------------------------------

Basic earnings per share was calculated as follows:
Weighted average number of common shares:
Issued common shares                                                 184,731,076        184,116,078
Effect of share options exercised                                              -            272,074
                                                              --------------------------------------
Weighted average number of common shares - basic                     184,731,076        184,388,152
                                                              --------------------------------------
                                                              --------------------------------------

Diluted earnings per share was calculated as follows:
Weighted average number of common shares:
Weighted average number of common shares - basic                     184,731,076        184,388,152
Effect of outstanding options                                                  -          1,140,005
                                                              --------------------------------------
Weighted average number of common shares - diluted                   184,731,076        185,528,157
                                                              --------------------------------------
                                                              --------------------------------------

Basic and diluted loss (income) per common share
From continuing operations                                                 (0.05)             (0.73)
From discontinued operations                                               (0.16)              0.00
                                                              --------------------------------------
Total basic and diluted loss per share                                     (0.21)             (0.73)
                                                              --------------------------------------
                                                              --------------------------------------

 

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of completion of these financial statements.

For the years ended December 31, 2013 and 2012, all stock options were anti- dilutive and were not included in the
diluted common share calculation.

16) Revenue

 

                                                              2013              2012
                                                -------------------------------------
Sales invoiced                                                   -             1,089
Deferred revenue at the end of the year                          -            (1,089)
                                                -------------------------------------
Sales recognized as revenue                                      -                 -
                                                -------------------------------------
                                                -------------------------------------

 

Revenue is recognized when title and risk transfer to the purchaser, which is at the time of lifting of the oil into the
tanker at the Sullom Voe terminal. All sales are made under contract to one UK customer. Under the contract with the
purchaser, Antrim invoices and receives payment for its oil in the month after production; however, the purchaser
retains certain rights impacting the timing of liftings which may result in no sales in a particular month resulting in
deferred revenue.

17) General and administrative expenses

 


                                                             2013               2012
                                               --------------------------------------
Wages and salaries                                          2,307              3,770
Occupancy                                                     551                467
Administrative                                              2,309              2,253
Travel                                                        162                315
Overhead recovery                                            (544)              (962)
                                               --------------------------------------
                                                            4,785              5,843
                                               --------------------------------------
                                               --------------------------------------

 

Total employee benefits expenses, including share -based compensation for the year ended December 31, 2013 were $2,838
(2012 - $4,966).

18) Finance income

 

                                                              2013               2012
                                               --------------------------------------
Interest Income                                                  2                276
                                               --------------------------------------
                                               --------------------------------------

 

19) Finance costs

 

                                                              2013               2012
                                               --------------------------------------
Debt financing                                                 987                  -
Accretion of decommissioning obligation                         60                 91
Bank charges                                                    16                 68
                                               --------------------------------------
                                                             1,063                159
                                               --------------------------------------
                                               --------------------------------------

 

20) Supplemental cash flow information

 


                                                             2013               2012
                                               --------------------------------------
(Increase)/decrease of assets:
Trade and other receivables                                (3,366)             4,962
Inventory and prepaid expenses                               (828)            (2,284)
Increase/(decrease) of liabilities:
Trade and other payables                                   (4,754)             2,039
                                               --------------------------------------
                                                           (8,948)             4,717
                                               --------------------------------------

Cash and cash equivalents are comprised of:
Cash in bank                                                1,082              1,503
Short-term deposits                                             -                  -
                                               --------------------------------------
                                                            1,082              1,503
                                               --------------------------------------
                                               --------------------------------------

 

21) Income taxes

The differences between the expected income tax provision and the reported income tax provision are summarized as
follows:

 


                                                             2013               2012
                                               --------------------------------------
Loss from continuing operations before income
 taxes                                                      9,445            134,805
Statutory income tax rate                                      25%                25%
                                               --------------------------------------
Expected recovery                                           2,361             33,701

Increase (decrease) in taxes resulting from:
Non-deductible expenses                                    (1,375)           (16,682)
Effect of different tax rates in foreign
 jurisdictions                                             (8,108)           (10,761)
Changes in statutory rate changes in the year                   -                412
Benefit of tax losses not recognized                        7,122             (6,670)
                                               --------------------------------------
                                                                -                  -
                                               --------------------------------------
                                               --------------------------------------

 

The statutory tax rate was 25% in 2013 (2012 - 25%).

There was no income tax expense in 2013 and 2012 relating to discontinued operations.

Deferred income tax

The deferred income tax assets are comprised of the following:

 


                                                      December 31        December 31
                                                             2013               2012
                                               --------------------------------------
Property, plant and equipment                                 961            (25,083)
Decommissioning obligations                                 1,239              3,081
Non-capital losses                                          9,256             94,165
Capital losses                                              3,444              1,447
Share issuance and financing costs                            276              1,103
Other                                                         321                249
Unrecognized deferred tax asset                           (15,497)           (74,962)
                                               --------------------------------------
                                                                -                  -
                                               --------------------------------------
                                               --------------------------------------

 

The Company has unused non-capital tax losses attributable to continuing operations of $37,038 (2012 - $310,676) to
carry forward against future taxable income of subsidiaries in which the losses arose. At December 31, 2013, the Company
had the following available tax loss carryforwards:

 

                                                      Expiry Dates                  $
                                               --------------------------------------
                                               --------------------------------------
Loss carryforwards attributable to continuing
operations:
Canada                                                   2014-2031             37,023
United Kingdom                                           No Expiry                  -
Ireland                                                  No Expiry                 15
                                                                  -------------------
                                                                               37,038
                                                                  -------------------
                                                                  -------------------

 

22) Commitments and contingencies

The Company has commitments in respect of its petroleum and natural gas properties and operating leases as follows:

 


                                   2014     2015     2016     2017     2018     Thereafter
------------------------------------------------------------------------------------------
($000's)
Office Leases                       240      251      251      233       10              -
Ireland                             350        -        -        -        -              -
United Kingdom
Continuing operations:
Fyne (1)                             34       34       34        -        -              -
Erne                                 14        -        -        -        -              -
Assets held for sale:
Causeway (2)                      4,734       27       29       32       32             32
Cormorant East                    1,804        8        8        8        8              8
------------------------------------------------------------------------------------------
Total                             7,176      320      322      273       50             40
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) In March 2013, the Company decided not to proceed with development of the Fyne Field
    using an FPSO. The Company continues to hold the licence pending further evaluation
    using buoy technology. The Crinan Field was relinquished in July 2013.
(2) Relates to Antrim's 35.5% interest in the Causeway Licences.

 

Contingencies

In 2011, the Company entered into a variation to an existing contract for drilling management services in the UK North
Sea which required the drilling of two wells, estimated to take 50 days in a letter of intent preceding the contract
variation. The Company contends that it met its contractual obligations under this variation through the drilling of the
Erne pilot well (21/29d-11) and the Erne sidetrack well (21/29d- 11Z). The drilling of these two wells took place over a
period of 58 days. Subsequent to releasing the rig, the Company received an invoice from the drilling management
services contractor charging the Company for approximately $5 million in additional costs as the contractor claims all
conditions of the contract had not yet been satisfied.

In July 2012, the drilling management services contractor filed a claim against the Company for the additional invoice
costs plus interest and lost management time . The Company has filed a defence against this claim in the High Court of
England and Wales and believes it is more likely than not that it will not have to pay. As a result, a contingent
liability has not been recorded. Under the Transaction the claim is to remain with ARNIL.

 

Operating lease arrangements
                                                              2013               2012
                                               --------------------------------------
Minimum lease payments under operating leases
recognized as an expense in the year                           551                470
                                               --------------------------------------
                                               --------------------------------------

 

At the balance sheet date, the Company had outstanding commitments for future minimum lease payments under non-
cancellable operating leases, which fall due as follows:

 

                                                              2013               2012
                                               --------------------------------------
Within one year                                                240                358
In the second to fifth years inclusive                         744              1,464
                                               --------------------------------------
                                                               984              1,822
                                               --------------------------------------
                                               --------------------------------------

 

Operating lease payments represent net rentals payable by the Company for its office properties. Current lease
arrangements expire at the end of February 2018.

23) Financial instruments and financial risks

Financial instruments

Financial assets and financial liabilities are initially recognized at fair value and are subsequently accounted for
based on their classification. The classification categories, which depend on the purpose for which the financial
instruments were acquired and their characteristics include held-for-trading, available-for-sale, held-to-maturity,
loans and receivables, investments, and other liabilities. Except in very limited circumstances, the classification is
not changed subsequent to initial recognition.

The Company's financial instruments consist of cash, cash equivalents, restricted cash, accounts receivable, other non-
current assets, accounts payable, debt and financial derivative. Cash and cash equivalents, restricted cash, and
accounts receivable are classified as loans and receivables and are accounted for at amortized cost. Accounts payable
are classified as other liabilities and are accounted for at amortized cost. Due to the short-term maturity of these
financial instruments, fair values approximate carrying amounts. Debt is classified as other financial liabilities and
is accounted for at amortized cost. The financial derivative is classified as a financial liability at fair value
through profit or loss.

Financial risks

The Company is exposed to financial risks encountered during the normal course of its business. These financial risks
are composed of credit risk, liquidity risk and market risk including commodity price and foreign currency exchange
risks.

(a) Credit risk

The Company is exposed to the risk that its counterparties will fail to discharge their obligations to the Company on
its cash, cash equivalents, accounts receivable and certain non-current assets.

Cash and cash equivalents and restricted cash are on deposit with reputable Canadian and international banks, and
therefore the Company does not believe these financial instruments are subject to material credit risk. The Company
sells all of its production to one oil and natural gas marketer and therefore is subject to concentration risk.
Management does not believe that this concentration of credit risk will result in any loss to the Company based on past
payment experience and its investment grade credit rating as established by independent credit rating agencies.

The Company's sales from discontinued operations in 2013 were all to a single customer. Factors included in the
assessment of accounts receivable for impairment are the relationship between the purchaser and the Company and the age
of the receivable.

The extent of the Company's credit risk exposure is identified in the following table:

 

                                                       December 31        December 31
Current                                                       2013               2012
                                               --------------------------------------
Cash and cash equivalents                                    1,082              1,503
Restricted cash                                                  -                808
Accounts receivable                                            184                332
                                               --------------------------------------
                                                             1,266              2,643
                                               --------------------------------------
                                               --------------------------------------

 

The Company's credit risk exposure with respect to assets held for sale is identified in the following table:

 

                                                       December 31        December 31
                                                              2013               2012
                                               --------------------------------------
Restricted cash                                              6,687                  -
Accounts receivable                                          3,512                  -
                                               --------------------------------------
                                                            10,199                  -
                                               --------------------------------------
                                               --------------------------------------

 

(b) Liquidity risk

The Company is exposed to liquidity risk from the possibility that it will encounter difficulty meeting its financial
obligations. The Company manages this risk by forecasting cash flows in an effort to identify future liabilities and
arrange financing, if necessary. It may take many years and substantial cash expenditures to pursue exploration and
development activities on all of the Company's existing undeveloped properties. Accordingly, the Company will need to
raise additional funds from outside sources in order to explore and develop its properties. There is no assurance that
adequate funds from debt and equity markets will be available to the Company in a timely manner.

As at December 31, 2013 the Company was in breach of certain covenants including its capex reserve and debt service
cover ratio covenants and had insufficient cumulative production to remove restrictions related to the use of proceeds
from oil sales. In addition, the Company now anticipates higher than expected capital costs to complete the Causeway
development for which the Company is subject to requirements to place additional funds into a reserve account with the
lender. Failure to meet the terms of one or more of these covenants may potentially result in accelerated repayment of
the debt obligations and accordingly the full amount of the outstanding debt has been classified as current. See note 1
Going Concern.

At December 31, 2013 the Company had a working capital surplus of $788 compared to a working capital deficiency of
$10,734 as at December 31, 2012. Without the reclassification of assets and liabilities held for sale, Antrim had a
working capital deficiency at December 31, 2013 of $23,981, including bank debt (after discount) of $20,159 and
financial derivative (after discount) of $8,158.

The following table shows the timing of cash outflows relating to accounts payable and accrued liabilities, current debt
and the financial derivative liability as at December 31, 2013.

 

                                                            Within
                                                            1 year       1 to 5 years
-------------------------------------------------------------------------------------
Accounts payable and accrued liabilities                    11,489                  -
Current debt                                                20,159                  -
Financial derivative                                         8,158                  -
-------------------------------------------------------------------------------------

 

(c)  Market risk

Market risk consists of commodity price risk and foreign currency exchange risk.

Commodity price risk

Currently all of the Company's production revenue is from one property in the UK. Commodity price risk related to crude
oil production represents a significant market risk exposure. Crude oil prices and quality differentials can be
influenced by global supply and demand factors as well as political events, quotas imposed on members of the
Organization of Petroleum Exporting Countries (OPEC) and weather.

At December 31, 2013, the Company had the following financial derivative contract:

 

                                                            Undelivered          Fair
                                               Volumes      Fixed price         value
Derivative          Term                           Bbl            $/bbl             $
-------------------------------------------------------------------------------------
Oil Swaps           October 2013 -             494,652           $81.21         8,158
                     December 2015

 

For the year ended December 31, 2013 the financial derivative liability movements were:

 


                                                       December 31        December 31
                                                              2013               2012
                                                -------------------------------------
Opening balance                                                  -                  -
Additions                                                    7,133                  -
Settlements                                                 (2,225)                 -
Unrealized loss on financial derivative                      3,250                  -
Reclassified to liabilities held for sale                   (8,158)                 -
                                                -------------------------------------
Closing balance                                                  -                  -
                                                -------------------------------------
                                                -------------------------------------

 

If the Company had settled the financial derivative at December 31, 2013 the pay ment amount would have been $10. 6
million.

Foreign currency exchange risk

The Company is exposed to fluctuations in foreign currency exchange rates as many of the Company's result, fluctuations
in the United States dollar against the Canadian dollar and British pound sterling could result in unanticipated
fluctuations in the Company's financial results. The Company seeks to minimize foreign exchange risk by holding cash and
cash equivalents in United States dollars when not required in support of current operations.

Capital management

The Company's objective when managing its capital is to safeguard the Company's ability to continue as a going concern,
maintain adequate levels of funding to support its exploration and development program, and provide flexibility in the
future development of its business. The ability of the Company to successfully carry out its business pla n is dependent
upon the continued support of its shareholders, attracting joint venture partners, the discovery of economically
recoverable reserves and the ability of the Company to obtain financing to develop reserves. The Company maintains and
adjusts its capital structure based on changes in economic conditions and the Company's planned requirements. The
Company may adjust its capital structure by issuing new equity and/or debt, selling assets, and controlling capital
expenditure programs. The Company intends to fund its planned capital program through existing cash resources, debt and
through cash generated from production at Causeway.

The Company's capital structure at December 31, 2013 consisted of cash and cash equivalents, bank debt and shareholders'
equity. Shareholders' equity includes shareholders' capital, contributed surplus, and accumulated other comprehensive
loss and deficit.

The capital structure of the Company consists of:

 

                                                       December 31        December 31
                                                              2013               2012
                                               --------------------------------------
Cash and cash equivalents                                    1,082              1,503
Shareholders  equity                                        28,712             66,996
                                               --------------------------------------
                                                            29,794             68,499
                                               --------------------------------------
                                               --------------------------------------

 

Current restrictions on the availability of credit may limit the Company's ability to access debt or equity financing
for its development projects. See note 1, Going Concern. The Company forecasts cash flows against a range of
macroeconomic and financing market scenarios in an effort to identify future liabilities and arrange financ ing, if
necessary. Although the Company may need to raise additional funds from outside sources, if available, in order to
develop its oil and gas properties, the Company seeks to maintain flexibility to manage financial commitments on these
assets.

Methods employed to adjust the Company's capital structure could include any, all or a combination of the following
activities:

 

i.   Issue new shares through a public offering or private placement;
ii.  Issue equity linked or convertible debt;
iii. Raise fixed or floating rate debt;
iv.  Sell or farmout existing exploration, development and producing assets.

 

24) Related party transactions

The financial statements include the financial statements of Antrim and the subsidiaries listed in the following table:

 

                                                                      Equity interest
                                                                                 in %
                                                                      ---------------
                                          Country of
Subsidiary                                Incorporation           2013           2012
-------------------------------------------------------------------------------------
Antrim Energy Ltd.                        Bahamas                  100            100
Antrim Exploration (Ireland) Limited      Ireland                  100            100
Antrim Resources (N.I.) Limited           United Kingdom           100            100

 

Compensation of key management personnel of the Company

Key management personnel include directors and executives of the Company. The compensation paid or payable to key
management personnel is as follows:

 

                                                               2013              2012
                                                 ------------------------------------
Short-term employee benefits                                  1,304             2,190
Share-based compensation                                        788               792
                                                 ------------------------------------
Total compensation of key management personnel                2,092             2,982
                                                 ------------------------------------
                                                 ------------------------------------

 

The total aggregate amount payable by Antrim in respect of severance to executives who could voluntarily terminate their
employment agreement upon closing of the Transaction is approximately $1,800.

Other related party transactions

The Company may from time to time enter into arrangements with related parties which are accounted for at the exchange
amount. In 2013, the Company incurred fees of $328 (2012 - $422) payable to Burstall Winger LLP, a law firm in which a
director of the Company is a partner.

25) Discontinued operations - Argentina

The Company entered into an agreement on March 23, 2012 to sell all of its interest in its wholly owned subsidiary
Antrim Argentina S.A. to Crown Point Energy Inc. ("Crown Point") (formerly known as Crown Point Ventures Ltd.) by way of
a plan of arrangement (the "Arrangement"). The consideration consisted of Cdn $10,262 in cash (subject to certain
adjustments) and 35,761,290 common shares of Crown Point ("Crown Point Shares"). Pursuant to the Arrangement, Antrim
would distribute the Crown Point Shares to its shareholders.

On May 28, 2012, Antrim completed the sale of Antrim Argentina S.A. to Crown Point. Under the terms of the Arrangement,
the Company received a cash payment of $9,976 (Cdn $10,262) and 35,761,290 Crown Point Shares. The actual cash payment
received was netted against adjustments of $1,015 (Cdn $1,016) which have been recognized as sale transaction costs.
These sale transaction costs, along with costs of $1,886 incurred by the Company, have been offset against income from
discontinued operations.

 

Details of the disposition are as follows:
                                                                                2012
                                                                      ---------------
Consideration received:
Cash                                                                           9,976
Crown Point Shares (based on a May 28, 2012 share price of Cdn $0.80)         27,811
                                                                      ---------------
                                                                              37,787
Carrying value of assets and liabilities disposed:
Working capital                                                                9,388
Property, plant and equipment                                                 19,886
Exploration and evaluation assets                                                719
Other non-current assets                                                       1,189
Decommissioning obligations                                                   (2,502)
                                                                      ---------------
Total carrying value of assets and liabilities disposed                       28,680
                                                                      ---------------
Gain on disposal excluding foreign currency translation adjustment             9,107
Foreign currency translation adjustment relating to disposal                  (3,213)
                                                                      ---------------
Gain on disposal after foreign currency translation adjustment                 5,894
                                                                      ---------------
                                                                      ---------------

 

Antrim distributed the Crown Point Shares to its shareholders on June 7, 2012 (the "Distribution Date"). On the
Distribution Date, Crown Point s closing share price on the TSX Venture Exchange was Cdn $0.51 which had decreased from
the May 28, 2012 closin g share price of Cdn $0. 80. This reduction in Crown Point s share price resulted in the Company
recognizing a capital loss on the

Crown Point Shares of $10,040. This amount has been recognized on the consolidated statement of comprehensive loss as a
reduction in the fair value of financial assets. A capital distribution of $17,657 has been recorded in deficit on the
statement of changes in equity.

The combined results of the discontinued operations have been included in the consolidated statement of comprehensive
loss. The comparative period income and cash flows from discontinued operations have been reclassified to include those
operations classified as discontinued in the current year.

The year ended December 31, 2012 discontinued financial and operating results include only those results up to May 28,
2012 (the date of sale of the Argentina operations).

 

                                                                         December 31
                                                                                2012
                                                                     ----------------
Discontinued operations
Revenue, net of royalties                                                      4,764

Direct production and operating expenditures                                  (1,906)
Depletion and depreciation                                                      (147)
General and administrative expenses                                             (768)
Sale transaction costs                                                        (1,886)
Exploration and evaluation expenditures                                          (26)
Other income                                                                     935
Export taxes                                                                     (88)
Write down of non-current assets                                                (568)
Finance income                                                                    88
Finance costs                                                                   (130)
Foreign exchange gain                                                             47
                                                                     ----------------
Income from discontinued operations                                              315
                                                                     ----------------
                                                                     ----------------


                                                                         December 31
                                                                                2012
                                                                     ----------------
Cash flow from discontinued operations
Net cash flow used in operating activities                                      (365)
Net cash flow used in investing activities                                    (1,121)
                                                                     ----------------
Net cash flow used in discontinued operations                                 (1,486)
                                                                     ----------------
                                                                     ----------------

 

26) Subsequent event

On February 7, 2014 the Company announced that it entered into an agreement to sell, subject to shareholder and
regulatory approval, a ll of the issued and outstanding shares in the capital of ARNIL for $53 million in cash, plus the
assumption of certain liabilities and adjusted working capital, from which Antrim will settle on closing all outstanding
obligations under its Payment and Oil Swap agreements. At December 31, 2013, amounts outstanding under the Company's
Payment and Oil
Swap arrangements are included in assets held for sale and discontinued operations. See note 1 Going Concern and note 4
Discontinued Operations for additional information.

 

DIRECTORS

Stephen Greer
President and Chief Executive Officer,
Antrim Energy Inc.

Colin Maclean (2) (3) (4) (5)
Independent Director

Dr. Gerry Orbell (1) (3) (4) (5)
Chairman,
Antrim Energy Inc.

Erik Mielke
Independent Director

Jim Perry (1) (3) (4) (5)
President,
Alternative Fuel Systems business unit
IMPCO Technologies Canada, Inc.

Jim Smith (1) (2) (5)
Independent Director

Jay Zammit (2) (5)
Partner,
Burstall Winger LLP

(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Reserves Committee
(4) Member of the Exploration Committee
(5) Member of the Corporate Governance Committee

OFFICERS

Stephen Greer
President and Chief Executive Officer

Anthony Potter
Chief Financial Officer

Kerry Fulton
Vice President, Operations

Terry Lederhouse
Vice President, Commercial

Adrian Harvey
Corporate Secretary

STOCK EXCHANGE LISTINGS

Toronto Stock Exchange: Trading Symbol "AEN"
London Stock Exchange (AIM): Trading Symbol
"AEY"

HEAD OFFICE

610, 301 8th Avenue SW
Calgary, Alberta
Canada T2P 1C5
Main: +1 403 264 5111
Fax: + 1 403 264 5113
info@antrimenergy.com
http://www.antrimenergy.com/

 

The Company's website is not incorporated by reference in and does not form a part of this report.

 

LONDON OFFICE

Ashbourne House, The Guildway
Old Portsmouth Road, Artington
Guildford, Surrey
United Kingdom GU3 1LR
Main: +44 (0) 1483-307 530
Fax: +44 (0) 1483-307 531

INTERNATIONAL SUBSIDIARIES

Antrim Energy Ltd.
Antrim Exploration (Ireland) Limited
Antrim Resources (N.I.) Limited

LEGAL COUNSEL

Burstall Winger LLP
Calgary, Alberta

 

BANKERS

Toronto-Dominion Bank of Canada

AUDITORS

 

PricewaterhouseCoopers LLP
Calgary, Alberta

 

INDEPENDENT ENGINEERS

McDaniel & Associates Consultants Ltd.

REGISTRAR AND TRANSFER AGENT

Inquiries regarding change of address, registered shareholdings, stock transfers or lost certificates should be direct
to:

 

CST Trust Company
Calgary, Alberta
inquiries@cantstockta.com

For further information, please contact:

Stephen Greer
President & CEO
Antrim Energy Inc.
Telephone: + 1 403 264- 5111
E-mail: greer@antrimenergy.com

Anthony Potter
Chief Financial Officer
Antrim Energy Inc.
Telephone: + 1 403 264- 5111
E-mail: potter@antrimenergy.com

Nominated Advisor
RFC Ambrian Limited
Sarah Wharry
Telephone: +44 (0) 20 3440 6800

OR

Buchanan
Tim Thompson/Tom Hufton
Telephone: +44 (0) 20 7466 5000
antrim@buchanan.uk.com

Contact Information

  • Antrim Energy Inc.