Announcement PDF ABN 13 086 972 429 HALF-YEAR REPORT 31 December 2023 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 CORPORATE DIRECTORY DIRECTORS Mr Robert Gardner Mr David Deloub Mr Jay Stephenson Executive Chairman Executive Director Non-executive Director COMPANY SECRETARY Mr Jay Stephenson REGISTERED OFFICE AUDITORS Suite 4, 182 Claisebrook Road, Perth WA 6000 Hall Chadwick Audit (WA) Pty Ltd 283 Rokeby Rd SUBIACO WA 6008 +61(0)8 9426 0666 Postal: PO Box 52 WEST PERTH WA 6872 CONTACT INFORMATION Telephone: +61 (0)8 6141 3500 Facsimile: +61 (0)8 6141 3599 Email: info@stonehorseenergy.com.au Website: www.stonehorseenergy.com SECURITIES EXCHANGE Australia Securities Exchange (ASX) Exchange Plaza Level 10, Central Park 152-158 St Georges Terrace, Perth WA 6000 ASX Code: SHE P a g e |i SHARE REGISTRY Computershare Registry Services Level 11, 172 St Georges Terrace Perth WA 6000 GPO Box D182 Perth WA 6840 1300 787 272 (investors within Australia) +61 (0)8 9323 2000 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 HALF YEAR REPORT 31 DECEMBER 2023 Contents DIRECTORS' REPORT ................................................................................................................................................... 3 AUDITOR’S INDEPENDENCE DECLARATION.............................................................................................................. 10 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................................... 11 CONSOLIDATED STATEMENT OF FINANCIAL POSITION............................................................................................ 12 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................................ 13 CONSOLIDATED STATEMENT OF CASH FLOWS ........................................................................................................ 14 NOTES TO THE FINANCIAL STATEMENTS ................................................................................................................. 15 DIRECTORS’ DECLARATION....................................................................................................................................... 21 AUDITOR’S REVIEW REPORT .................................................................................................................................... 22 P a g e | ii STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT Your Directors present their report together with the summary of the financial information of Stonehorse Energy Limited (the Company or Stonehorse) and its controlled entities (Group) for the half year ended 31 December 2023 and the auditor's report thereon. 1. Directors The names of Directors in office at any time during or since the end of the year are: Mr Robert Gardner Executive Chairman Mr David Deloub Executive Director Mr Jay Stephenson Non-executive Director Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. 2. Company Secretary The following person held the position of Company Secretary at the end of the financial year: Mr Jay Stephenson 3. Review of Operations 3.1. Operations Review Stonehorse Energy Limited (ASX: SHE) (Stonehorse or the Company) is pleased to present this Directors’ report for the half year ended 31 December 2023. OPERATIONAL HIGHLIGHTS ➢ The Company entered into a Participation Agreement with Canadian based Certus Oil & Gas Inc to earn a 26.25% Net Working Interest in the proposed Certus Caroline 1-27-33-05 liquids rich gas well located in Central Alberta, Canada. ➢ Stonehorse successfully completed the drilling, stimulation, and tie-in operations for the Caroline well in mid-October 2023. ➢ Production to Sales from this well commenced in late October and has subsequently produced in excess of 70,000 BOE through to 31st December 2023. ➢ The Company announced that it had entered a Farmout, Option and Participation Agreement with Canadian based Gryphon Oil Corp (Gryphon) to earn a 18.75% Net Working Interest in the proposed Wapiti 16-02-65- 08 light oil well located in Northern Alberta, Canada. ➢ The Gryphon Wapiti well was successfully spud in October and commenced production to sales on 1st January 2024. It was an impressive second half of 2023 for Stonehorse Energy with the Certus Caroline well producing over ~70,000 BOE of raw production on an 8/8ths basis from flush production on October 19th to 31st December 2023. In addition, the drilling, completion and tie-in was also successfully completed at Wapiti, with well producing to sales on the 1st January 2024. P a g e |3 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT The Company’s Executive Director David Deloub commented “ The performance of the Caroline well to date supports the economic case for additional development opportunities in the area. The Wapiti well adds high value light oil production to the company’s oil and gas portfolio. With our successful start to the year and additional opportunities coming forward, we see 2024 as being a transformational period for the company”. CANADIAN ASSETS During the Second half of 2023, Stonehorse entered into a Participation Agreement with Canadian based Certus Oil & Gas Inc (Certus) to earn a 26.25% Net Working Interest in a proposed Certus 1-27-33 liquids rich gas well located in Central Alberta, Canada. Stonehorse Energy has agreed to participate in the proposed drilling, completion, and tie-in of the liquids rich Certus 1-27-33 gas well. Wapiti well Caroline well Figure 1. Location of the Caroline and Wapiti wells located in central Alberta, CA. During the Period, Stonehorse successfully completed the Certus Caroline well, located in Central Alberta, Canada1. The frack stimulation was successfully pumped over 65 stages across a ~9000 ft lateral interval in the Glauconite formation. Drilling and completion operations were executed without any safety incidents, commencing the flowback and test phase. Multi day flow-back and in-test was successfully conducted at Caroline, prompting the well to be equipped and tied into permanent production facilities and brought online to sales on the 19th October 2023. From October to December 2023 the Certus Caroline produced over 75,000 BOE with an initial production average of 1,193 BOE per day well above expectations with a higher than forecasted condensate yield2. The production efficiency, mixed with the continuous 1 ASX Announcement – 5 October 2023 “Canadian Operations Update – Expect Production to Sales-Oct” 2 ASX Announcement – 13 November 2023 “Canadian Operations Update” P a g e |4 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT strong hydrocarbon commodity process, made a significant contribution to the overall portfolio performance from October onward. Figure 2. Arial view of fracture spread on location at the Certus Caroline 1-27-33-05-W5 well. Also, during the second half of 2023, Stonehorse agreed to participate in the drilling, completion, and tie-in of the Gryphon, Wapiti 16-02-65-08 light oil well located in Western Central Alberta. The arrangement with Gryphon included; a negotiated one well commitment to earn 3 sections of acreage. With success on the well, Stonehorse has the further option to participate in a second well drilled off the same pad on the same terms along with the option to select a further 3 sections of land in which it can elect to further participation. During the Period, Stonehorse announced the successful spud of the Gryphon Wapiti well, located in West-Central Alberta, Canada3. Wapiti entails a legacy oil productive reservoir, neighbouring decent analogue producing fields both north and south of the prospective area. The well has available infrastructure on hand and access to takeaway capacity for gas processing and oil sales, with major E&P operations in the surrounding area. The Pad preparation, rig mobilisation and spud was completed on schedule, with drilling operations commenced on October 22nd. In mid-November, drilling operations were successfully completed on the Wapiti well, both on time and within budget, reaching a total depth of 3,280m 3 ASX Announcement – 27 October 2023 “Canadian Operations Update – Gryphon and Certus wells” P a g e |5 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT Figure 3. Image of the Gryphon Wapiti well site with drill rig. During the Period, the 29 stage fracture operations were successfully completed for the Gryphon Wapiti well, with post frac integrity test and flow back / test operations following4. Initial tests of the well’s oil were positive, and in line with pre-drill expectations. Following the test period, Stonehorse commenced a shut-in of the well, recording pressure data whilst installing production equipment and organising flowline transport to the nearest processing plant. Permanent production equipment and flowline were subsequently with production sales commenced on 1st January 2024. 4 ASX Announcement – 13 December 2023 “Canadian Operations Update – Gryphon Well” P a g e |6 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT Figure 4. Fracture spread on location at the Wapiti well in Alberta, Canada. US ASSETS The current oil and gas well portfolio consisting of 11 operating wells in North America continues to perform strongly delivering seasoned production. Total net operating revenues have been impacted by softer oil and gas prices in North America. AUSTRALIAN ASSETS Myall Creek-2 (Surat Basin, QLD) Despite delays due to Armour’s being placed into administration and subsequent restructure (Armour has now been acquired by ADZ a privately held company) the agreed intention of the joint venture parties is to progress and complete the planned frac stimulation and realise production revenue and ultimately a return on the Myall Creek 2 investment during the course of 2024. CURRENT PORTFOLIO OF OIL AND GAS WELL ASSETS The Company currently has non-operated working interests in 14 wells including the 2 new wells located in Alberta, Canada and the highly productive Jewell well located in Oklahoma. Well Name Reference Number Working Interest County, State Operator Burgess 28-1 96.81% Ellis, OK Black Mesa Energy Sutton 2H-52 25.00% Hansford, TX Strat Land Exploration Bullard 1-18-07UWH 15.60% Gravin, OK Rimrock Resources Stonehorse US P a g e |7 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT Henry Federal 1-8-5XH 2.30% Blaine, OK Continental Resources Randolph 1-34-27XHM 0.21% Blaine, OK Continental Resources Randolph 3-34-27XHM 0.21% Blaine, OK Continental Resources Randolph 4-34-27XHM 0.21% Blaine, OK Continental Resources Jewell 1-13-12SXH 41.50% Carter, OK Black Mesa Energy Newberry 12-1 21.70% Carter, OK Black Mesa Energy Mitchell 12-1 50.00% Carter, OK Black Mesa Energy Thelma 1-32 50.00% Murray, OK Black Mesa Energy Caroline 1-27-33 26.25% Sundry, AB Certus Wapiti 16-02-65-08 18.75% Wapiti, AB Gryphon Myall Creek-2 25.00% Surat Basin, Qld ADZ Stonehorse Canada Stonehorse Australia Myall Creek Table 1. Current Portfolio of North American and Australian well bore interests. SUBSEQUENT EVENTS The Caroline well’s IP 90 average production at an impressive 1,085 BOE per day of sales, equating to 285 BOE per day for Stonehorse’s net 26.25% working interest. The Company is also pleased to announce the successful completion, tie in and first production on the Gryphon, Wapiti well which produced to sales on the 1st January 2024. The Wapiti 16-02-65-08 well test, construction and tie-in were completed with well equip, battery construction and tie-in completed on time and budget with no accidents or incidents. Well production was brought online to a permanent facility January 1, 2024. Early production indicates light oil and performing as expected. Light oil is being trucked to terminal and associated gas in being gathered and processed at regional third-party gas plant. CORPORATE In mid-July Stonehorse formally launched its Investor Hub. The Investor Hub is a dedicated platform for investors to learn more about Stonehorse Energy and our latest activities during this period of anticipated growth for the company. Visit the Investor Hub here: https://investorhub.stonehorseenergy.com/welcome 3.2. Operating results The loss of the Group for the half year amounted to $676,404 (2022: gain $760,951), which was expected at the Group's current operating levels. The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business. 3.3. Financial position The Group cash balance as at 31 December 2023 was $5,409,595 and had working capital surplus of $4,173,682 (30 June 2023: $9,158,407 and net assets of $13,019,142 (30 June 2023: $13,695,546) as at 31 December 2023. P a g e |8 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 DIRECTORS' REPORT 4. Events subsequent to reporting date There were no reportable events subsequent to the reporting date of 31st December 2023. Auditor’s Independence Declaration The lead auditor’s independence declaration under section 307C of the Corporations Act 2001 (Cth) for the half-year ended 31 December 2023 has been received and can be found on page 10 of the interim financial report. ROBERT GARDNER Chairman Dated this 14 March 2024 P a g e |9 AUDITOR’S INDEPENDENCE DECLARATION STONEHORSE ENERGY LIMITED In accordance with section 307C of the Corporations Act 2001, I provide the following declaration of independence to the directors of Stonehorse Energy Limited. As lead audit partner for the review of the financial report of Stonehorse Energy Limited for the halfyear ended 31 December 2023, I declare that to the best of my knowledge and belief, there have been no contraventions of: • the auditor independence requirements of the Corporations Act 2001 in relation to the review; and • any applicable code of professional conduct in relation to the review. Hall Chadwick Audit (WA) Pty Ltd ABN 42 163 529 682 Nikki Shen Director Dated 14th March 2024 10 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the period ended 31 December 2023 31 Dec 2023 31 Dec 2022 $ $ Revenue 1,248,681 2,904,648 Less: Production costs (373,331) (224,189) Gross profit 875,350 2,680,459 Other income 73,699 - Foreign Exchange gain 43,030 36,313 992,079 2,716,772 Compliance costs (40,757) (44,393) Employee benefits expenses (141,731) (123,402) Exploration and evaluation expenditure (304,795) (48,989) Professional fees (252,850) (65,989) Insurance expense (78,823) (19,026) Other expenses (50,408) (43,614) (664,119) (863,670) Note Continuing operations Amortisation expense 10 Share based payment expenses - (30,756) Fair value loss on financial assets (135,000) (270,000) (Loss)/Gain before tax (676,404) 1,206,933 - 445,982 (Loss)/Gain from continuing operations (676,404) 760,951 Net (Loss)/Gain for the period (676,404) 760,951 Income tax Other comprehensive income, net of income tax - Items that will not be reclassified subsequently to profit or loss - - Items that may be reclassified subsequently to profit or loss - - Other comprehensive income for the year, net of tax - - (676,404) 760,951 ₵ ₵ (0.10) 0.11 Total comprehensive gain attributable to members of the parent entity Gain per share: Basic gain per share (cents per share) 2 The statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes. P a g e | 11 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31 December 2023 31 Dec 2023 30 Jun 2023 Note $ $ Cash and cash equivalents 3 5,409,595 10,710,865 Trade and other receivables 5 494,062 5,690 Financial assets 4 450,000 585,000 Other current assets 19,186 63,630 Total current assets 6,372,842 11,365,185 Current assets Non-current assets Property, plant, and equipment 956 956 Exploration and evaluation assets 10 2,335,517 650,157 Producing assets 11 6,508,985 3,886,026 Total non-current assets 8,845,460 4,357,139 Total assets 15,218,301 15,902,324 118,773 126,391 Income tax payable 2,080,387 2,080,387 Total current liabilities 2,199,161 2,206,778 Total liabilities 2,199,161 2,206,778 Net assets 13,019,142 13,695,546 35,505,381 35,505,381 556,126 556,126 Accumulated losses (23,042,365) (22,365,961) Total equity 13,019,142 13,695,546 Current liabilities Trade and other payables 6 Equity Issued capital Reserves 7 The statement of financial position is to be read in conjunction with the accompanying notes. P a g e | 12 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the period ended 31 December 2023 Issued Capital Accumulated Losses Reserves Total $ $ $ $ 35,505,381 (24,699,925) 2,016,727 12,822,183 Gain for the period - 760,951 - 760,951 Other comprehensive income for the period - - - Total comprehensive gain for the period - 760,951 - Shares issued during the period - - Performance rights issued during the period - Transaction costs on share issue Note Balance at 1 July 2022 760,951 Transaction with owners, directly in equity - - 30,756 30,756 - - - - Balance at 31 December 2022 35,505,381 (23,938,974) 2,047,483 13,613,890 Balance at 1 July 2023 35,505,381 (22,365,961) 556,126 13,695,546 Loss for the period - (676,404) - (676,404) Total comprehensive gain for the period - (676,404) - (676,404) - - - - Performance rights issued during the period - - - - Transaction costs on share issue - - - - 35,505,381 (23,042,365) 556,126 13,019,142 Transaction with owners, directly in equity Shares issued during the period Balance at 31 December 2023 6 The statement of changes in equity is to be read in conjunction with the accompanying notes. P a g e | 13 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 CONSOLIDATED STATEMENT OF CASH FLOWS for the period ended 31 December 2023 2023 $ 2022 $ Cash flows from operating activities Receipts from customers 1,132,775 2,866,006 Payments to suppliers and employees (1,244,417) (795,436) 71,828 - - (111) (39,814) 2,070,459 - - (1,685,361) - (3,658,520) (1,912) (5,343,881) (1,912) Proceeds from exercise of options - - Net cash generated by financing activities - - (5,383,695) 2,068,547 82,425 58,581 10,710,865 8,275,134 5,409,595 10,402,262 Note Interest received Interest paid Net cash (used in)/generated by operating activities Cash flows from investing activities Payments for property, plant, and equipment Payments for exploration and evaluation assets Payments for producing assets 10 Net cash used in investing activities Cash flows from financing activities Net (decrease)/increase in cash held Effect of exchange rate fluctuations on cash held Cash at the beginning of the period Cash at the end of the period 3 The statement of cash flows is to be read in conjunction with the accompanying notes. P a g e | 14 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS for the period ended 31 December 2023 n Note 1. Statement of significant accounting policies These are the condensed financial statements and notes of Stonehorse Energy Limited (the Company or Stonehorse) and its controlled entities (Group). Stonehorse is a public company incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The financial statements were authorised for issue on 14 March 2024 by the directors of the Company. a. Basis of preparation This half-year financial report is intended to provide users with an update on the latest annual financial statements of Stonehorse Limited. As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this financial report be read in combination with the annual financial statements of the Group for the year ended 30 June 2023, together with any public announcements made during the half-year. i. Statement of compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 ‘Interim Financial Reporting’. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 ‘Interim Financial Reporting’. The half-year report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent annual financial report. ii. Financial position The financial statements have been prepared on the basis of historical cost, except where applicable, financial assets which are carried at fair value. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. iii. Going concern The half-year financial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlements of liabilities in the ordinary course of business. iv. Revenue Recognition The Group currently generates revenue from its revenue interests in production projects. Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Sale of oil and gas Revenue is recognised when the Group is notified of its proportionate share from operators of each production asset project. Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. P a g e | 15 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS for the period ended 31 December 2023 b. Critical Accounting Estimates and Judgments The critical estimates and judgements are consistent with those applied and disclosed in the 30 June 2023 annual report. Key Judgments – Producing Assets In determining the recoverable amount of assets, in the absences of quoted market prices, estimations are made regarding the present value of future cash flows using asset specific discount rates and the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. c. Adoption of new and revised accounting standards In the half-year ended 31 December 2023, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group and effective for the half-year reporting periods beginning on or after 1 July 2023. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and therefore no material change is necessary to Group accounting policies. P a g e | 16 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 Note 2 Earnings per share (EPS) 31 December 2023 $ a. (Loss)/Gain used in the calculation of basic EPS gain (676,404) b. Weighted average number of ordinary shares after consolidation outstanding during the half-year used in calculation of basic EPS c. Basic and diluted EPS (cents per share) Note 3 Cash and cash equivalents Cash at bank and on hand Note 4 Financial assets Note 31 December 2022 $ 760,951 31 December 2023 No. 31 December 2022 No. 684,460,287 684,460,287 31 December 2023 31 December 2022 ₵ ₵ (0.10) 0.11 31 December 2023 $ 30 June 2023 $ 5,409,595 10,710,865 31 December 2023 $ 30 June 2023 $ 450,000 585,000 450,000 585,000 Current Investment in listed shares Stonehorse currently holds 45,000,000 Brookside Energy Limited (BRK) shares. The fair value of these fully paid ordinary shares at 31 December 2023 was based on ASX quoted market value. These shares are classified as Tier 1 financial assets. These shares are a financial asset through profit and loss. Note 5 Trade and other receivables 31 December 2023 $ 30 June 2023 $ Trade receivable 115,906 - Other receivable 378,156 5,690 494,062 5,690 Current P a g e | 17 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS for the period ended 31 December 2023 Note 6 Trade and other payables 31 December 2023 $ 30 June 2023 $ Trade payables 39,515 44,589 Accruals 12,000 36,500 Current Unsecured Directors’ fees accrual Other Note 7 Issued capital Fully paid ordinary shares at no par value Note - - 67,258 45,302 118,773 126,391 31 December 2023 No. 30 June 2023 No. 31 December 2023 $ 30 June 2023 $ 684,460,287 684,460,287 35,505,381 35,505,381 684,460,287 684,460,287 35,505,381 35,505,381 - - - - 684,460,287 684,460,287 35,505,381 35,505,381 a. Ordinary shares At the beginning of the period Shares issued during the period: Exercise of options At reporting date Note 8 Events subsequent to reporting date There have been no material events after balance date. Note 9 Commitments and contingences There is no change in the Group's commitments or contingencies since the half year ended 31 December 2023 to date of this report. P a g e | 18 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 Note 10 Exploration and evaluation assets Balance at beginning of period Add: Capitalised expenses Less: Transfer to Producing assets Total 31 December 2023 $ 30 June 2023 $ 650,157 650,157 1,685,360 - - - 2,335,517 650,157 The recoupment of costs carried forward in relation to the above areas of interest in the exploration phase is dependent on the successful development and commercial exploitation or sale of the respective area. Note 11 Producing assets 31 December 2023 $ 30 June 2023 $ 3,886,026 4,988,616 - 32,224 Add: Acquisition of new assets 3,658,520 371,440 Less: Transferred to other receivable(*) (371,442) - - (48,989) Less: Amortisation (664,119) (1,457,265) Total 6,508,985 3,886,026 Balance at beginning of period Add: Capitalisation of production expense Less: Expenditure written off (*) The proton assets are reclassed to other receivables during the year due to a change in the arrangement. Note 12 Operating segments Identification of reportable segments Stonehorse Energy Limited operates predominantly in one industry being the oil and gas industry in the USA and Canada. Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis of its oil and gas interests in the USA and Canada and its corporate activities in Australia. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics. Types of reportable segments a) Oil and gas exploration: Segment assets, including acquisition cost of exploration licenses and all expenses related to the projects in the USA are reported on in this segment. b) Corporate, including treasury, corporate and regulatory expenses arising from operating an ASX listed entity. Segment assets, including cash and cash equivalents, and investments in financial assets are reported in this segment. Accounting policies adopted P a g e | 19 STONEHORSE ENERGY LIMITED AND ITS CONTROLLED ENTITIES ABN 13 086 972 429 HALF YEAR REPORT 31 DECEMBER 2023 NOTES TO THE FINANCIAL STATEMENTS for the period ended 31 December 2023 Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. Unless indicated otherwise in the segment assets note, deferred tax assets and i