{"url_path":"/sec/fecof/10-k/2026/item-18","section_key":"item-18","section_title":"Item 18 FINANCIAL STATEMENTS.**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/849997/0001477932-26-003204-index.html","accession_number":"0001477932-26-003204","cik":"0000849997","ticker":"FECOF","issuer_name":"FEC Resources Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/849997/0001477932-26-003204-index.html","primary_entity_key":"0000849997","primary_entity_name":"FEC Resources Inc."},"word_count":19551,"has_tables":true,"body_markdown":"**ITEM 18.  FINANCIAL STATEMENTS.**\n\n \n\nThe Auditors’ Report, financial statements and notes thereto, schedules thereto, as required under Item 18 are found immediately below.\n\n \n\n**Financial Statements:**\n\n \n\n[Report of Auditors, dated March 31, 2026](#report) (PCAOB ID 1173)\n \n\n F-2\n\n \n\n[Balance Sheets at December 31, 2025 and December 31, 2024](#position)\n \n\n F-4\n\n \n\n[Statements of Loss and Deficit for the three Years ended December 31, 2025, December 31, 2024, and December 31, 2023.](#loss)\n \n\n F-5\n\n \n\n[Statements of Cash Flows for the three Years ended December 31, 2025, December 31, 2024, and December 31, 2023](#cf)\n \n\n F-7\n\n \n\n[Notes to the Consolidated Financial Statements](#notes)\n \n\n F-8\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n44\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**Financial Statements**\n\n \n\n**As of December 31, 2025 and 2024**\n\n**and for each of the years in the three year period ended**\n\n**December 31, 2025**\n\n**(Expressed in United States dollars)**\n\n \n\n \n\nF-1\n\n*Table of Contents*\n\n \n\n \n\n**Report of Independent Registered Public Accounting Firm**\n\n \n\nTo the shareholders and the board of directors of FEC Resources Inc.\n\n \n\n**Opinion on the Financial Statements**\n\n \n\nWe have audited the accompanying statements of financial position of FEC Resources Inc. (the \"Company\") as of December 31, 2025 and 2024, the related statements of comprehensive loss, changes in equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the \"financial statements\"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and its financial performance and its cash flows for the years then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.\n\n \n\n**Going Concern**\n\n \n\nThe accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 2, the Company has disclosed certain conditions that raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in this regard are described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.\n\n \n\n**Basis for Opinion**\n\n \n\nThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (\"PCAOB\") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.\n\n \n\nOur audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n \n\n \n\nF-2\n\n*Table of Contents*\n\n \n\n**Critical Audit Matter**\n\n \n\nThe critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.\n\n \n\n**CRITICAL AUDIT MATTER**\n\n \n\n**HOW THE MATTER WAS ADDRESSED IN THE AUDIT**\n\n \n\nFair value – Investment in Forum Energy Limited\n\n \n\nRefer to Note 7 of the financial statements\n\n \n\nThe Company holds an investment in shares of a private company that are measured at fair value through other comprehensive income. As these shares are not traded in an active market, the valuation of this investment must consider other inputs, observable or unobservable, that are available.\n\n  \n\nAs at December 31, 2025, the Company’s parent company, which also controls the investee company, derives substantially all of its shareholder value from its investment in Forum Energy Limited. The Company determined the fair value of the its investment in Forum Energy Limited as at December 31, 2025 based on the fair value of the common shares of its parent company.\n\n \n\nWe identified this fair value measurement as a critical audit matter because auditor judgment is required to evaluate whether the inputs used are appropriate and the most reliable indicator of fair value.\n\n \n\n \n\n \n\n \n\nOur audit procedures relating to this fair value measurement included the following, among others:\n\n \n\n \n\n \n\n \n\n \n\n·\n\nEvaluated the reasonability of the judgement that substantially all of the fair value of the Company’s parent is attributed to its investments in Forum Energy Limited; and\n\n \n\n \n\n \n\n \n\n·\n\nWith the assistance of a valuation specialist:\n\n \n\n \n\no\n\nVerified the share prices used in the calculation to determine fair value of the investments;\n\n \n\n \n\n \n\n \n\n \n\n \n\no\n\nAssessed the appropriateness of the valuation method used;\n\n \n\n \n\n \n\n \n\n \n\n \n\no\n\nAssessed the reasonableness of the assumptions applied; and\n\n \n\n \n\n \n\n \n\n \n\n \n\no\n\nTested the mathematical accuracy of the calculations.\n\n \n\n \n\n \n\n \n\n \n\n \n\n**DMCL LLP**\n\nDALE MATHESON CARR-HILTON LABONTE LLP\n\nCHARTERED PROFESSIONAL ACCOUNTANTS\n\n \n\nWe have served as the Company’s auditor since 2017\n\nVancouver, Canada\n\nMarch 31, 2026\n\n  \n\n \n\nF-3\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**Statements of Financial Position**\n\n*Expressed in United States Dollars*\n\n \n\n \n\n \n\n \n\n**December 31,****2025**\n\n \n\n \n\n \n\nDecember 31, 2024\n\n \n\n**ASSETS**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Current assets**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nCash (Note 6)\n\n \n**$****14,864**\n \n\n \n$5,756\n \n\nPrepaid expenses\n\n \n\n \n**8,912**\n \n\n \n\n \n8,489\n \n\n \n\n \n\n \n**23,776**\n \n\n \n\n \n14,245\n \n\n**Non-current assets**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInvestment in Forum Energy Limited (Note 7)\n\n \n\n \n**6,242,423**\n \n\n \n\n \n8,568,094\n \n\n \n\n \n**$****6,266,199**\n \n\n \n$8,582,339\n \n\n \n\n**LIABILITIES AND SHAREHOLDERS’ EQUITY**\n\n \n\n \n\n**Current liabilities**\n\n \n\n \n\n \n\n \n\n \n\n \n\nTrade and accrued payables\n\n \n**$****34,322**\n \n\n \n$41,607\n \n\nShort term loan (Note 9)\n\n \n\n \n**40,248**\n \n\n \n\n \n895,637\n \n\n \n\n \n\n \n**74,570**\n \n\n \n\n \n937,244\n \n\n \n\n**                                                                                                          **\n\n**Shareholders’ Equity    **\n\n \n\n \n\n \n\n \n\n \n\n \n\nShare capital (Note 8)\n\n \n\n \n**18,775,628**\n \n\n \n\n \n17,620,625\n \n\nContributed surplus (Note 8)\n\n \n\n \n**3,058,063**\n \n\n \n\n \n3,058,063\n \n\nAccumulated other comprehensive income (Note 7)\n\n \n\n \n**3,780,492**\n \n\n \n\n \n6,106,163\n \n\nDeficit\n\n \n\n \n**(19,422,554****)**\n \n\n \n(19,139,756)\n\n \n\n \n\n \n**6,191,629**\n \n\n \n\n \n7,645,095\n \n\n \n\n \n**$****6,266,199**\n \n\n \n$8,582,339\n \n\n \n\nBasis of Presentation and Going Concern (Note 2)\n\nSubsequent Event (Note 14)\n\n \n\nSIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:\n\n \n\n*“Daniel Carlos”*\n\n \n\n*“Paul Wallace”*\n\n \n\nDirector\n\n \n\nDirector\n\n \n\n* *\n\nThe accompanying notes form an integral part of these financial statements\n\n \n\n \n\nF-4\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**STATEMENTS OF COMPREHENSIVE LOSS**\n\n*Expressed in United States Dollars*\n\n**,**\n\n \n\n \n\n**Year ended December 31,****2025**\n\n \n\n \n\nYear ended December 31, 2024\n\n \n\n \n\nYear ended December 31, 2023\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**General and administrative expenses**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nGeneral and administration (Notes 9 and 10)\n\n \n**$****241,376**\n \n\n \n$182,241\n \n\n \n$159,202\n \n\n**Operating loss**\n\n \n\n \n**(241,376****)**\n \n\n \n(182,241)\n \n\n \n(159,202)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nInterest expense (Note 9)\n\n \n\n \n**(41,422****)**\n \n\n \n(62,196)\n \n\n \n(32,593)\n\n**Net loss for the year**\n\n \n**$****(282,798****)**\n \n$(244,437)\n \n$(191,795)\n\n**Other comprehensive income (loss)**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nItems that will not be reclassified to profit or loss:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nChanges in fair value of investment (Note 7)\n\n \n\n \n**(2,325,671****)**\n \n\n \n6,106,163\n \n\n \n\n \n-\n \n\n**Comprehensive income (loss) for the year**\n\n \n**$****(2,608,469****)**\n \n$5,861,726\n \n\n \n$(195,795)\n\n**Loss per common share**\n\n- Basic and diluted\n\n \n**$****(0.00****)**\n \n$(0.00)\n \n$(0.00)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nWeighted average number of shares outstanding, basic and diluted\n\n \n\n \n**916,231,001**\n \n\n \n\n \n861,082,371\n \n\n \n\n \n861,082,371\n \n\n \n\nThe accompanying notes form an integral part of these financial statements\n\n \n\n \n\nF-5\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**STATEMENTS OF CHANGES IN EQUITY**\n\n*Expressed in United States Dollars*\n\nFor the years ended December 31, 2025, 2024 and 2023\n\n \n\n \n\n \n\n**Share capital**\n\n \n\n \n\n**Contributed surplus**\n\n \n\n \n\n**Accumulated other comprehensive income**\n\n \n\n \n\n**Deficit**\n\n \n\n \n\n**Total**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Balance January 1, 2025**\n\n \n$17,620,625\n \n\n \n$3,058,063\n \n\n \n$6,106,163\n \n\n \n$(19,139,756)\n \n$7,645,095\n \n\nTotal comprehensive loss for the year\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(282,798)\n \n\n \n(282,798)\n\nIssued for settlement of PXP Loan, net of costs\n\n \n\n \n1,155,003\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n1,155,003\n \n\nValuation loss on investment\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(2,325,671)\n \n\n \n-\n \n\n \n\n \n(2,325,671)\n\n**Balance December 31, 2025**\n\n \n$18,775,628\n \n\n \n$3,058,063\n \n\n \n\n$         3,780,492\n\n \n\n \n$(19,422,554)\n \n$6,191,629\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Share capital**\n\n \n\n \n\n**Contributed surplus**\n\n \n\n \n\n**Accumulated other comprehensive income**\n\n \n\n \n\n**Deficit**\n\n \n\n \n\n**Total**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Balance January 1, 2024**\n\n \n$17,620,625\n \n\n \n$3,058,063\n \n\n \n$-\n \n\n \n$(18,895,319)\n \n$1,783,369\n \n\nTotal comprehensive loss for the year\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(244,437)\n \n\n \n(244,437)\n\nValuation gain on investment\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n6,106,163\n \n\n \n\n \n-\n \n\n \n\n \n6,106,163\n \n\n**Balance December 31, 2024**\n\n \n$17,620,625\n \n\n \n$3,058,063\n \n\n \n$6,106,163\n \n\n \n$(19,139,756)\n \n$7,645,095\n \n\n \n\n \n\n \n\n**Share capital**\n\n \n\n \n\n**Contributed surplus**\n\n \n\n \n\n**Deficit**\n\n \n\n \n\n**Total**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**Balance January 1, 2023**\n\n \n$17,620,625\n \n\n \n$3,058,063\n \n\n \n$(18,703,524)\n \n$1,975,164\n \n\nTotal comprehensive loss for the year\n\n \n\n \n-\n \n\n \n\n \n-\n \n\n \n\n \n(191,795)\n \n\n \n(191,795)\n\n**Balance December 31, 2023**\n\n \n$17,620,625\n \n\n \n$3,058,063\n \n\n \n$(18,895,319)\n \n$1,783,369\n \n\n \n\nThe accompanying notes form an integral part of these financial statements \n\n \n\n \n\nF-6\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**STATEMENTS OF CASH FLOWS**\n\n*Expressed in United States Dollars*\n\n \n\n \n\n \n\n**Year ended**\n\n**December 31,****2025**\n\n \n\n \n\nYear ended\n\nDecember 31, 2024****\n\n \n\n \n\nYear ended\n\nDecember 31,2023\n\n \n\n**Cash used in:**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n**OPERATING ACTIVITIES**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet loss for the year\n\n \n**$****(282,798****)**\n \n$(244,437)\n \n$(191,975)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNon-cash items included in net loss\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nAccrued interest expense\n\n \n\n \n**41,422**\n \n\n \n\n \n62,196\n \n\n \n\n \n32,593\n \n\nChanges in working capital related to operating activities\n\nPrepaid expenses\n\n \n\n \n**(423****)**\n \n\n \n747\n \n\n \n\n \n(647)\n\nTrade and accrued payables\n\n \n\n \n**(7,285****)**\n \n\n \n24,558\n \n\n \n\n \n1,687\n \n\n**Net cash used in operating activities**\n\n \n\n \n**(249,084****)**\n \n\n \n(156,936)\n \n\n \n(158,162)\n\n \n\n \n\n**FINANCING ACTIVITY**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoan from PXP Energy Corporation\n\n \n\n \n**260,950**\n \n\n \n\n \n155,286\n \n\n \n\n \n356,500\n \n\nShare issuance costs PXP Loan settlement\n\n \n\n \n**(2,758****)**\n \n\n \n-\n \n\n \n\n \n-\n \n\n**Net cash provided by financing activity**\n\n \n\n \n**258,192**\n \n\n \n\n \n155,286\n \n\n \n\n \n356,500\n \n\n \n\n \n\n**INVESTING ACTIVITY**\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nLoan to Forum Energy Limited\n\n \n\n \n**-**\n \n\n \n\n \n-\n \n\n \n\n \n(204,000)\n\n**Net cash provided by (used in) investing activity**\n\n \n\n \n**-**\n \n\n \n\n \n-\n \n\n \n\n \n(204,000)\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nNet decrease in cash\n\n \n\n \n**9,108**\n \n\n \n\n \n(1,650)\n \n\n \n(5,662)\n\nCash – beginning of the year\n\n \n\n \n**5,756**\n \n\n \n\n \n7,406\n \n\n \n\n \n13,068\n \n\n**Cash – end of the year**\n\n \n**$****14,864**\n \n\n \n$5,756\n \n\n \n$7,406\n \n\n \n\nSupplementary Cash Flow Information\n\n \n\n \n\n Non-cash transactions in investing and financing activities:\n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\n \n\nShares issues to for settlement of PXP Loan\n\n \n**$****1,157,761**\n \n\n \n$-\n \n\n \n$-\n \n\n \n\nThe accompanying notes form an integral part of these financial statements\n\n \n\n \n\nF-7\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 1 Corporate Information\n\n \n\nFEC Resources Inc. (“FEC” or the “Company”) was incorporated under the laws of Alberta, Canada and is a holding Company with an interest in Forum Energy Limited (“FEL”).  The Company is listed in the United States on the OTC Pink (“OTC Pink”), having the symbol FECOF.\n\n \n\nAt December 31, 2025, the Company has a 6.8% interest in FEL. (Note 7).  \n\n \n\nThe principal address of the Company is Suite 2300, Bentall 5, 550 Burrard Street, Vancouver, BC, V6C 2B5. The Company’s ultimate parent company is PXP Energy Corporation (“PXP”) with a registered office at 2/F LaunchPad, Reliance corner Sheridan Streets, Mandaluyong City 1550, Metro Manila, Philippines.\n\n \n\nNote 2 Basis of Preparation and Going Concern\n\n \n\na) Statement of Compliance\n\n \n\nThese financial statements of the Company have been prepared in accordance with IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).\n\n \n\nThe financial statements were authorized for issue by the Board of Directors on March 31, 2026.\n\n \n\nb) Basis of Measurement\n\n \n\nThe financial statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value described in the applicable notes and are presented in United States dollars, which is also the Company’s functional currency.\n\n \n\nThe preparation of financial statements in compliance with IFRS Accounting Standards requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5.\n\n \n\nc) Nature of Operations and Going Concern\n\n \n\nAs a holding company with an interest in FEL, the Company’s business is indirectly subject to risks inherent in oil and gas exploration and development operations. In addition, there are risks associated with FEL’s stage of operations and the foreign jurisdiction in which it or FEL may operate or invest. The Company has identified certain risks pertinent to its investment including: exploration and reserve risks, uncertainty of reserve estimates, ability to exploit successful discoveries, drilling and operating risks, title to properties, costs and availability of materials and services, capital markets and the requirement for additional capital, market perception, loss of or changes to production sharing, joint venture or related agreements, economic, political and sovereign risks, possibility of less developed legal systems, corporate and regulatory formalities, environmental regulation, reliance on strategic relationships, market risk, competition, dependence on key personnel, volatility of future oil and gas prices and foreign currency risk. The Company has an accumulated deficit since inception of $19,422,554.\n\n \n\n \n\nF-8\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 2 Basis of Preparation and Going Concern (continued)\n\n \n\nc) Nature of Operations and Going Concern (continued)\n\n \n\nManagement considers that the current economic environment is difficult and the outlook for holding companies investing in oil and gas exploration companies presents significant challenges in terms of raising funds through issuance of shares. To the extent necessary, the Company has relied on its ability to raise funds via dispositions of quantities of its shareholdings in FEL to PXP under terms that are consistent with the best interests of shareholders, in order to finance its operations. The Company has been successful in disposing quantities of its shareholdings in FEL in previous fiscal years. However, there can be no assurance the Company will continue to be able to dispose of quantities of its shares in FEL under suitable terms. Currently management has no plans to sell any additional FEL shares.\n\n \n\nSince the delisting of FEL from the London Stock Exchange, there is no liquidity via a public market for the FEL shares. As the Company is wholly reliant on the information disclosed by PXP concerning the business of FEL, the Company may not be able to obtain information necessary to facilitate a wider sales process and may be reliant on significant shareholders of PXP for the disposition of any of its FEL shares. Management continues to look at all options including raising funds to operate and participate in future FEL financings by way of debt or equity financings.\n\n \n\nManagement has concluded that the combination of these circumstances gives rise to a material uncertainty that casts substantial doubt on the ability of the Company to continue as a going concern; therefore, the Company may be unable to realize its assets and discharge its liabilities in the normal course of business.\n\n \n\nThese financial statements have been prepared on the basis of the accounting principles applicable to a going concern, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at December 31, 2025, the Company’s management believes it does not have sufficient cash to fund the ongoing operations for the next 12 months. The continuation of the Company is dependent upon its ability to raise funds via dispositions of quantities of its shareholdings in FEL to PXP under terms that are consistent with the best interests of shareholders, or obtain loans from PXP. Also, the Company may issue new shares to PXP and/or other third parties. There is no assurance that the Company will be able to obtain adequate financing in the future or that such dispositions will be on terms advantageous to the Company. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Such adjustments could be material.\n\n \n\n \n\nF-9\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 3 Material Accounting Policy Information\n\n \n\nThe accounting policies set out below have been applied consistently to all years presented in these financial statements.\n\n \n\na) Foreign Currency Translation\n\n \n\nThe functional and presentation currency of the Company is the US dollar. Accordingly, foreign currency transactions and balances are translated as follows: (i) monetary assets and liabilities denominated in currencies other than the US dollar (“foreign currencies”) are translated into US dollars at the exchange rates prevailing at the balance sheet date; (ii) non-monetary assets denominated in foreign currencies and measured at other than fair value are translated using the rates of exchange at the transaction dates; (iii) non-monetary assets denominated in foreign currencies that are measured at fair value are translated using the rates of exchange at the dates those fair values are determined; and (iv) income statement items denominated in foreign currencies are principally translated using daily exchange rates, except for depreciation and depletion which is translated at historical exchange rates. Foreign exchange gains and losses are recognized in net loss and presented in the Statements of Comprehensive Loss in accordance with the nature of the transactions to which the foreign currency gains and losses relate. Unrealized foreign exchange gains and losses on cash balances denominated in foreign currencies are disclosed separately in the statements of cash flows.\n\n \n\nb) Income Taxes\n\n \n\nIncome tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it relates to a business combination or items recognized directly in equity or in other comprehensive loss/income.\n\n \n\nCurrent income taxes are recognized for the estimated income taxes payable or receivable on taxable income or loss for the current year and any adjustment to income taxes payable in respect of previous years. Current income taxes are determined using tax rates and tax laws that have been enacted or substantively enacted by the year-end date.\n\n \n\nDeferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax basis, except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising on the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit or loss.\n\n \n\nRecognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted to those instances where it is probable that future taxable profit will be available against which the deferred tax asset can be utilized. At the end of each reporting year the Company reassesses unrecognized deferred tax assets. The Company recognizes a previously unrecognized deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.\n\n \n\n \n\nF-10\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 3 Material Accounting Policy Information (continued)\n\n \n\n \n\nc) Loss Per Share\n\n \n\nBasic loss per share is computed by dividing the net loss applicable to common shares of the Company by the weighted average number of common shares outstanding for the relevant year.\n\n \n\nDiluted loss per common share is computed by dividing the net loss applicable to common shares by the sum of the weighted average number of common shares issued and outstanding and all additional common shares that would have been outstanding, if potentially dilutive instruments were converted.\n\n \n\nThere were no dilutive instruments (consisting of shares issuable on the exercise of options and warrants) outstanding during the years ended December 31, 2025, December 31, 2024 and December 31, 2023. Accordingly, there is no difference in the amounts presented for basic and diluted loss per share.\n\n \n\nd) Financial Instruments\n\n \n\nThe Company measures financial instruments at fair value at each reporting date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.\n\n \n\nThe Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.\n\n \n\nAll assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:\n\n \n\n· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities\n\n \n\n· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable\n\n \n\n· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable\n\n \n\nFor assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the reporting date.\n\n \n\n \n\nF-11\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 3 Material Accounting Policy Information (continued)\n\n \n\nd) Financial Instruments (continued)\n\n \n\n \n\nFinancial Assets\n\n \n\nMeasurement – initial recognition\n\n \n\nFinancial assets and financial liabilities are recognized in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. On initial recognition, all financial assets and financial liabilities are recorded at fair value, net of attributable transaction costs, except for financial assets and liabilities classified as at fair value through profit or loss (“FVTPL”). The directly attributable transaction costs of financial assets and liabilities classified as at FVTPL are expensed in the period in which they are incurred.\n\n \n\nSubsequent measurement of financial assets and liabilities depends on the classifications of such assets and liabilities.\n\n \n\nClassification of financial assets\n\n \n\n*Amortized cost:*\n\n \n\nFinancial assets that meet the following conditions are measured subsequently at amortized cost:\n\n \n\n(i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and\n\n \n\n(ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.\n\n \n\nThe amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. Interest income is recognized using the effective interest method. Interest income is recognized in Other (Expense) Income, net in the statements of comprehensive loss.\n\n \n\nThe Company's financial assets at amortized cost consists of cash.\n\n \n\n*Fair value through other comprehensive income (\"FVTOCI\"):*\n\n \n\nFinancial assets that meet the following conditions are measured at FVTOCI:\n\n \n\n(i) The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and\n\n \n\n(ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.\n\n \n\n \n\nF-12\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 3 Summary of Material Accounting Material Policies (continued)\n\n \n\nd) Financial Instruments (continued)\n\n \n\n \n\nThe Company's financial assets at FVTOCI include its investment in FEL (Note 7).\n\n \n\n*Equity instruments designated as FVTOCI:*\n\n \n\nOn initial recognition, the Company may make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments that would otherwise be measured at fair value through profit or loss to present subsequent changes in fair value in other comprehensive income. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination. Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in Other Comprehensive Income. The cumulative gain or loss is not reclassified to profit or loss on disposal of the equity instrument, instead, it is transferred to retained earnings.\n\n \n\n*Financial assets measured subsequently at fair value through profit or loss (“FVTPL”):*\n\n \n\nBy default, all other financial assets are measured subsequently at FVTPL.\n\n \n\nThe Company, at initial recognition, may also irrevocably designate a financial asset as measured at FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases.\n\n \n\nFinancial assets measured at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized in profit or loss to the extent they are not part of a designated hedging relationship. The Company does not have any financial assets at FVTPL.\n\n \n\nFinancial liabilities and equity\n\n \n\nDebt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issuance costs. Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.\n\n \n\nClassification of financial liabilities\n\n \n\nFinancial liabilities that are not contingent consideration of an acquirer in a business combination, held for trading or designated as at FVTPL, are measured at amortized cost using effective interest method.\n\n \n\n \n\nF-13\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 3 Material Accounting Policy Information (continued)\n\n \n\nd) Financial Instruments (continued)\n\n \n\n \n\nImpairment of Financial Assets\n\n \n\nAt each reporting date the Company assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or group of financial assets is deemed to be impaired, if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that event has an impact on the estimated future cash flows of the financial asset or the group of financial assets.\n\n \n\nFinancial Liabilities\n\n \n\nFinancial liabilities are classified as other financial liabilities, based on the purpose for which the liability was incurred, and comprise of trade payables and short term loans. These liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using the effective interest rate method. This ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Trade and other payables represent liabilities for goods and services provided to the Company prior to the end of the period which are unpaid. Short term loans represent liabilities for advances from PXP for working capital and pre-drilling costs.\n\n \n\ne) Share Capital\n\n \n\nEquity instruments are contracts that give a residual interest in the net assets of the Company. Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares are classified as equity instruments. Incremental costs directly attributable to the issuance of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.\n\n \n\nf) Finance Income and Expenses\n\n \n\nFinance expense comprises interest expense on borrowings, accretion of the discount on provisions and impairment losses recognized on financial assets.\n\n \n\nInterest income is recognized as it accrues in profit or loss, using the effective interest method.\n\n \n\nForeign currency gains and losses, reported under finance income and expenses, are reported on a net basis.\n\n \n\n \n\nF-14\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 4 Standards, Amendments and Interpretations\n\n \n\nThe Company has prepared its financial statements in accordance with IFRS Accounting Standards as issued by the IASB. The financial statements have been prepared in accordance with IFRS Accounting Standards and interpretations effective as of December 31, 2025.\n\n \n\nNew IFRS Accounting Standards and interpretations or changes to existing standards with future effective dates are either not applicable or not expected to have a significant impact on the financial statements of the Company.\n\n \n\nAs at the date of authorization of these financial statements, the IASB had issued certain pronouncements that are mandatory for the Company’s accounting periods commencing on or after March 1, 2025. In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements (“IFRS 18”) which replaces IAS 1 Presentation of Financial Statements. This standard aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss, in particular additional defined subtotals, disclosures about management-defined performance measures and new principles for aggregation and disaggregation of information. IFRS 18 is accompanied by limited amendments to the requirements in IAS 7 Statement of Cash Flows. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027. Companies are permitted to apply IFRS 18 before that date. The Company is currently assessing the impact the new standard will have on its financial statements. Other recent accounting pronouncements are not applicable or do not have a significant impact to the Company, have been excluded.\n\n \n\nNote 5 Critical Accounting Estimates and Judgments\n\n \n\nThe Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.\n\n \n\nThe effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income/loss in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.\n\n \n\nThe determination of the fair value of the Company’s investment in FEL is a significant accounting estimate (Note 7).\n\n \n\nInformation about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are discussed below:\n\n \n\ni) Deferred tax assets and liabilities\n\n \n\nSignificant judgment is required in determining the provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. We recognize liabilities and contingencies for anticipated tax audit issues based on our current understanding of the tax law. For matters\n\n \n\n \n\nF-15\n\n*Table of Contents*\n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 5 Critical Accounting Estimates and Judgments (continued)\n\n \n\n \n\ni) Deferred tax assets and liabilities (continued)\n\n \n\nwhere it is probable that an adjustment will be made, we record our best estimate of the tax liability including the related interest and penalties in the current tax provision. We believe we have adequately provided for the probable outcome of these matters; however, the final outcome may result in a materially different outcome than the amount included in the tax liabilities.\n\n \n\nii) Going Concern\n\n \n\nThese financial statements have been prepared on the basis of the accounting principles applicable to a going concern, which assumes that the Company will be able to continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. These material uncertainties may cast substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability\n\n \n\nand classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. Such adjustment could be material\n\n \n\nNote 6 Cash\n\n \n\nCash held at banks earns interest at floating rates based on daily bank deposit rates.\n\n \n\nNote 7 Investment in Forum Energy Limited (”FEL”)\n\n \n\ni) Investment in FEL\n\n \n\nThe investment in FEL is summarized as follows:\n\n \n\n \n\n \n\nNumber of shares held\n\n \n\n \n\nAmount\n\n \n\nBalance December 31, 2023\n\n \n\n \n8,206,638\n \n\n \n$2,461,931\n \n\nChange in fair value\n\n \n\n \n-\n \n\n \n\n \n6,106,163\n \n\nBalance December 31, 2024\n\n \n\n \n8,206,638\n \n\n \n$8,568,094\n \n\nChange in fair value\n\n \n\n \n-\n \n\n \n\n \n(2,325,671)\n\nBalance December 31, 2025\n\n \n\n \n8,206,638\n \n\n \n$6,242,423\n \n\n \n\nAs at December 31, 2025, the Company’s interest in FEL was 6.80% (2024 – 6.80%).\n\n \n\n \n\nF-16\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 7 Investment in Forum Energy Limited (”FEL”) (continued)\n\n \n\ni) Investment in FEL (continued)\n\n \n\n \n\nFEL’s assets consist of interests in various petroleum service contracts in the Philippines, the most significant of which in terms of Prospective Resources is SC 72. On December 15, 2014, the Philippine Department of Energy (“DOE”) granted a force majeure on SC 72 because the\n\ncontract area falls within the territorial disputed area of the West Philippine Sea. Under the terms of the force majeure, all exploration work at SC 72 was immediately suspended until the DOE notified FEL that it could re-commence exploration. On October 16, 2020, FEL received a letter from the DOE lifting the force majeure and directing FEL to resume exploration activities on SC 72.\n\n \n\nOn April 6, 2022, FEL as operator under SC 72, received a directive from the DOE to put on hold all exploration activities for SC 72 until such time that the Security, Justice and Peace Coordinating Cluster (“SJPCC”) has issued the necessary clearance to proceed. On April 8, 2022, FEL advised the DOE that in compliance with the DOE directive they “have suspended (or caused the suspension of) all activities in the West Philippine Sea beginning April 6, 2022, in the process, incurring substantial stand-by and other costs.” On April 11, 2022, as a result of not receiving the necessary clearance, force majeure was once again declared on SC 72.\n\n \n\nOn October 11, 2022, the DOE granted PXP and FEL the following: (i) the Declaration of Force Majeure for SC 72 from April 6, 2022 until such time as the same is lifted by the DOE, (ii) the inclusion of total expenses incurred as a result of the DOE directive to suspend activities as part of the approved recoverable costs, subject to DOE audit, and (iii) in addition to the period in item (i) above, PXP and FEL will be entitled to an extension of the exploration period under SC 72 corresponding to the number of days that the contractors actually spent in preparation for the activities that were suspended by the DOE’s suspension order on April 6, 2022.\n\n \n\nOn March 20, 2023, the DOE further affirmed that the entire period from October 14, 2020 (when the Force Majeure was lifted) to April 6, 2022 (when the same was re-imposed) will be credited back to SC 72. Thus, once the Force Majeure is lifted, Forum (GSEC 101) Limited (“FGL”) will have 20 months to drill the two commitment wells, equivalent to the remaining term of SP 2 of SC 72 before October 14, 2020. Their have been no changes in status as of December 31, 2025.\n\n \n\n*Determination of fair value*\n\n \n\nThe investment in FEL represents an investment in a private company for which there is no active market and for which there are no publicly available quoted market prices.\n\n \n\nThe Company has classified its investment in FEL as Level 2 in the fair value hierarchy.\n\n \n\nFor purposes of determining fair value of the investment in FEL, the Company considered valuation techniques described in IFRS 13 – Fair Value Measurement. In respect of the investment in FEL, management considered the fair value of $6,242,423 (2024 - $8,568,094) to be indicative of the fair value of the investment in FEL. On May 13, 2024, PXP disclosed that it was undertaking a share swap with Tidemark Holdings Limited (“Tidemark”) whereby PXP would exchange PXP shares for all FEL shares held by Tidemark at a value of US$1.17 per share (430,243,903 PXP shares at PHP3.62). This imputed a value of $9,601,766 on the transaction date. The Company re-calculated the volume weighted average price of the PXP shares as at December 31, 2025 resulting in a fair value of $6,242,423.\n\n \n\n \n\nF-17\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\ni) Investment in FEL (continued)\n\n \n\n \n\nthe transaction date. The fair value of the investment is consistent with the re-calculated implied value based on the May 10, 2024 share swap between PXP and Tidemark, which is a Level 2 input. The share swap transaction closed on March 20, 2025.\n\n \n\nNote 8 Share Capital\n\n \n\na) Authorized:\n\n \n\nThe Company is authorized to issue an unlimited number of common shares without par value and is authorized to issue an unlimited number of Class A and Class B preferred convertible redeemable voting shares without par value.\n\n \n\nIssued:\n\n \n\nCommon Shares\n\n \n\nNumber\n\n \n\n \n\nAmount\n\n \n\nBalance December 31, 2023, and 2024\n\n \n\n \n861,082,371\n \n\n \n$17,620,625\n \n\nIssued for PXP Loan, net of costs (i)\n\n \n\n \n131,563,725\n \n\n \n\n \n1,155,003\n \n\nBalance December 31, 2025\n\n \n\n \n992,646,096\n \n\n \n$18,775,628\n \n\n \n\n(i) On July 31, 2025, the Company issued 131,563,725 in settlement of the PXP Loan comprised of $1,011,156 principal and $146,605 in interest for a total of $1,157,761 less share issuance costs of $2,758.\n\n \n\nNo preferred shares have been issued.\n\n \n\nb) Nature and Purpose of Equity and Reserves\n\n \n\nContributed Surplus is used to recognize the value of stock option grants prior to exercise.\n\n \n\nDeficit is used to record the Company’s change in deficit from income and losses from period to period.\n\n \n\nc) Share based payments:\n\n \n\nThe Company has established a stock option plan whereby options may be granted to its directors, officers, consultants, and employees. The exercise price of each option equals the market price of the Company’s stock on the date of the grant and an option’s maximum term is five years. The options vest immediately. There were no stock options outstanding on December 31, 2025 or December 31, 2024, and none were issued between January 1, 2023 and December 31, 2025.\n\n \n\nNote 9 Related Party Transactions and Balances\n\n \n\nThe Company considers its officers (CEO and CFO) and directors to be key management. Key management are those persons having authority and responsibility for planning, directing, and controlling activities, directly or indirectly, of the Company.\n\n \n\n(i) During the year ended December 31, 2024, general and administrative expenses included key management personnel compensation totaling $48,000 (2024: $48,000; 2023: 48,000).\n\n \n\n \n\nF-18\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 9 Related Party Transactions and Balances (continued)\n\n \n\n \n\n(ii) On March 10, 2022, the Company announced that it agreed to fund an additional cash call for pre-drilling costs received from FEL. The advance to FEL was via non-interest bearing loans. In order to be able to fund the cash call, the Company accepted a loan from PXP for the same amount (“PXP Loan”). The PXP loan bears interest of Libor plus 3.5% and both interest and principal is repayable on the earlier of a) August 31, 2025 or b) any equity issuance by FEC, or c) any sale of FEL shares by FEC, or d) any third party borrowing by FEC. The Company also received an additional $260,950 for working capital from PXP during the year ended December 31, 2025 (2024 - $155,286; 2023 - $356,500) under the same terms and conditions as the PXP Loan. As at December 31, 2025, the outstanding PXP Loan balance was $40,248 (2024 - $895,637) which included accrued interest of $248 (2024 - $105,431). As at December 31, 2025, the outstanding PXP Loan balance is due on demand. Total interest expense amounted to $41,422 for the year ended December 31, 2025 (2024 – $62,196; 2023 – $32,593). The PXP Loan balance was reduced by $200 as a result of the assumption by PXP of the balance of the advances made to FEL. On July 31, 2025, the Company issued 131,563,725 in settlement of the PXP Loan outstanding on that date comprised of $1,011,156 principal and $146,605 in interest for a total of $1,157,761.\n\n \n\nNote 10 General and administrative expenses\n\n \n\n \n\n \n\n**December 31, 2025**\n\n \n\n \n\nDecember 31, 2024\n\n \n\n \n\nDecember 31, 2023\n\n \n\nProfessional fees\n\n \n**$****112,794**\n \n\n \n$54,310\n \n\n \n$23,841\n \n\nBank charges\n\n \n\n \n**865**\n \n\n \n\n \n886\n \n\n \n\n \n666\n \n\nListing and filing fees\n\n \n\n \n**18,590**\n \n\n \n\n \n19,929\n \n\n \n\n \n25,183\n \n\nOffice and miscellaneous\n\n \n\n \n**20,486**\n \n\n \n\n \n19,219\n \n\n \n\n \n22,572\n \n\nConsulting (Note 9)\n\n \n\n \n**86,106**\n \n\n \n\n \n86,397\n \n\n \n\n \n86,749\n \n\nForeign exchange\n\n \n\n \n**2,535**\n \n\n \n\n \n1,500\n \n\n \n\n \n191\n \n\n \n\n \n**$****241,376**\n \n\n \n$182,241\n \n\n \n$159,202\n \n\n \n\nNote 11 Income Taxes\n\n \n\nReconciliation of accounting and taxable income, for the years ended December 31 are as follows:\n\n \n\n \n\n \n\n**December 31, 2025**\n\n \n\n \n\nDecember 31, 2024\n\n \n\n \n\nDecember 31, 2023\n\n \n\nLoss before income taxes\n\n \n**$****(282,798****)**\n \n$(244,437)\n \n$(191,795)\n\nTax expense (recovery) based on statutory rate of 27.0%\n\n \n\n \n**(75,000****)**\n \n\n \n(66,000)\n \n\n \n(52,000)\n\nPermanent differences and other\n\n \n\n \n**(478,000****)**\n \n\n \n824,000\n \n\n \n\n \n(84,000)\n\n \n\n \n\n \n**(553,000****)**\n \n\n \n758,000\n \n\n \n\n \n(136,000)\n\nChanges in unrecognized deferred tax assets\n\n \n\n \n**553,000**\n \n\n \n\n \n(758,000)\n \n\n \n136,000\n \n\nTotal income tax (recovery)\n\n \n**$****-**\n \n\n \n$-\n \n\n \n$-\n \n\n \n\n \n\nF-19\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 11 Income Taxes (continued)\n\n \n\n \n\nThe nature and tax effect of the temporary differences giving rise to the deferred tax assets and liabilities at December 31, 2025 and 2024 are summarized as follows:\n\n \n\n \n\n \n\nDecember 31, 2025\n\n \n\n \n\nDecember 31, 2024\n\n \n\nUnrecognized deferred income tax assets:\n\n \n\n \n\n \n\n \n\n \n\n \n\nAllowable capital losses\n\n \n**$****468,000**\n \n\n \n$468,000\n \n\nNon-capital losses\n\n \n\n \n**2,021,000**\n \n\n \n\n \n1,945,000\n \n\nInvestments\n\n \n\n \n**939,000**\n \n\n \n\n \n625,000\n \n\nExploration & development\n\n \n\n \n**163,000**\n \n\n \n\n \n-\n \n\nUnrecognized deferred tax assets\n\n \n\n \n**(3,591,000****)**\n \n\n \n(3,038,000)\n\n \n\n \n$-\n \n\n \n$-\n \n\n \n\nAs at December 31, 2025, the Company had estimated non-capital losses for Canadian tax purposes of $7,486,000 that expire between 2028 to 2045 which may be carried forward to offset future years’ taxable income.\n\n \n\nThe potential benefit of these carry-forward non-capital losses has not been recognized in these financial statements as it is not considered probable that sufficient future taxable profit will allow the deferred tax asset to be recovered.\n\n \n\nNote 12 Financial Instruments and Risk Management\n\n \n\nThe Company is exposed through its operations to the following financial risks:\n\n \n\n- Market Risk\n\n- Credit Risk\n\n- Liquidity Risk\n\n \n\nIn common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.\n\n \n\nThere have been no substantive changes in the Company’s exposure to financial instrument risks, its objectives, polices and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in the note.\n\n \n\nGeneral Objectives, Policies and Procedures\n\n \n\nThe Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function. The Board of Directors receive quarterly reports from the Company’s Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility. Further details regarding these policies are set out below.\n\n \n\n \n\nF-20\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 12 Financial Instruments and Risk Management(continued)\n\n \n\n \n\na) Market Risk\n\n \n\nMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk are comprised of foreign currency risk, interest rate risk and equity and commodity price risk.\n\n \n\nForeign currency exchange risk\n\n \n\nThe Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars. As at December 31, 2025, the Company had an insignificant amount of cash denominated in Canadian dollars that was subject to exchange rate fluctuations between the Canadian dollar and the U.S. dollar. As at December 31, 2025, the Company held $9,167 of financial liabilities denominated in Canadian dollars that would be subject to exchange rate fluctuations between Canadian dollars and U.S. dollars.\n\n \n\nb) Credit risk\n\n \n\nThe Company maintains cash deposits in one chartered Canadian bank which, from time to time, exceed the amount of depositor’s insurance available in each respective account. Management assesses the financial condition of this bank and believes that the possibility of any credit loss is minimal. The maximum exposure of credit risk is the Company’s cash deposit of $14,864 (2024: $5,756).\n\n \n\nc) Liquidity risk\n\n \n\nLiquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company does not generate cash from operations but rather, the Company will, from time to time, issue shares via equity placements, borrow funds from an affiliated company or undertake to sell a portion of its investment in the shares of FEL should it be necessary to raise funds. The Company manages liquidity by maintaining cash balances available to meet its anticipated operational needs. Liquidity requirements are managed based on expected cash flow to ensure that there is adequate capital to meet short-term and long-term obligations. The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its growth plans. At December 31, 2025, the Company’s trade and accrued payables were $34,322 and loans from PXP were $40,248, all of which fall due for payment within twelve months of the date of the statement of financial position.\n\n \n\nThe carrying values of trade and accrued payables and loans from PXP approximate their fair values due to the relatively short periods to maturity of the instruments.\n\n \n\nLiquidity risk is assessed as high.\n\n \n\n \n\nF- 22\n\n*Table of Contents*\n\n \n\n**FEC RESOURCES INC.**\n\n**NOTES TO THE FINANCIAL STATEMENTS**\n\n**December 31, 2025**\n\n(Expressed in United States Dollars)\n\n \n\nNote 13 Capital Management\n\n \n\nThe Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders, to meet external capital requirements on credit facilities and to support any growth plans.\n\n \n\nThe capital of the Company consists of the items included in shareholders’ equity and cash net of debt obligations. The Company monitors capital based on the debt to debt-plus-equity ratio. Debt is total debt shown on the balance sheet, less cash. Debt-plus-equity is calculated as debt shown on the balance sheet, plus total shareholders’ equity which includes share capital, warrants, contributed surplus and deficit. The Company’s Board of Directors approves management’s annual capital expenditures plans and reviews and approves any material debt borrowing plans proposed by the Company’s management.\n\n \n\nAs at December 31, 2025 the Company had no externally imposed capital requirements nor were there any changes in the Company’s approach to capital management during the year.\n\n \n\nNote 14 Subsequent Events\n\n \n\nSubsequent to year end, the Company received an additional $38,000 for working capital under the PXP Loan.\n\n \n\n \n\nF- 23\n\n*Table of Contents*\n\n \n\nFEC RESOURCES INC. (the “Company”)\n\n \n\nMANAGEMENT DISCUSSION AND ANALYSIS\n\nOF FINANCIAL POSITION AND RESULTS OF OPERATIONS\n\nFOR THE YEAR ENDED DECEMBER 31, 2025\n\n(all funds in US dollars unless otherwise stated)\n\n \n\nTHE FOLLOWING MANAGEMENT DISCUSSION AND ANALYSIS (“MD&A”) IS PROVIDED AS OF MARCH 31, 2026, AND SHOULD BE READ IN CONJUNCTION WITH THE AUDITED FINANCIAL STATEMENTS AND NOTES FOR THE YEAR ENDED DECEMBER 31, 2025.  THOSE FINANCIAL STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) AS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD (“IASB”). \n\n \n\nFORWARD-LOOKING STATEMENTS\n\n \n\nCertain statements in this MD&A, including statements regarding the Company’s current funds on hand being able to secure the Company for the foreseeable future, and the Company’s ability to raise new money by way of loans or the issuance of new shares to meet its working capital needs and future plans and objectives of the Company are forward-looking information that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from those anticipated in such statements. Material risk factors that could cause actual results to differ materially from the forward-looking information include unforeseen expenses which the Company may incur and which expenses could cause current funds on hand to not be adequate to secure the Company for the foreseeable future, or arrange debt or equity financing if required to meet working capital needs and other risks and uncertainties as disclosed under the heading “Risk Factors” herein. The Company has assumed that it will not be incurring significant expenses in the short term other than normal operating expenses which the Company’s parent, PXP Energy Corporation (“PXP”), has indicated that it will fund for the foreseeable future. The reader is also cautioned that should Forum Energy Limited (“FEL”) find it necessary to raise capital to fund its current and future business, the Company’s interest in FEL may be diluted because the Company may not have the resources to participate if provided the opportunity to do so.  The reader is also cautioned that assumptions used in the preparation of such information, while considered reasonable by the Company at the time, may prove to be incorrect.The Company has no policy for updating forward-looking information beyond the procedures required under applicable securities laws.\n\n \n\nOverall Performance\n\n \n\n*Forum Energy Limited (“FEL”)*\n\n \n\nAs at December 31, 2025, the Company held 8,206,638 shares (8,206,638 shares at December 31, 2024), representing a 6.80% interest of the capital of FEL, a private company, which has participating interests in six (6) oil and gas blocks in the Philippines through various subsidiaries.  FEL’s subsidiaries are Forum Energy Philippines Corporation (“FEPC”), Forum (GSEC 101) Limited (“FGL”), and ForumPH SC72 Holdings, Inc. (“ForumPH”).  FEL and the Company are both ultimately under the control of PXP and, therefore, are affiliates.\n\n \n\n \n\n45\n\n*Table of Contents*\n\n \n\nThe following information related to PXP or FEL has been provided to us by PXP or FEL, as we do not have direct knowledge of such information.\n\n \n\nPXP holds a 99.35% controlling interest in FEL, with 92.55% held directly and 6.80% held indirectly through its 81.25% shareholding of the Company.  FEL is a company incorporated under the laws of England and Wales with focus on the Philippines and has: (a) a 70% operating interest in Service Contract (“SC”) 72 Recto Bank, which covers the Sampaguita natural gas discovery in offshore West Palawan, held through FGL; (b) minority interests in four blocks in offshore Northwest Palawan, including a 4.69% interest in the producing Galoc Field, held through FEPC; and (c) a 100% operating interest in SC 40 North Cebu held through FEPC’s 66.67%-held subsidiary, Forum Exploration Inc. (“FEI”).\n\n \n\nA summary of FEL’s interests are as follows:\n\n \n\n**SC Block**\n\n \n\n**% interest**\n\n \n\n \n\n**Currently Producing**\n \n\nSC 72 Recto Bank\n\n \n\n \n70%\n \n\nNo\n \n\nSC 40 North Cebu\n\n \n\n \n66.67%\n \n\nNo\n \n\nSC 86 Octon (former SC 6A)(1)\n\n \n\n \n6.84%\n \n\nNo\n \n\nSC 88 Galoc (former SC 14C-1)(2)\n\n \n\n \n4.69%\n \n\nYes\n \n\nCadlao New SC (former SC 6B Bonita)(3)\n\n \n\n \n2.45%\n \n\nNo\n \n\nWest Linapacan New SC (former SC 14C-2)(4)\n\n \n\n \n9.10%\n \n\nNo\n \n\nSC 14A Nido(5)\n\n \n\n \n8.47%\n \n\nNo\n \n\nSC 14B Matinloc(5)\n\n \n\n \n12.41%\n \n\nNo\n \n\nSC 14B-1 North Matinloc(5)\n\n \n\n \n19.46%\n \n\nNo\n \n\nSC 14D Retention Area(5)\n\n \n\n \n8.16%\n \n\nNo\n \n\nSC 14 Tara(5)\n\n \n\n \n10%\n \n\nNo\n \n\n \n\n(1) SC 6A was surrendered to the DOE on March 31, 2021, which was approved on September 5, 2022. The area was nominated for a new Service Contract on March 17, 2023. The government awarded the new SC (No. 86) on September 30, 2025.\n\n(2) SC 14C-1 expired on December 17, 2025 after reaching the maximum 50-year term. Prior to its expiry, the Joint Venture applied for a Development and Production Petroleum Service Contract (“DP PSC”) to enable production operations in the Galoc Field to continue. The government awarded the new contract (No. 88) on December 18, 2025.\n\n(3) The 50-year term of SC 6B expired on February 28, 2024. Prior to its expiry, the Joint Venture applied for a new Service Contract on January 26, 2024. The application is currently awaiting final approval from the Office of the President.\n\n(4) SC 14C-2 expired on December 17, 2025 after reaching the maximum 50-year term. Prior to its expiry, the Joint Venture submitted a Letter of Intent to apply for a DP PSC to evaluate additional prospects within the block and reassess redevelopment options for the West Linapacan A Field. The JV members are currently preparing the documents to be submitted to the DOE.\n\n(5) A Notice to Surrender of the blocks were issued by Operators Philodrill and AC Energy (for Tara) on February 16, 2021.  This was approved by the DOE on May 18, 2022.\n\n \n\n \n\n46\n\n*Table of Contents*\n\n \n\nThe following is a brief description of the properties of Forum Energy together with production details where appropriate.\n\n \n\n*SC 72 Recto Bank*\n\n \n\nFEL’s principal asset is a 70% participating interest in SC 72 (previously Geophysical Survey and Exploration Contract No. 101 (“GSEC 101”)), a petroleum license located in the Recto Bank, offshore west of Palawan Island, the Philippines. The remaining 30% of SC 72 is owned by Monte Oro Resources & Energy Inc., a company incorporated in the Philippines, which is involved in a joint venture with FEL with respect to SC 72.\n\n \n\nOn February 15, 2010, the GSEC 101 license was converted to SC 72, and FEL immediately conducted geological and geophysical works to further evaluate the block and fulfill its commitment to the government. SC 72 covers 8,800 square kilometers, which is 85% of the area covered by GSEC 101.\n\n \n\nExploration in the area began in 1970, and in 1976, gas was discovered in the Sampaguita structure following the drilling of a well. To date, a total of three wells have been drilled at the southwest end of the structure. Two of the wells tested gas at rates warranting further exploration.\n\n \n\nIn early 2011, FEL acquired 2,202 line-km of 2D seismic, gravity, and magnetic data over SC 72 to further define previously mapped leads. Also, 565 square kilometers of 3D seismic data were acquired over the Sampaguita Field (the “Sampaguita 3D”). These fulfilled the Consortium’s minimum work obligation under Sub-Phase (“SP”) 1.\n\n \n\nBased on a technical evaluation conducted by Weatherford Petroleum Consultants in 2012, the Sampaguita Field is estimated to contain 2.6 trillion cubic feet (TCF) of in-place contingent gas resources and 5.4 TCF of prospective gas resources.\n\n \n\nThe 2D seismic data were reprocessed in 2013 and were subsequently interpreted, aided by gravity-magnetics data that were analyzed by Fugro and Cosine Ltd. (“Cosine”) in 2012 and 2015, respectively. In 2015, Arex Energy produced a report on the North Bank Prospect, located northwest of the Sampaguita Field, and estimated the prospective resources to be significant enough to continue with the exploration of the concession.\n\n \n\nIn October 2018, FEL started the Broadband Pre-Stack Depth Migration (“PSDM”) reprocessing of the Sampaguita 3D seismic data with DownUnder GeoSolutions (“DUG”), a company based in Perth, Australia, as contractor. The reprocessing work was completed in June 2019. \n\n \n\nIn November 2018, the governments of the Philippines and China signed a Memorandum of Understanding on Cooperation on Oil and Gas Development (“MOU”). In October 2019, the Philippines’ Department of Foreign Affairs (“DFA”) announced that the Philippines and China had officially convened an Intergovernmental Steering Committee to supervise projects under the two countries’ joint oil and gas exploration in the West Philippine Sea. However, after a series of meetings, the two parties failed to reach an agreement, and in June 2022, the negotiations were officially ended. \n\n \n\n \n\n47\n\n*Table of Contents*\n\n \n\nOn October 16, 2020, FEL received notice from the Philippine Department of Energy (“DOE”) that the Force Majeure (“FM”) imposed on SC 72 on December 15, 2014, was lifted with immediate effect and that FEL was to resume exploration activities on SC 72.  FEL has 20 months from the date of lifting of the FM to drill two (2) commitment wells.  The total cost of drilling these wells depends on a number of factors. The Company’s management estimates the total work to be between US$70 million and US$100 million. It is important to note that, to date, there has been no announcement of any agreement between FEL and CNOOC in relation to SC 72.\n\n \n\nSince then, the 2021 and 2022 WP&B for SC 72 was approved by the DOE. Preparations for drilling activities, including the purchase of long lead items (“LLIs”), the requisition for other materials, and the signing up of technical services, were undertaken for the conduct of geophysical and geotechnical surveys and the drilling of wells Sampaguita 4 and Sampaguita 5 starting the second quarter of 2022.\n\n \n\nOn April 6, 2022, FGL as operator under SC 72, received a directive from the DOE to put on hold all exploration activities for SC 72 until such time that the Security, Justice, and Peace Coordinating Cluster (“SJPCC”) has issued the necessary clearance to proceed.  On April 11, 2022, as a result of not receiving the necessary clearance, Force Majeure was once again declared on SC 72.\n\n \n\nOn May 27, 2022, FGL, on behalf of the SC 72 Joint Venture, and Nido Petroleum Philippines Pty Ltd (“Nido”), Operator of SC 54 and SC 6B, signed a Term Sheet in which Nido agreed to purchase most of the SC 72 LLIs, such as wellheads, casings and accessories, conductor, drill bits, etc., for $ 2.9 million, to be paid in installments within a twelve (12)-month period. A Sale and Purchase Agreement (“SPA”) with Nido was executed on June 10, 2022 to formalize the transaction.\n\n \n\nIn June 2022, media outlets reported that the MOU between China and the Philippines had been terminated although media outlets also reported that discussions would continue on joint exploration of SC 72.\n\n \n\nOn October 11, 2022, the DOE granted FGL the following: (i) the Declaration of Force Majeure for SC 72 from April 6, 2022, until such time as the same is lifted by the DOE, (ii) the inclusion of total expenses incurred as a result of the DOE directive to suspend activities as part of the approved recoverable costs, subject to DOE audit, and (iii) in addition to the period in item (i) above, FGL will be entitled to an extension of the exploration period under SC 72 corresponding to the number of days that the contractors actually spent in preparation for the activities that were suspended by the DOE’s suspension order on April 6, 2022.\n\n \n\nOn March 20, 2023, the DOE further affirmed that the entire period from when the Force Majeure was lifted to when it was re-imposed (October 14, 2020 to April 6, 2022) will be credited back to SC 72.  Consequently, once the Force Majeure is lifted, FGL will have 20 months to drill the two commitment wells, equivalent to the remaining term of SP 2 of SC 72 before October 14, 2020.\n\n \n\nIn May 2023, an amendment to the SPA between FGL and Nido was signed, granting Nido an extension to settle the remaining balance of the SC 72 LLIs’ purchase price. Following Nido’s full payment of the balance in early October 2023, FGL and Nido executed a Deed of Absolute Sale, finalizing the transfer of ownership of the LLIs to Nido.\n\n \n\n \n\n48\n\n*Table of Contents*\n\n \n\nOn November 21, 2025, the DOE approved the WP&B for 2026, with only License Administration costs and SC payments classified as firm budgets. The implementation of the Sub-Phase 2 work commitment comprising the drilling of two wells, will be contingent upon the lifting of the force majeure imposed by the DOE in April 2022.\n\n \n\n*SC 40 North Cebu*\n\n \n\nA 100% operating interest in SC 40 is held by FEPC’s 66.67% owned subsidiary FEI.\n\n \n\nSC 40 is located in the Visayan Basin in the central part of the Philippine Archipelago and covers an area of 340,000 hectares in the northern part of Cebu Island and adjacent offshore areas. It contains the Libertad Gas Field and several prospects and leads.\n\n \n\nIn June 2022, FEI contracted a drilling consultant to prepare drilling programs and budgets for two wells, one of which will be located in the Dalingding Prospect, a reef structure defined by seismic with the Late Miocene to Pliocene-age Barili Limestone as the primary target. A well, Dalingding-1, was drilled on this structure in 1996 and was plugged and abandoned as a dry hole with minor gas shows after reaching a total depth of 1,508 ft. FEI’s re-evaluation of the prospect concluded that the Dalingding-1 well did not reach the Barili target, which is currently estimated at 480 ft below the well’s final depth. FEI proposes drilling a new well to a depth of 4,000 ft to reach the Barili Limestone and secondary targets underneath.\n\n \n\nIn August 2022, FEI contracted a third party to dispose the Hycalog Rig and ancillary equipment stored in Brgy. Maya, Daanbantayan, Cebu Province. The sale process started on September 13, 2022, of which a Luzon-based company offered the highest bid. The pullout of the items began in December 2022, and was completed in June 2023.\n\n \n\nAn independent technical evaluation involving a review of available data, project risk assessment, and project economics of the Maya and Dalingding Prospects started in the first quarter of 2023. The results indicate that deterministic and probabilistic volumetric estimates for the Dalingding Prospect show mean resources of 10 billion cubic feet (“BCF”) for a Gas Case and 3.5 million barrels (”MMBO”) for an Oil Case. The study was completed in March 2024.\n\n \n\nAs part of the Social Development Program commitment of SC 40 with the DOE, FEI conducted a school donation drive on September 1, 2023, at the Maya National High School in Daanbantayan, Cebu. A total of 1,050 school kits, consisting of basic study materials such as notebooks, pad papers, pens, pencils, water bottles, etc., were assembled for the students of the school. Some teaching materials were also given to the faculty.\n\n \n\nOn January 3, 2024, the DOE approved the work program and budget for 2024 that includes the conduct of a magnetotelluric (“MT”) survey over the Dalingding Prospect. The survey aims to define the top of the carbonate target and help determine its depth from surface.  The results will be used to further refine the Dalingding-2 drilling program. \n\n \n\n \n\n49\n\n*Table of Contents*\n\n \n\nMT equipment testing and data acquisition in Daanbantayan, Cebu commenced on June 14, 2024, and was completed on September 2, 2024. A total of 30 stations were acquired on two parallel lines oriented in a NW-SE direction, and 20 stations on one perpendicular line oriented in a NE-SW direction.\n\n \n\nThe MT survey set-up consisted of four electric field probes buried in north, east, west, and south directions, connected to a car battery-powered ADU-07e (recording unit) via a 20-50m cable. Daily data acquisition ran at one station per day for an average of 6 hours and 46 minutes. A quick quality control check was conducted at the end of the day to identify any potential issues or errors in the acquired data and to pinpoint stations that require resurveying.\n\n \n\nOn December 23, 2024, the proposed WP&B for 2025 was submitted to the DOE. It has a firm program that includes the continuation and finalization of the MT survey data processing and interpretation, and the technical re-evaluation of the Dalingding prospect, wherein the MT data will be integrated to existing geologic, geophysical, and well data. The DOE approved the 2025 WP&B on January 7, 2025.\n\n \n\nThe evaluation of the MT data was completed in April 2025. The results successfully mapped the presence of a reef boundary, presumably the Barili Limestone, identified through sharp resistivity contrasts with surrounding formations. However, the interpreted reef depth and thickness of the overlying seal vary, possibly due to data interpolation effects, as a significant amount of cultural noise had to be removed during the interpretation process.\n\n \n\nA data integration study was carried out by FEI following receipt of the MT report, which was completed in June 2025. The subsurface resistivity data derived from the MT method show that resistivity can vary laterally within a formation, reflecting the differences in its physical properties. When combined with other geophysical methods, MT data can provide a more comprehensive understanding of subsurface geology. The study also concludes that, while seismic remains the primary tool for defining prospect structures, MT-derived resistivity can aid in predicting porosity and fluid type within seismically delineated geologic bodies. By integrating data from multiple geophysical tools and sources, the porosity distribution on the Barili Limestone surface was successfully estimated and mapped.\n\n \n\nOn March 11, 2026, the DOE approved the WP&B for 2026\n\n \n\n*SC 88 Galoc (formerly SC 14 C-1)*\n\n \n\nBlock C-1 Galoc covered an area of 164 square kilometers and contains the Galoc Oil Field, which had produced approximately 25.33 MMBO as of December 31, 2025.\n\n \n\nGross production in 2025 averaged 1,093 barrels of oil per day (“BOPD”), down from 1,224 BOPD in 2024, representing a year-on-year decline of 10.7%. This decline is consistent with the field’s natural decline rate observed for the past three to four years.\n\n \n\n \n\n50\n\n*Table of Contents*\n\n \n\nThree liftings, totaling 414,124 barrels, were delivered during 2025. The first lifting was completed on February 28, 2025, with a cargo size of 157,381 barrels; the second on June 01, 2025, totaling 123,361 barrels; and the third was completed on October 1, 2025, with a cargo of 133,382 barrels. The crude oil was sold to regional refineries at an average realized price of US$69.96 per barrel. \n\n \n\nThe field's profitability is expected to continue over the next 1-2 years, subject to effective cost management, operational efficiency, high oil prices, and sustained performance of the remaining production wells, Galoc-5 and Galoc-6. \n\n \n\nOn May 7, 2020, GPC informed the DOE of the cessation of operations for Galoc Field, starting September 24, 2020. This followed GPC’s receipt of a Notice of Termination from Rubicon Offshore International (“ROI”), the owner of the floating production storage and offloading (“FPSO”) vessel, Rubicon Intrepid. GPC also requested approval of the initial drawdown from the fund set-up under the DOE-approved Galoc Decommissioning Plan (“DP”) for implementing the field suspension plan.  However, in September 2020, the Galoc Joint Venture (“JV”) negotiated with ROI to sell the Rubicon Intrepid, allowing the Galoc Field to continue production beyond the original cessation schedule of September 24, 2020. Tamarind Resources, the owner of GPC, established a subsidiary, Philippines Upstream Infrastructure (“PUI”), to acquire the FPSO from ROI.  GPC and ROI then signed a Transition Operations and Maintenance (“O&M”) contract enabling ROI’s crew to manage FPSO operations during a six-month transition period.  Following this, GPC entered into a 24-month O&M contract with Three60 Energy, an energy services provider, to take over FPSO operations after the transition period. \n\n \n\nOn September 14, 2020, Galoc Production Company 2 (“GPC2”) withdrew from SC 14C-1 and the Joint Operating Agreement, with the withdrawal becoming effective on December 16, 2020. The majority of the remaining members absorbed GPC2’s interest, including FEPC, which increased its participation from 2.27575% to 3.2103%.\n\n \n\nOn December 23, 2020, GPC resigned as the SC 14C-1 operator, and the JV elected GPC’s affiliate, NPG Pty Limited (“NPG”), as its replacement.\n\n \n\nOn February 1, 2021, Three60 Energy formally assumed operational control of the FPSO, now called Intrepid Balanghai, following the transition period with ROI from September 2020 to January 2021.\n\n \n\nIn June 2021, the DOE requested that NPG prepare a new decommissioning plan (“DP”) for Galoc Field’s eventual closure. This DP updated the 2016 Abandonment Plan and the 2020 Suspension & Abandonment Plan, both of which had received DOE approval. Submitted on July 30, 2021, the DP outlines the scope and estimated costs of final field decommissioning, including the FPSO, subsea equipment, and production wells. The total decommissioning cost is projected at $24 million, with $9.5 million allocated for FPSO disconnection and subsea equipment abandonment and $14.5 million for permanent plugging and abandonment (“P&A”) of the production wells.\n\n \n\nIn January 2023, Matahio Energy completed the acquisition of NPG, which operates the Galoc Field, and PUI, which owns the FPSO Intrepid Balanghai. In March 2023, ownership of the FPSO was transferred directly from PUI to NPG.  Following this transfer, NPG (acting as a corporate entity and not in its capacity as SC 14C-1 Joint Venture Participant) entered into a new bareboat charter with the other JV Partners, including FEPC, for the purpose of continuing production operations at the Galoc Field.\n\n \n\n \n\n51\n\n*Table of Contents*\n\n \n\nIn December 2023, the DOE released Department Circular (“DC”) no. 2023-12-0033 on the awarding of Development and Production Petroleum Service Contracts (“DP PSC”) through direct negotiations. It took effect on January 3, 2024.  The DP PSC covers expiring service contracts but with ongoing production or producible petroleum reserves as validated by the DOE. It will have an initial term aligned with the period necessary to produce the recoverable oil or gas reserves declared in the DOE-approved Plan of Development (“POD”). The contract may also be subject to renewal for an additional period based on mutually agreed terms and conditions.\n\n \n\nSC 14C-1 qualified for the issuance of a DP PSC allowing production operations at Galoc Field beyond the original end of the SC's term on December 17, 2025. Accordingly, the Consortium applied for a DP PSC in March 2025 and submitted the required documentation over the succeeding months. The Government awarded the new contract, SC No. 88, on December 18, 2025, and following the withdrawal of one company from the application, FEPCO’s participating interest increased from 3.2103% under the expired SC 14C-1 to 4.69174%.\n\n \n\n*SC 14C-2 West Linapacan*\n\n \n\nBlock C-2 covered an area of 176.5 square kilometers and hosts two main oil-bearing structures, West Linapacan A and West Linapacan B, which are structural traps formed by fault-related folding. The West Linapacan A Field was discovered in 1990 and, from 1992 to 1996, produced over 8.5 MMBO from fractured Linapacan Limestone, the stratigraphic equivalent of the Nido Limestone. The field is located in 300 to 350 m of water, approximately 60 km offshore from Palawan Island.\n\n \n\nWest Linapacan B, located along the same structural trend, was discovered in 1993 with the drilling of West Linapacan B1-X but was never developed. Test results confirmed reservoir productivity, and available data suggest the well did not reach the oil-water contact, indicating that additional hydrocarbon accumulations may extend beyond the currently defined structural limits.\n\n \n\nIn 2018, Philodrill completed the mapping and interpretation of reprocessed 3D seismic data, focusing on the West Linapacan B structure, which was drilled in 1991. The SC 14C-2 and SC 74 Consortia conducted joint Rock Physics and QI studies in 2019 using existing 3D seismic and well data, with Ikon Science completing the initial phase in October 2019. However, only the SC 74 JV proceeded with the second phase of the QI Study.\n\n \n\nIn September 2021, the Consortium initiated a technical study on the West Linapacan B Field, including geologic data review, well log digitization, reservoir modeling, and resource estimation. Phase 1, completed in November 2021, indicated that a stand-alone development for West Linapacan B was not economically viable. Phase 2 explored a joint development of the West Linapacan A and B Fields, concluding that feasibility depended on recoverable reserves, development costs, production rates, and oil prices.\n\n \n\n \n\n52\n\n*Table of Contents*\n\n \n\nOn December 20, 2024, Philodrill submitted the WP&B for 2025 to the DOE. The firm program includes the preparation of a plan and design study for a new well, West Linapacan A-7, as well as a POD for the West Linapacan A Field. On July 4, 2025, the Consortium commissioned Three60 Energy, the current Operations and Maintenance (“O&M”) contractor for the Galoc Field, to prepare the POD, which is expected to be completed by early November 2025.\n\n \n\nOn November 17, 2025, the Consortium submitted a Letter of Intent to apply for a DP PSC covering SC 14C-2, which expired on December 17, 2025, along with additional open acreages. The new DP PSC  will provide a fresh evaluation window to assess West Linapacan B, Linapacan B in the former SC 74 block, and other adjacent structures for potential cluster development. The block qualifies for a DP PSC based on the declared reserves in the West Linapacan A Field. The JV members are currently preparing the documents to be submitted to the DOE.\n\n \n\n*SC 86 Octon (formerly SC 6A)*\n\n \n\nIn 2018, Philodrill completed the seismic interpretation/mapping work on the northern sector of the block using the PSDM 3D volume. The evaluation focused on the Malajon, Salvacion, and Saddle Rock prospects.  The Malajon and Saddle Rock closures were previously tested by wells that encountered good oil shows in the Galoc Clastic Unit (“GCU”) interval. However, no drill stem tests were conducted in this interval due to operational constraints. A seismic attribute analysis of the prospects was completed the following year, aimed at characterizing the target reservoirs and determining their distribution in terms of porosity, thickness, and lithology.\n\n \n\nIn June 2020, LMKR, a private petroleum technology company based in Dubai, completed a pilot study on the Malajon area using 3D seismic and well data. The study shows the Malajon structure has good hydrocarbon potential and thus requires further detailed analysis. LMKR also identified four (4) sand packages within the GCU after generating several elastic properties (P-impedance, Vp/Vs, etc.).\n\n \n\nA more detailed Quantitative Interpretation (“QI”) study was approved by the JV aimed at generating pay probability maps and identifying prospective zones that could be targeted for any future wells. It also included detailed attribute analysis as several channelized sands within the GCU have been identified during the pilot study. An amended WP&B for 2020 to cover this additional study was approved by the DOE in July 2020.  The LMKR report was submitted to the DOE in July 2021.\n\n \n\nSC 6A had an original term set to expire on February 28, 2024, leaving the Consortium with limited time to drill an exploratory well and to develop a field in case of a discovery. In view of this, the Consortium decided to surrender the contract effective March 31, 2021, and subsequently re-apply for a new contract under the Philippine Conventional Energy Contracting Program (“PCECP”) through area nomination.  The surrender of the SC was approved by the DOE on September 5, 2022.\n\n \n\nOn March 17, 2023, Philodrill submitted the SC application to the DOE. It has an area of 1,320 sq. km, which includes the former SC 6A and additional areas relinquished from the adjacent SC 74 in 2022. This area has been termed Nominated Area No. 10 by the DOE.\n\n \n\n \n\n53\n\n*Table of Contents*\n\n \n\nOn May 15, 2023, the DOE, in its preliminary review, confirmed the completeness of the technical, legal, and financial documents submitted by the JV in support of the SC application.\n\n \n\nThe new Service Contract (No. 86) was awarded on September 30, 2025. The first sub-phase will focus on further subsurface work in addition to the G&G studies conducted by the former SC 6A JV. These activities aim to establish a final well design and location for the Malajon Prospect and to appraise the Octon Discovery.\n\n \n\nFEPC has a participating interest of 6.8439% in the new SC.\n\n \n\n*Cadlao Block (former SC 6B Bonita)*\n\n \n\nSC 6B had an area of 567 sq. km and contains the Cadlao Oil Field. The field was discovered in 1977 and produced about 11 MMBO from two subsea production wells from 1981-1991. The remaining recoverable reserves are estimated at 3.7 MMBO for proven reserves (1P) and 5.7 MMBO for proven plus probable reserves (2P) based on a 2012 study by Gaffney, Cline & Associates, Inc. Additionally, near Cadlao lies the East Cadlao Prospect, with estimated recoverable resources of 1.48 MMBO at the P10 level, and 1.17 MMBO at the P50 level.\n\n \n\nIn December 2021, Nido submitted a farm-in proposal to the JV to increase its participating interest in SC 6B from 9.09% to 72.727% and take over the operatorship of the Service Contract.  A farm-in agreement (“FIA”) was later executed on February 11, 2022, with FEPC’s interest being reduced to 2.4546% from 8.182% in exchange for the said carry in Cadlao’s development costs. Under the FIA, Nido will fund 100% of the drilling of a well, Cadlao-4, the conduct of an extended well test (“EWT”), and the subsequent development of the Cadlao Field.\n\n \n\nNido proposes a two-phase redevelopment consisting of\n\n \n\n·\n\nPhase 1: A 3 to 9-month EWT using a new single deviated well (Cadlao-4), a mobile offshore production unit (“MOPU”), and either a floating storage and offloading (“FSO”) vessel or a shuttle tanker; and\n\n \n\n \n\n·\n\nPhase 2: Further development of the EWT well and additional wells potentially substituting the MOPU for a small wellhead platform (“WHP”) and storage barge.\n\n \n\nIn April 2022, RISC completed an independent assessment of the Cadlao Field. Overall, RISC supports the redevelopment as an economic opportunity although costs will have to be carefully controlled.\n\n \n\nThe Deed of Assignment (“DOA”) of Participating Interest to Nido and the revised 2022 WP&B were submitted to the DOE on April 11, 2022. The WP&B includes the drilling of Cadlao-4 and the conduct of an EWT. However, the spud date of the well will depend on rig and FSO unit availability.  The DOA was approved on December 19, 2022.\n\n \n\n \n\n54\n\n*Table of Contents*\n\n \n\nFrom November 28 to December 1, 2022, Nido conducted a geophysical site survey at Cadlao using the vessel Cassandra VI.  The purpose of the survey was to identify the possible constraints and hazards on the seafloor where the Cadlao-4 well will be located.\n\n \n\nOn November 15, 2023, Nido and PNOC Exploration Corporation (“PNOC EC”) signed a FIA that provides for PNOC EC’s acquisition of a 20% participating interest in the block, including sharing the cost of drilling and EWT for the Cadlao-4 well. While PNOC EC’s participation was approved by the Consortium, the formal transfer and assignment of the 20% interest from Nido to PNOC EC shall be subject to the approval of DOE.\n\n \n\nNido had initially identified a drillship to drill the Cadlao-4 well, although it still requires equipment modifications. However, due to safety concerns about using a drillship at a water depth of 93.7 m, a jack-up rig is now being considered for both drilling and the EWT. Nido is currently reviewing the contract for the jack-up rig.\n\n \n\nOn January 5, 2024, the Consortium sent to DOE its letter of intent to apply for a DP PSC before the end of SC 6B’s production term. On January 26, 2024, Nido submitted the application documents over the former SC 6B block and additional open areas. These documents include a copy of the POD for the Cadlao Field. The new SC will replace SC 6B, which expired on February 28, 2024. The Consortium is now awaiting the government’s final decision on the application.\n\n \n\n*SC 14A (Nido), SC 14B (Matinloc) & SC 14B-1 (N. Matinloc)*\n\n \n\nProduction in the Nido and Matinloc Fields was terminated permanently on March 13, 2019, after producing 22,173 barrels of oil from January to March 2019. The Nido Field accounted for 93.06% of the total while Matinloc Field contributed 6.94%.  Shell Philippines was the sole buyer of the crude during the period. \n\n \n\nNido started oil production in 1979 while Matinloc was put in place in 1982. The final inception-to-date production figures for the two fields are 18,917,434 barrels for Nido and 12,582,585 barrels for Matinloc.  The North Matinloc Field, which was in production from 1988 to 2017, produced a total of 649,765 barrels of oil.  The total production for the three (3) fields is 32,149,784 barrels. \n\n \n\nSeven (7) production wells in Nido (3 out of 5), Matinloc (3), and North Matinloc (1) were successfully P&A from April to May 2019. The P&A of the remaining Nido wells, A1 and A2, were only partially abandoned due to difficulties encountered during operations. \n\n \n\nFollowing the suspension of field operations and the P&A of most of the wells in March 2019, Philodrill conducted the stripping and disposal of equipment and materials aboard the production platforms from June to October 2019.  In December 2019, all production platforms were turned over to the DOE.  On June 26, 2020, the DOE signed a Deed of Donation and Acceptance with the Department of National Defense to formalize the transfer of ownership of the Nido and Matinloc platforms to the Armed Forces of the Philippines, which will now use the platforms for defense purposes.\n\n \n\n \n\n55\n\n*Table of Contents*\n\n \n\nThe P&A of the remaining Nido production wells, A-1 and A-2 wells was completed on October 5, 2020. This was initially scheduled in April 2020 but had to be deferred due to COVID-19 related health and travel restrictions. \n\n \n\nWith the completion of P&A of all production wells, a Notice to Surrender the SC 14A, 14B, 14B-1, Tara, and SC 14D blocks was sent to the DOE on February 16, 2021.  This was approved by the DOE on May 18, 2022.\n\n \n\nForum Energy Objectives and Strategy\n\n \n\nThe core objective of FEL is to maximize the potential of its investments and its current licences to generate income, whilst at the same time continuing to reduce administrative expenses.\n\n \n\nFEL plans to achieve this by:\n\n \n\n·\nDevelopment of SC 72\n\n·\nContinued review of exploration blocks to identify potential drilling targets\n\n·\nContinued review of administrative expenses\n\n \n\nFor further details regarding FEL, see its 2024 financial statement package at **https://find-and-update.company-information.service.gov.uk/company/05411224/filing-history******\n\n \n\nPlease note that FEL is not required to file its financial statement package with Companies House in the UK until September 30 following the end of its fiscal year which is December 31. Accordingly, the FEL financial statement package for 2025 is not expected to be available until Q3 of 2026.\n\n \n\nRisk factors specific to FEL\n\n \n\nThe Company is exposed to certain risk factors which are specific to its investment in FEL. These include the following:\n\n \n\nOn October 16, 2020, FEL received notice from the DOE that the FM imposed on SC 72 on December 15, 2014 was lifted with immediate effect and that FEL was to resume exploration activities on SC 72. Under the current work program commitments, FEL was given 20 months from the date of lifting of the FM to drill two commitment wells. The total cost of drilling these wells depends on a number of factors. The Company’s management estimates the total work to be between $70 million and $100 million. It is important to note that, to date, there has been no announcement of any agreement between FEL and CNOOC in relation to the implementation of the MOU involving SC 72. The risk therefore exists that should FEL not be able to meet its commitments to the DOE, it may have to surrender its rights to SC 72 and pay a penalty equivalent to the minimum financial commitment of the current sub-phase.\n\n \n\nOn April 6, 2022, FEL as operator under SC 72, received a directive from the DOE to put on hold all exploration activities for SC 72 until such time that the Security, Justice, and Peace Coordinating Cluster (“SJPCC”) has issued the necessary clearance to proceed. On April 11, 2022, as a result of not receiving the necessary clearance, Force Majeure was once again declared on SC 72.\n\n \n\n \n\n56\n\n*Table of Contents*\n\n \n\nIn June 2022, media outlets reported that the MOU between China and the Philippines had been terminated although media outlets also reported that discussions would continue on joint exploration of SC 72.\n\n \n\nOn October 11, 2022, the DOE granted FGL the following: (i) the Declaration of Force Majeure for SC 72 from April 6, 2022, until such time as the same is lifted by the DOE, (ii) the inclusion of total expenses incurred as a result of the DOE directive to suspend activities as part of the approved recoverable costs, subject to DOE audit, and (iii) in addition to the period in item (i) above, FGL will be entitled to an extension of the exploration period under SC 72 corresponding to the number of days that the contractors actually spent in preparation for the activities that were suspended by the DOE’s suspension order on April 6, 2022.\n\n \n\nOn March 20, 2023, the DOE further affirmed that the entire period from when the Force Majeure was lifted to its re-imposition (October 14, 2020 to April 6, 2022) would be credited back to SC 72.  Once the Force Majeure is lifted, FGL will have 20 months to drill the two commitment wells, equivalent to the remaining term of Sub-Phase 2 of SC 72 before October 14, 2020.\n\n \n\n·\n\nFEL’s cash inflows is heavily dependent on the Galoc Field production, which continued to operate beyond the original cessation date of September 24, 2020, following an agreement the previous operator GPC signed with ROI, the owner of the FPSO Rubicon Intrepid. The viability of continued production depends on the consistent output of the producing wells as well as the price of oil.\n\n \n\n \n\n·\n\nFEL’s operations do not generate sufficient cash to fund new exploration work in Galoc and its other blocks; therefore, in the event FEL issued new capital to fund these costs, the Company’s interest in FEL may be diluted.\n\n \n\n \n\n·\n\nFEL is a closely held private company and there is a limited population of potential buyers for FEC’s relatively small interest in FEL.\n\n \n\n \n\n·\n\nFEL’s interest in its main asset SC 72 could be diluted depending on the agreement reached, if any, with potential farm-in partners in the future.\n\n \n\n \n\n·\n\nFurther exploration work has to be completed on SC 72 and SC 40 to confirm the value of the resources within these properties.\n\n \n\nOn March 10, 2022, the Company announced that it agreed to fund an additional cash call for pre-drilling costs received from FEL in the amount of $198,620.  The advance to FEL was via non-interest bearing loans.  To fund the $198,620, the Company accepted a loan from PXP for the same amount (“PXP Loan”).  The PXP loan bore interest of LIBOR plus 3.5% and was settled in a shares for debt transaction on July 31, 2025.   \n\n \n\nIn October 2023, FEL advised the Company of its intent to complete a $3,000,000 fund raising to repay its loan from PXP and for general working capital purposes.  FEC agreed to participate in its pro-rata 6.8% share amounting to $204,000 through additional loans from PXP on the same terms and conditions as previous advances.\n\n \n\n \n\n57\n\n*Table of Contents*\n\n \n\nOn December 21, 2023, $626,820 of advances made to FEL by the Company were converted to shares in FEL at a price of $0.30 per share. The $626,820 conversion into FEL shares represented 6.8% of $9,217,939 of debt settled by FEL.\n\n \n\n**Selected Annual Financial Information Of The Company**\n\n \n\nSelected Financial Data\n\n \n\n \n\n \n\nYear Ended\n\n12/31/25\n\n \n\n \n\nYear Ended\n\n12/31/24\n\n \n\n \n\nYear Ended\n\n12/31/23\n\n \n\nRevenue\n\n \n$-\n \n\n \n$-\n \n\n \n$-\n \n\nNet loss\n\n \n$(282,798)\n \n$(244,437)\n \n$(191,795)\n\nBasic and Diluted Loss per share\n\n \n$\n(0.00)/(0.00)\n\n \n$\n(0.00)/(0.00)\n\n \n$(0.00)/(0.00)\n\nDividends per share\n\n \n$0.00\n \n\n \n$0.00\n \n\n \n$0.00\n \n\nWeighted  Avg. Shares O/S (’000)\n\n \n\n \n916,231,001\n \n\n \n\n \n861,082,371\n \n\n \n\n \n861,082,371\n \n\nWorking Capital (Deficit)\n\n \n$(50,794)\n \n$(922,999)\n \n$(678,562)\n\nLong-Term Debt\n\n \n$-\n \n\n \n$-\n \n\n \n$-\n \n\nShareholders’ Equity\n\n \n$6,191,629\n \n\n \n$7,645,095\n \n\n \n$1,783,369\n \n\nTotal Assets\n\n \n$6,266,199\n \n\n \n$8,582,339\n \n\n \n$2,478,573\n \n\n \n\nResults of Operations\n\n \n\nThe accounts show a loss for the twelve months ended December 31, 2025 of $282,798, or $0.00 per share, versus a loss of $244,437 for the same period in 2024.  \n\n \n\nThe higher net loss due to higher professional fees (legal and auditing) incurred during the year.\n\n \n\nGeneral and administration expense were $241,376 for the twelve month period ended December 31, 2025 versus $182,241 for the same period in 2024.  Overall expenses were higher than those experienced in the previous year.  Higher professional fees accounted for the difference.  Legal and audit related fees were $112,794 for the twelve month period ended December 31, 2025 versus $54,310 for the same period in the previous year as we engaged professional advice for an in depth review of our strategic options going forward in 2025.  Office and miscellaneous costs were $20,486 for the twelve month period ended December 31, 2025 versus $19,219 for the same period in the previous year.  The difference was not material. Consulting fees for the twelve months ended December 31, 2025 were $86,106 versus $86,397 for the previous year.  The difference was not material. Listing and filing fees were$18,590 for the twelve month period ended December 31 , 2025 versus $19,929 for the same period in the previous year.  The difference was due to higher filing costs in 2024.  For the year ended December 31, 2025, foreign exchange loss was $2,535 versus a loss of $1,500 for the same period in the previous year. Interest expense for the year ended December 31, 2025 was $41,422 versus $62,196 for the same period in the previous year.  The difference was due to the settlement in shares of the PXP Loan on July 31, 2025 resulting in lower interest expense.  Comprehensive loss for the twelve months ended December 31, 2025 was $2,325,671 versus an income of $6,106,163 for the twelve month period ended December 31, 2024.  The difference was a result of the change in fair value of our investment in FEL.\n\n \n\n \n\n58\n\n*Table of Contents*\n\n \n\nBalance Sheet\n\n \n\nThe Company’s current assets were $23,776 at December 31, 2025 versus $14,245 for the year ended December 31, 2024. The difference is mainly a result of the higher cash balance on December 31, 2025. The Company’s assets reflect the investment in FEL on a fair value basis. The fair value of the investment in FEL is stated at $6,242,423 or $0.76 per share. ** **\n\n \n\nThe investment in FEL represents an investment in a private company for which there is no active market and for which there are no publicly available quoted market prices. The Company has classified its investment in FEL as Level 2 in the fair value hierarchy.\n\n \n\nFor purposes of determining fair value of the investment in FEL, the Company considered valuation techniques described in IFRS 13 – Fair Value Measurement. In respect of the investment in FEL, management considered the fair value of 6,242,423 (2024 - $8,568,094) to be indicative of the fair value of the investment in FEL. On May 13, 2024, PXP disclosed that it was undertaking a share swap with Tidemark Holdings Limited (“Tidemark”) whereby PXP would exchange PXP shares for all FEL shares held by Tidemark at a value of US$1.17 per share (430,243,903 PXP shares at PHP3.62). This imputed a value of $9,601,766 on the transaction date.  The Company re-calculated the volume weighted average price of the PXP shares as at December 31, 2025 resulting in a 34.99% (2024 - 10.77%) reduction in the fair value from the transaction date. The fair value of the investment is consistent with the re-calculated implied value based on the May 10, 2024 share swap between PXP and Tidemark, which is a Level 2 input.  The share swap transaction closed on March 20, 2025.\n\n \n\nThere were no transfers between Level 2 and the other levels in the hierarchy during 2025 or 2024.\n\n \n\nSummary of Quarterly Results\n\n \n\nSelected Financial Data\n\n(in ‘000, except EPS)\n\n \n\n \n\n4th\n\nQtr 25\n\n3rd\n\nQtr 25\n\n2nd\n\nQtr 25\n\n1st\n\nQtr 25\n\n4th\n\nQtr 24\n\n3rd\n\nQtr 24\n\n2nd\n\nQtr 24\n\n1st\n\nQtr 24\n\n(Loss)\n\n(53)\n\n(54)\n\n(114)\n\n(62)\n\n(85)\n\n(57)\n\n(57)\n\n(45)\n\nBasic and Diluted Loss per share\n\n0.00\n\n0.00\n\n0.00\n\n0.00\n\n0.00\n\n0.00\n\n0.00\n\n0.00\n\n \n\nLiquidity\n\n \n\nThe Company’s working capital deficit at December 31, 2025, was $50,794 versus a working capital deficit of $922,999 at December 31, 2024, and shareholders’ equity was $6,191,629 at December 31, 2025 (December 31, 2024 - $7,645,095).  The change was mainly due to the decrease in the valuation of FEL which is an investment in shares of a private company that are measured at fair value through other comprehensive income offset by the shares for debt conversion of the PXP Loan on July 31, 2025.  As the FEL shares are not traded in an active market, the valuation of this investment is based on management’s consideration of other observable inputs that are available.  For purposes of determining fair value of the investment in FEL, the Company considered valuation techniques described in IFRS 13 – Fair Value Measurement.\n\n \n\n \n\n59\n\n*Table of Contents*\n\n \n\nManagement considers that the current economic environment is difficult and the outlook for oil and gas exploration companies presents significant challenges in terms of raising funds through issuance of shares.  Previously, to the extent necessary, the Company disposed of quantities of its shareholdings in FEL to PXP under terms that are consistent with the best interests of all shareholders, in order to finance its operations.  In the past, the Company issued new shares under a rights offering scheme to raise new capital to fund its operations but more recently has relied on loans from PXP.\n\n \n\nManagement currently believes that it is in the best interest of all shareholders that management explores the issuance of new shares or debt to fund its future operations.\n\n \n\nThe Company’s continued operations depend on its ability to raise funds through the disposition of quantities of its shareholdings in FEL to PXP under terms that are consistent with the best interests of shareholders, or through obtaining loans from PXP.  Also, the Company may issue new shares to PXP and/or other third parties.\n\n \n\nThe Company is not required to directly contribute capital to any of the projects in which it has an indirect or direct interest.\n\n \n\nCash used in operating activities for the twelve month period ended December 31, 2025, was $249,084 versus $156,936 for the same period in 2024 mainly as a result of the differences described above. \n\n \n\nCash provided by financing activity was $258,192 for the twelve months ended December 31, 2025, versus $155,286 for the same period in the previous year. The amount was from loans from PXP.\n\n \n\nOn March 10, 2022, the Company announced that it agreed to fund an additional cash call for pre-drilling costs received from FEL in the amount of $198,620.  The advance to FEL was via non-interest bearing loans.  In order to be able to fund the $198,620, the Company received a loan from PXP for the same amount (“PXP Loan”).  The PXP Loan bears interest of LIBOR plus 3.5% and both interest and principal are repayable on the earlier of a) August 31, 2025, or b) any equity issuance by FEC, or c) any sale of FEL shares by FEC, or d) any third party borrowing by FEC.   PXP advanced an additional $$356,500, $155,286, and  $260,950 for the years ended December 31, 2023, 2024, and 2025 to the Company for working capital under the same terms and conditions as the PXP Loan.  As at December 31, 2025, the outstanding PXP Loan balance was $40,248 (December 31, 2024 - $895,637). Total interest expense for the year amounted to $41,422 (2024 - $62,196).\n\n \n\nOn July 31, 2025, PXP agreed to convert the PXP Loan amounting to $1,011,155.58 plus accrued interest to July 31, 2025 of $146,604.90 into shares of the Company at $0.0088 per Company share.  A total of 131,563,725 common shares of the Company were issued to settle $1,157,760.78 in debt.\n\n \n\n \n\n60\n\n*Table of Contents*\n\n \n\nFourth Quarter\n\n \n\nDuring the fourth quarter there were no significant events.  Other than additional legal and audit related costs for the in depth review of the Company’s strategic options, the Company incurred only basic operating costs.  The Company does not experience seasonal fluctuations in its business and there were no dispositions of any business segments.\n\n \n\nCapital Resources\n\n \n\nSince the Company has no revenue, it will need to continue to raise funds through either debt, equity, or the sale of assets in order to continue its operations or participate in other projects.  The Company currently has no plans to sell any more of its FEL shares and will be reliant on debt or equity issuances for future funding requirements. ****\n\n \n\nSince the delisting of FEL from the London Stock Exchange, there is no liquidity via a public market for the FEL shares.  As the Company is wholly reliant on the information disclosed by PXP concerning the business of FEL, the Company may not be able to obtain information necessary to facilitate a wider sales process and may be reliant on significant shareholders of PXP for the disposition of any of its FEL shares. Management has looked at all options including raising funds to operate and participate in future FEL financings by way of debt or equity financings.  Given the current share price of the Company, and given that any external financings may have been extremely dilutive, the Company has been accepting loans from PXP in order to sustain operations and to maintain its 6.8% interest in FEL.\n\n \n\nFrom January 1, 2025 to July 31, 2025, short term loans increased by $262,124 as a result of additional working capital advances ($220,950) and accrued interest ($41,174) under the PXP loan.  The short term loans were settled through the issuance of common shares on July 31, 2025.  From August 1, 2025 to December 31, 2025 an additional $40,000 was advanced by PXP under the same terms and conditions and interest accrued to December 31, 2025 was $248.\n\n \n\nOff balance sheet Arrangements\n\n \n\nThere are no off-balance sheet arrangements in existence as of this date.\n\n \n\nTransactions with Related Parties\n\n \n\nThe Company considers its officers (CEO and CFO) and directors to be key management. Key management are those persons having authority and responsibility for planning, directing, and controlling activities, directly or indirectly, of the Company.\n\n \n\nDuring the year ended December 31, 2025, general and administrative expenses included key management personnel compensation totaling $48,000 (2024: $48,000; 2023: 48,000).\n\n \n\n \n\n61\n\n*Table of Contents*\n\n \n\nNote 9 Related Party Transactions and Balances (continued)\n\n \n\nOn March 10, 2022, the Company announced that it agreed to fund an additional cash call for pre-drilling costs received from FEL. The advance to FEL was via non-interest bearing loans. In order to be able to fund the cash call, the Company accepted a loan from PXP for the same amount (“PXP Loan”). The PXP loan bears interest of Libor plus 3.5% and both interest and principal is repayable on the earlier of a) August 31, 2025 or b) any equity issuance by FEC, or c) any sale of FEL shares by FEC, or d) any third party borrowing by FEC. The Company also received an additional $260,950 for working capital from PXP during the year ended December 31, 2025 (2024 - $155,286; 2023 - $356,500) under the same terms and conditions as the PXP Loan. As at December 31, 2025, the outstanding PXP Loan balance was $40,428 (2024 - $895,637) which included accrued interest of $428 (2024 - $105,431). Total interest expense amounted to $41,422 for the year ended December 31, 2025 (2024 – $62,196; 2023 – $32,593). The PXP Loan balance was reduced by $200 as a result of the assumption by PXP of the balance of the advances made to FEL. On July 31, 2025, the Company issued 131,563,725 in settlement of the PXP Loan outstanding on that date comprised of $1,011,156 principal and $146,605 in interest for a total of $1,157,761.\n\n \n\nCritical Accounting Estimates and Judgments\n\n \n\nThe Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.\n\n \n\nThe effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income/loss in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both.\n\n \n\nThe determination of the fair value of the Company’s investment in FEL is a significant accounting estimate.\n\n \n\nStandards, Amendments and Interpretations Not Yet Effective\n\n \n\nThe Company has prepared its financial statements in accordance with IFRS Accounting Standards as issued by the IASB. The financial statements have been prepared in accordance with IFRS Accounting Standards and interpretations effective as of December 31, 2025.\n\n \n\nNew IFRS Accounting Standards and interpretations or changes to existing standards with future effective dates are either not applicable or not expected to have a significant impact on the financial statements of the Company.\n\n \n\n \n\n62\n\n*Table of Contents*\n\n \n\nAs at the date of authorization of these financial statements, the IASB had issued certain pronouncements that are mandatory for the Company’s accounting periods commencing on or after March 1, 2025. In April 2024, the IASB issued IFRS 18 Presentation and Disclosure in Financial Statements (“IFRS 18”) which replaces IAS 1 Presentation of Financial Statements. This standard aims to improve how companies communicate in their financial statements, with a focus on information about financial performance in the statement of profit or loss, in particular additional defined subtotals, disclosures about management-defined performance measures and new principles for aggregation and disaggregation of information. IFRS 18 is accompanied by limited amendments to the requirements in IAS 7 Statement of Cash Flows. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027. Companies are permitted to apply IFRS 18 before that date. The Company is currently assessing the impact the new standard will have on its financial statements. Other recent accounting pronouncements are not applicable or do not have a significant impact to the Company, have been excluded.\n\n \n\nFinancial Instruments and Risk Management\n\n \n\nThe Company is exposed through its operations to the following financial risks:\n\n \n\n \n\n-\n\nMarket Risk\n\n \n\n-\n\nCredit Risk\n\n \n\n-\n\nLiquidity Risk\n\n \n\n-\n\nDilution Risk\n\n \n\nIn common with all other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout this management discussion and analysis.\n\n \n\nThere have been no substantive changes in the Company’s exposure to financial instrument risks, its objectives, polices and processes for managing those risks or the methods used to measure them from previous years unless otherwise stated in the note below.\n\n \n\n*General Objectives, Policies and Procedures*\n\nThe Board of Directors has overall responsibility for the determination of the Company’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Company’s finance function. The Board of Directors receive quarterly reports from the Company’s Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.\n\n \n\n \n\n63\n\n*Table of Contents*\n\n \n\nThe overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Company’s competitiveness and flexibility.Further details regarding these policies are set out below.\n\n \n\na)\n\n*Market Risk*\n\n \n\nMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices are comprised of foreign currency risk, interest rate risk and equity and commodity price risk.\n\n \n\n*Foreign currency exchange risk*\n\nThe Company is exposed to foreign currency fluctuations for general and administrative transactions denominated in Canadian Dollars. The majority of the Company’s cash is kept in U.S. dollars. As at December 31, 2025, the Company had an insignificant amount of cash denominated in Canadian dollars that was subject to exchange rate fluctuations between the Canadian dollar and the U.S. dollar. As at December 31, 2025, the Company held financial liabilities of $33,742 that are denominated in Canadian dollars that would be subject to exchange rate fluctuations between Canadian dollars and U.S. dollars.   \n\n \n\nb)\n\n*Credit risk*\n\n \n\nThe Company maintains cash deposits in one chartered Canadian bank which, from time to time, exceed the amount of depositors insurance available in each respective account.  Management assesses the financial condition of this bank and believes that the possibility of any credit loss is minimal. The maximum exposure of credit risk is the Company’s cash deposit of $14,864 (December 31, 2024: $5,756).\n\n \n\nc)\n\n*Liquidity risk*\n\n \n\nLiquidity risk is the risk that the Company will not be able to meet its obligations as they fall due.  The Company does not generate cash from operations but rather, the Company will, from time to time, issue shares via equity placements, borrow funds from an affiliated company or undertake to sell a portion of its investment in the shares of FEL should it be necessary to raise funds.  \n\n \n\nAt this time, the Company has no new business plans and if it continues to act as a holding company of FEL shares, there is a risk it will receive no return from that investment unless alternate sources of funding are found.\n\n \n\nThe Company manages liquidity by maintaining cash balances available to meet its anticipated operational needs. Liquidity requirements are managed based on expected cash flow to ensure that there is adequate capital to meet short-term and long-term obligations.  The Company has in place a planning and budgeting process to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis and its growth plans. As at December 31, 2025, the Company’s trade and accrued payables were $34,322, all of which fall due for payment within twelve months of the date of the statement of financial position. \n\n \n\nThe carrying values of trade and accrued payables and short-term loans approximate their fair values due to the relatively short periods to maturity of the instruments.\n\n \n\nLiquidity risk is assessed as high\n\n \n\nd)\n\n*Dilution risk*\n\n \n\nAs discussed elsewhere in this MD&A, there is a risk of continued dilution of the Company’s interest in FEL should it either need to sell shares of FEL to raise operating funds, or not participate in any future share issuance financings undertaken by FEL.  Currently there are no plans to sell any of the Company’s FEL shares to fund operations.  There is a risk that shareholders may be diluted should the Company need to raise additional operating funds through debt or equity financings.\n\n \n\n \n\n64\n\n*Table of Contents*\n\n \n\nOther Risk Factors\n\n \n\nAs a holding company with an interest in FEL, the Company’s business is indirectly subject to risks inherent in oil and gas exploration and development operations.  In addition, there are risks associated with FEL’s stage of operations and the foreign jurisdiction in which it or FEL may operate or invest.  The Company has identified certain risks pertinent to its investment including: exploration and reserve risks, uncertainty of reserve estimates, ability to exploit successful discoveries, drilling and operating risks, title to properties, costs and availability of materials and services, capital markets and the requirement for additional capital, market perception, loss of or changes to production sharing, joint venture or related agreements, economic and sovereign risks, possibility of less developed legal systems, corporate and regulatory formalities, environmental regulation, reliance on strategic relationships, market risk, competition, dependence on key personnel, volatility of future oil and gas prices and foreign currency risk.\n\n \n\nSince the delisting of FEL from the London Stock Exchange, there is no liquidity via a public market for the FEL shares.  As the Company is wholly reliant on the information disclosed by PXP concerning the business of FEL, the Company may not be able to obtain information necessary to facilitate a wider sales process and may be reliant on significant shareholders of PXP for the disposition of any of its FEL shares. Management has looked at all options including raising funds to operate and participate in future FEL financings by way of debt or equity financings.  Given the current share price of the Company, and given that any external financings may been extremely dilutive, the Company continues to receive loans from PXP in order to continue operations and to maintain its 6.8% interest in FEL. There is no guarantee these loans will continue and the Company does not currently have any way to pay these loans back.\n\n \n\nOn April 6, 2022, FEL as operator under SC 72, received a directive from the DOE to put on hold all exploration activities for SC 72 until such time that the Security, Justice and Peace Coordinating Cluster (“SJPCC”) has issued the necessary clearance to proceed. On April 11, 2022, as a result of not receiving the necessary clearance, Force Majeure was once again declared on SC 72 casting substantial doubt on the future of SC 72 and the Company’s 6.8 percent interest in FEL.\n\n \n\nIn June 2022, media outlets reported that the MOU between China and the Philippines on joint exploration of the West Philippine Sea had been terminated although also reporting that both sides were going to continue with discussions on joint exploration.\n\n \n\nOn October 11, 2022, the DOE granted FGL the following: (i) the Declaration of Force Majeure for SC 72 from April 6, 2022, until such time as the same is lifted by the DOE, (ii) the inclusion of total expenses incurred as a result of the DOE directive to suspend activities as part of the approved recoverable costs, subject to DOE audit, and (iii) in addition to the period in item (i) above, FGL will be entitled to an extension of the exploration period under SC 72 corresponding to the number of days that the contractors actually spent in preparation for the activities that were suspended by the DOE’s suspension order on April 6, 2022.\n\n \n\n \n\n65\n\n*Table of Contents*\n\n \n\nOn March 20, 2023, the DOE further affirmed that the entire period from when the Force Majeure was lifted to when it was re-imposed (from October 14, 2020 to April 6, 2022) will be credited back to SC 72.  Thus, once the Force Majeure is lifted, FGL will have 20 months to drill the two commitment wells, equivalent to the remaining term of Sub-Phase 2 of SC 72 before October 14, 2020.\n\n \n\nOn November 21, 2025, the DOE approved the Work Program and Budget (“WP&B”) for 2026 with only License Administration costs and Service Contract payments classified as firm budgets. The implementation of the Sub-Phase 2 work commitment comprising the drilling of two wells, will be contingent upon the lifting of the force majeure imposed by the DOE in April 2022.\n\n \n\nCapital Management\n\n \n\nThe Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, to provide an adequate return to shareholders.\n\n \n\nThe capital of the Company consists of the items included in shareholders’ equity and cash net of debt obligations. The Company’s Board of Directors approves management’s annual capital expenditures plans and reviews and approves any material debt borrowing plans proposed by the Company’s management.\n\n \n\nAs at December 31, 2025, the Company had no externally imposed capital requirements nor was there any changes in the Company’s approach to capital management during the year.\n\n \n\n*General and administration*\n\n \n\nThe following tables show the detailed breakdown of the components of general and administration expenditures.\n\n \n\nGeneral and administrative expenses\n\n \n\n \n\n \n\n**December 31, 2025**\n\n \n\n \n\nDecember 31, 2024\n\n \n\n \n\nDecember 31, 2023\n\n \n\nProfessional fees\n\n \n**$****112,794**\n \n\n \n$54,310\n \n\n \n$23,841\n \n\nBank charges\n\n \n\n \n**865**\n \n\n \n\n \n886\n \n\n \n\n \n666\n \n\nListing and filing fees\n\n \n\n \n**18,590**\n \n\n \n\n \n19,929\n \n\n \n\n \n25,183\n \n\nOffice and miscellaneous\n\n \n\n \n**20,486**\n \n\n \n\n \n19,219\n \n\n \n\n \n22,572\n \n\nConsulting (Note 9)\n\n \n\n \n**86,106**\n \n\n \n\n \n86,397\n \n\n \n\n \n86,749\n \n\nForeign exchange\n\n \n\n \n**2,535**\n \n\n \n\n \n1,500\n \n\n \n\n \n191\n \n\n \n\n \n**$****241,376**\n \n\n \n$182,241\n \n\n \n$159,202\n \n\n \n\n \n\n66\n\n*Table of Contents*\n\n \n\nOther MD&A Requirements\n\n \n\n*Disclosure of Outstanding Share Data*\n\n*As At December 31, 2025*\n\n \n\n(a) Authorized and issued share capital:\n\n \n\nClass\n\n \n\nPar Value\n\n \n\nAuthorized\n\n \n\nNumber Issued and Outstanding as at\n\nDec. 31, 2025\n\n \n\n \n\nNumber Issued and Outstanding as at December 31, 2024\n\n \n\nCommon Shares\n\n \n\nNPV\n\n \n\nUnlimited\n\n \n\n \n992,646,096\n \n\n \n\n \n861,082,371\n \n\nPreferred Shares (convertible redeemable voting)\n\n \n\nNPV\n\n \n\nUnlimited\n\n \n\nNone\n\n \n\n \n\nNone\n\n \n\n \n\n(b) Summary of Options and Warrants outstanding as at December 31, 2025.\n\n \n\nThere were no options outstanding as at December 31, 2025. There were no warrants outstanding as at December 31, 2025.\n\n \n\nAdditional information on the Company is available at www.sedarplus.ca.\n\n \n\nOutlook\n\n \n\nOn April 6, 2022, FEL as operator under SC 72, received a directive from the DOE to put on hold all exploration activities for SC 72 until such time that the Security, Justice and Peace Coordinating Cluster (“SJPCC”) has issued the necessary clearance to proceed. On April 11, 2022, as a result of not receiving the necessary clearance, Force Majeure was once again declared on SC 72.\n\n \n\nIn June 2022, media outlets reported that the MOU between China and the Philippines on joint exploration of the West Philippine Sea had been terminated although also reporting that both sides were going to continue with discussions on joint exploration.\n\n \n\nOn October 11, 2022, the DOE granted FGL the following: (i) the Declaration of Force Majeure for SC 72 from April 6, 2022, until such time as the same is lifted by the DOE, (ii) the inclusion of total expenses incurred as a result of the DOE directive to suspend activities as part of the approved recoverable costs, subject to DOE audit, and (iii) in addition to the period in item (i) above, FGL will be entitled to an extension of the exploration period under SC 72 corresponding to the number of days that the contractors actually spent in preparation for the activities that were suspended by the DOE’s suspension order on April 6, 2022.\n\n \n\nOn March 20, 2023, the DOE further affirmed that the entire period from when the Force Majeure was lifted to when it was re-imposed (from October 14, 2020 to April 6, 2022) will be credited back to SC 72.  Thus, once the Force Majeure is lifted, FGL will have 20 months to drill the two commitment wells, equivalent to the remaining term of Sub-Phase 2 of SC 72 before October 14, 2020.\n\n \n\n \n\n67\n\n*Table of Contents*\n\n \n\nOn January 8, 2025, FEL submitted a Work Program and Budget (“WP&B”) for 2025 to the DOE, with only License Administration costs and SC payments classified as firm budgets. The implementation of the Sub-Phase 2 work commitment comprising the drilling of two wells, will be contingent upon the lifting of the force majeure imposed by the DOE in April 2022.\n\n \n\nFEL will continue to coordinate with the Philippine Government on the resumption of activities in SC 72.\n\n \n\nFor SC 40 North Cebu, FEL will continue evaluating the petroleum potential of the Dalingding Prospect. A possible exploration well is under consideration, either by FEI independently or in partnership with another company.\n\n \n\nOn FEL’s non-operated blocks, Development and Production Petroleum Service Contract (DP PSC) No. 88 was awarded for the Galoc Block on December 18, 2025, ensuring continued production the Galoc Field, which is expected to remain profitable over the next 1-2 years. The new contract replaced SC 14C-1, which expired on December 17, 2025.\n\n \n\nSC 86 (formerly SC 6A Octon) will allow the continued appraisal of the Malajon Area, including the West Malajon Prospect, where geological and geophysical studies aim to mature the prospect to “drill-ready” status and identify a specific well location.\n\n \n\nMeanwhile, the DP PSC for Cadlao, which replaces SC 6B that expired in February 2024, will support the planned redevelopment of the Cadlao Oil Field, beginning with the drilling of the Cadlao-4 well and, if successful, the implementation of an extended well test.\n\n \n\nFor the West Linapacan Block, a new DP PSC is being planned to replace SC 14C-2, which expired on December 17, 2025. On November 17, 2025, the Consortium submitted a Letter of Intent to apply for a DP PSC covering SC 14C-2 along with additional open acreage. This will allow the continued appraisal of the West Linapacan A for potential development, as well as the evaluation of nearby structures, such as West Linapacan B, for possible tie-backs to any future West Linapacan A development. The block qualifies for a DP PSC based on the declared reserves in the West Linapacan A Field.\n\n \n\nThe Company has limited cash resources and required additional capital to allow it to continue to trade, maintain its 6.8% interest in FEL, or invest in any new projects.\n\n \n\n**Looking Forward**\n\n \n\nThis discussion contains \"forward looking statements\" as per Section 21E of the US Securities and Exchange Act of 1934, as amended.  Although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.  Management is currently reviewing many options and there is no assurance that they will not make decisions other than those now contemplated.  The Company is subject to political risks and operational risks identified in documents filed with the Securities and Exchange Commission, including changing oil prices, unsuccessful drilling results, change of government and political unrest in its main area of operations.\n\n \n\n \n\n68\n\n*Table of Contents*"}