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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION
12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2017

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[   ] SHELL COMPANY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-29832

CHELSEA OIL AND GAS LTD.(Exact name of Registrant as specified in its charter)

Alberta, Canada(Jurisdiction of
incorporation or organization)

127,
10thAve NW Calgary, Alberta, Canada, T2M 0B4(Address of principal executive offices)

Jesse Meidl, Director T: (403) 457-1959 F: (403)
457-1933 127, 10thAve NWCalgary,
Alberta, Canada, T2M 0B4(Name, Telephone, E-mail and/or
Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered or to be registered pursuant to Section
12(g) of the Act: Common Shares, no par value

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act: Common Shares, no par value

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Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report:

64,056,876 Common Shares, no par value as of December
31, 2017

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]         No [X]

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Yes [  
]         No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
[X]        No [   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [   ]        No [X]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act (Check one):

|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [X]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|[   ] U.S. GAAP | [X] International Financial
      Reporting Standards |            
|--------------- | ----------------------------------------------------- | -----------
|                | as issued
      by the International Accounting       | [   ] Other
|                | Standards
      Board                                 |            

If Other has been checked in response to the previous
question indicate by check mark which financial statement item the registrant
has elected to follow. Item 17 [   ]    Item 18
[   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]        No [X]

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TABLE OF CONTENTS

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|INTRODUCTION
      AND USE OF CERTAIN TERMS | 1     
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|FORWARD-LOOKING
      STATEMENTS            | 5     
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|                                            | PART I
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-i-

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TABLE OF CONTENTS (continued)

| |         |                                                                                                     |      |                                                               | Page
| | ------- | --------------------------------------------------------------------------------------------------- | ---- | ------------------------------------------------------------- | ----
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 7.C  | INTEREST
      OF EXPERTS AND COUNSEL                         | 36  
| |         |                                                                                                     |      |                                                               |     
| |         | ITEM
      8. FINANCIAL INFORMATION                                                                 | 36  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 8.A  | CONSOLIDATED
      STATEMENTS AND OTHER FINANCIAL INFORMATION | 36  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 8.B  | SIGNIFICANT
      CHANGES                                     | 36  
| |         |                                                                                                     |      |                                                               |     
| |         | ITEM
      9. THE OFFER AND LISTING                                                                 | 36  
| |         |                                                                                                     |     
| |         |                                                                                                     | 9.A  | PRICING
      HISTORY                                         | 36  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 9.B  | PLAN
      OF DISTRIBUTION                                    | 37  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 9.C  | MARKET                                                        | 37  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 9.D  | SELLING
      SHAREHOLDERS                                    | 37  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 9.E  | DILUTION                                                      | 37  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 9.F  | EXPENSES
      OF THE ISSUE                                   | 37  
| |         |                                                                                                     |      |                                                               |     
| |         | ITEM
      10. ADDITIONAL INFORMATION                                                               | 37  
| |         |                                                                                                     |     
| |         |                                                                                                     | 10.A | SHARE
      CAPITAL                                           | 37  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.B | ARTICLES
      OF AMALGAMATION                                | 38  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.C | MATERIAL
      CONTRACTS                                      | 39  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.D | EXCHANGE
      CONTROLS                                       | 39  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.E | TAXATION                                                      | 39  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.F | DIVIDENDS
      AND PAYING AGENTS                             | 40  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.G | STATEMENT
      BY EXPERTS                                    | 40  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.H | DOCUMENTS
      ON DISPLAY                                    | 40  
| |         |                                                                                                     |      |                                                               |     
| |         |                                                                                                     | 10.I | SUBSIDIARY
      INFORMATION                                  | 40  
| |         |                                                                                                     |      |                                                               |     
| |         | ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT NON-PRODUCT RELATED
      MARKET RISK | 40  
| |         |                                                                                                     |      |                                                              
| |         | ITEM
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                               | 40  
| |         |                                                                                                     |      |                                                              
| | PART II | 41                                                                                                 
| |         |                                                                                                    
| |         | ITEM
      13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                      | 41  

-ii-

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TABLE OF CONTENTS (continued)

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|--------- | -------------- | ------------------------------------------------------------------------------------------------- | ---- | --------------------------------------------------------------------------- | ----
|          |                |                                                                                                   |      |                                                                             |     
|          |                | ITEM
      14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS | 41  
|          |                |                                                                                                   |      |                                                                            
|          |                | ITEM
      15. CONTROLS AND PROCEDURES                                                            | 41  
|          |                |                                                                                                   |     
|          |                | ITEM
      16. AUDIT COMMITTEE FINANCIAL EXPERTS                                                  | 42  
|          |                |                                                                                                   |     
|          |                |                                                                                                   | 16.A | AUDIT
      COMMITTEE FINANCIAL EXPERTS                                     | 42  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.B | CODE
      OF ETHICS                                                        | 44  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.C | PRINCIPAL
      ACCOUNTANT FEES AND SERVICES                                | 44  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.D | EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE             | 44  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.E | PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER | 45  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.F | CHANGE
      IN REGISTRANTS CERTIFYING ACCOUNTANT                          | 45  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.G | CORPORATE
      GOVERNANCE                                                  | 46  
|          |                |                                                                                                   |      |                                                                             |     
|          |                |                                                                                                   | 16.H | MINE
      SAFETY DISCLOSURES                                               | 46  
|          |                |                                                                                                   |      |                                                                             |     
|          | PART
      III | 47                                                                                               
|          |                |                                                                                                  
|          |                | ITEM
      17. FINANCIAL STATEMENTS                                                               | 47  
|          |                |                                                                                                   |     
|          |                | ITEM
      18. FINANCIAL STATEMENTS                                                               | 47  
|          |                |                                                                                                   |     
|          |                | ITEM
      19. EXHIBITS                                                                           | 47  
|          |                |                                                                                                   |     
|SIGNATURE | 48            

-iii-

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INTRODUCTION AND USE OF CERTAIN TERMS

Unless otherwise specified,
information provided in this annual report on Form 20-F (this Form
20-F) is as of December 31, 2017.

Unless the context requires
otherwise, when used in this annual report on Form 20-F, the terms Chelsea,
we, us our the Corporation and the Company refer to Chelsea Oil and
Gas Ltd. All dollar amounts contained in this Form 20-F are expressed in U.S.
dollars and references to dollars, $, US$ or USD are to U.S. dollars,
and all references to A$ or AUD are to Australian dollars and C$ are to
Canadian dollars. In addition, unless the context suggests otherwise, references
to:

| |  | ABCA means the Business Corporations Act(Alberta), as amended or re-enacted, including the regulations
      promulgated thereunder;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ACOR means Australian-Canadian Oil Royalties
      Ltd., a predecessor of Chelsea;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | AIF means the Annual Information Form including
      the appendices hereto filed by Chelsea for the year ended December 31,
      2016 pursuant to Canadian National Instrument (NI) 51- 105;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | AGM means the Annual General Meeting of the
      Corporation held on June 2, 2015;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Arrangement means the plan of arrangement under
      the provisions of Section 288 of the BCBA between Chelsea and ITME on the
      terms and conditions set forth in the Arrangement Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Arrangement Agreement means the arrangement
      agreement dated May 28, 2013 between ITME and Chelsea in respect of the
      Arrangement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ATP means Authority to Prospect, an ATP is a
      concession granted by the State of Queensland, Australia, which entitles
      its holders to an exclusive right to explore for oil and natural gas in
      Queensland in the particular area covered by the ATP. Each ATP has an
      initial term of four years. The area covered by an ATP is reduced by
      relinquishment of approximately one-fourth of the area at the start of the
      third year of its effectiveness and an additional one-fourth of the
      original area at the start of the fourth year of its effectiveness. The
      area to be relinquished is chosen by the holder of the ATP. An ATP will
      require some kind of geological and/or geophysical operations, such as new
      seismic or seismic interpretation, drilling or other operations during the
      term of the tenure. The amount of work to be performed depends upon the
      expenditures required for each specific year of the tenure. Holders are
      only required to expend those amounts as set out in the original
      concession document. Applications for renewal may be filed at the time of
      expiration of an ATP;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ATP 582 means Authority to Prospect number 582,
      issued pursuant to section 84 of the Petroleum and Gas (Production and
      Safety) Act 2004;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | BCBCA means the Business Corporations Act(British Columbia), as amended or re- enacted, including the
      regulations promulgated thereunder;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | BCSC has the meaning ascribed under Directors
      and Senior Management; Cease Trade Ordersin this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | Board of Directors means the board of directors
      of Chelsea, as constituted from time to time, and where the context
      requires, includes any duly constituted committee thereof;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

- 1 -

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| |  | Bowen Basin means a foreland basin in eastern
      Queensland of Early Permian to Middle Triassic age sediments. It occupies
      about 160,000km2, the southern half of which is covered by the
      Surat Basin;                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Central means Central Petroleum Ltd.;                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | CFI means Carbon Farming Initiative;                                                                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Chapman means Chapman Petroleum Engineering
      Ltd., engaged by Chelsea to complete a NI 51-101 reserve report on
      Chelseas assets in the Surat Basin in Australia;                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | COGE Handbook means the Canadian Oil and Gas
      Evaluation Handbook prepared jointly by the Society of Petroleum
      Evaluation Engineers (Calgary Chapter) and the Canadian Institute of
      Mining, Metallurgy & Petroleum (Petroleum Society), as amended from
      time to time;                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Common Shares or Chelsea Common Shares
      means the common shares in the capital of the Corporation;                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Computershare means Computershare Trust Company
      of Canada, the registrar and transfer agent for the Common Shares;                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Cooper Basin means the sedimentary geological
      basin of Triassic age covering 130,000 km2in the north east
      part of South Australia and in the south west part of Queensland;                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Corporation or Chelsea means Chelsea
      Oil and Gas Ltd., including where the context requires, its predecessors;                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | CSG has the meaning ascribed under Industry
      Overview; Availability of Servicesin this Form 20-F;                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | DPIIP means Discovered Petroleum Initially In
      Place, the quantity of petroleum which is estimated, on a given date, to
      be contained in known accumulations, plus those quantities already
      produced therefrom. If the hydrocarbon is oil, it may be referred to as
      OOIP and if the hydrocarbon is gas, it may be referred to as OGIP;
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | EA means Environmental Authority;                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Earning Obligations has the meaning ascribed
      under Information of the Company; Three Year History and
      Development of Chelseain this Form 20-F;                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Farm-Out has the meaning ascribed under
      Information of the Company; Three Year History and Development
      of Chelseain this Form 20-F;                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Farm-Out Interest has the meaning ascribed under
      Property, Plant and Equipmentin this Form 20-F;                                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | Georgina Basin means the intracratonic
      sedimentary basin in central and northern Australia, lying within the
      Northern Territory and within Queensland and South Georgina Basin means
      the southerly portion of the Georgina Basin;                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                               
| |  | IFRSmeans International Financial Reporting
      Standards as issued by the International Accounting Standard Board;                                                                                                                                                                                                                                       

- 2 -

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| |  | ITME means International TME Resources Inc.;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Heritage Act has the meaning ascribed under
      Industry Overview; Aboriginal Heritagein this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | FIRB has the meaning ascribed under Industry
      Overview; Foreign Acquisitions in Australia in this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | FIRB Approval has the meaning ascribed under
      Industry Overview; Acquiring Sharesin this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | MI 51-105 has the meaning ascribed under
      Operating and Financial Review and Prospects in this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Native Title means agreements signed pursuant to
      the Native Title Act 1993 which recognizes that the indigenous people of
      Australia continue to hold rights and interests in relation to certain
      lands and water;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Native Title Act means the Native Title Act
      1933(Cwth), as amended;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | NGL means Natural Gas Liquids, those hydrocarbon
      components that can be recovered from natural gas as liquids, including
      but not limited to ethane, propane, butanes, pentanes plus condensate, and
      small quantities of non-hydrocarbons;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | NI 51-101 means Canadian National Instrument
      51-101 - Standards of Disclosure for Oil and Gas Activities;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | NI 52-110 has the meaning ascribed under
      Audit Committeein this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Non-Brokered Private Placement means the private
      placement of 5,473,385 subscription receipts of the Corporation issued at
      a price of $0.35 per subscription receipt which closed in January, 2012,
      and which subscription receipts were converted into 5,473,385 Common
      Shares on February 29, 2012;                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Options means stock options to purchase Common
      Shares issued pursuant to the Corporations stock option plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Overriding Royaltyor ORRI means
      Overriding Royalty Interest, an interest assigned out of the lessees
      leasehold or Working Interest. The amounts payable from Overriding Royalty
      Interests are payments calculated as a percentage of either Gross
      Production or the gross revenues of the Working Interest (based on the
      wellhead price) from a concession or lease, usually free and clear of all
      exploration, drilling and development and production costs, except for any
      applicable taxes and federal levies. In calculating the wellhead price,
      pipeline and trucking costs have already been deducted from the refinery
      price. The overriding royalties discussed herein are generally expressed
      as a percent of the Gross Production;
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | OTCQB has the meaning ascribed under The
      Offer and Listing; Pricing Historyin this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | Petroleum Act means the Petroleum Act 1923(QLD);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

- 3 -

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| |  | PL means Petroleum Lease, a lease granted by the
      State of Queensland, Australia under the Petroleum Act and includes any
      variation, renewal, permit, license or other interest issued in
      substitution thereof and any other petroleum tenure or rights to explore
      for or produce Petroleum Substances;                                                                                                                                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | PRRT has the meaning ascribed under Industry
      Overview; Land Tenure and Royaltiesin this Form 20-F;                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Santos means Santos Ltd. an Australian oil
      company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Simpson Basin means the intracratonic early to
      middle Triassic basin occupying 100,000km2of northern South
      Australia, south east Northern Territory and south west Queensland;                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Statoil means Statoil ASA;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Surat Basin means the intracratonic early
      Jurassic to Cretaceous basin occupying 300,000km2of central
      southern Queensland and central northern New South Wales;                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Surat-Bowen Basin means the combination of
      Permian and Triassic age sediments of the deeper Bowen Basin, overlain by
      the Jurassic and Cretaceous strata of the Surat Basin. Because intervals
      of both sequences are prospective and have produced in close or even
      over-lying proximity, Operators tend to use the two names
      inter-changeably;                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Section 31 Deed means the right to negotiate
      deed of agreement regarding the addition of excluded land into an ATP
      under Section 31(1)(b) of the Native Title Act 1993 (Cth);                                                                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Total means Total S.A;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | US GAAP means United States Generally Accepted
      Accounting Principles;                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Warrant means one Common Share purchase warrant
      of the Corporation; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | Working Interest or WImeans all or a
      fractional part of the ownership rights granted by a concession or lease.
      The owner of a Working Interest or a part thereof pays all costs of
      exploration and is entitled to the Gross Production, less royalties
      retained by the grantor or lessor, and less Overriding Royalty Interests
      or other non-operating interests created or assigned from the Working
      Interest. The owner of a Working Interest may incur operating expenses in
      excess of income.

- 4 -

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FORWARD-LOOKING STATEMENTS

Statements made in this Form 20-F
that are not historical or current facts are forward looking statements made
pursuant to the safe harbor provisions of Section 27A of the Securities Act of
1933, as amended (the Act), and Section 21E of the Securities Exchange
Act of 1934, as amended. These statements often can be identified by the use of
terms such as may, will, expect, believe, anticipate, estimate,
approximate, or continue, or the negative thereof. We intend that such
forward-looking statements be subject to the safe harbors for such statements.
We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Any
forward-looking statements represent managements best judgment as to what may
occur in the future. However, forward-looking statements are subject to risks,
uncertainties and important factors beyond our control that could cause actual
results and events to differ materially from historical results of operations
and events and those presently anticipated or projected. We disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statement or to reflect the
occurrence of anticipated or unanticipated events. See Item 3.D Risk Factors
for additional information relating to our risk factors.

- 5 -

---

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

|3. **A** | SELECTED FINANCIAL DATA                                                                           
|-------- | --------------------------------------------------------------------------------------------------
|         |                                                                                                   
|         | The following table presents financial data for Chelsea
      as of and for the periods indicated:

|                                          |   | As at December 31, |  
|----------------------------------------- | - | ------------------ | -
|                                          |   | 2017               |  
|Total assets                              | $ | 1,964,989          |  
|Current liabilities                       | $ | 5,370,079          |  
|Shareholders equity /
      (deficiency) | $ | (3,807,490         | )
|Weighted-average shares
      outstanding |   | 64,056,876         |  

|                                       |   | For the Year Ended December 31, |  
|-------------------------------------- | - | ------------------------------- | -
|                                       |   | 2017                            |  
|Revenue                                | $ | 19,899                          |  
|Net loss for the year                  | $ | 9,923,195                       |  
|Basic and diluted loss
      per share | $ | (0.015                          | )

|3.B | CAPITALIZATION AND INDEBTEDNESS                
|--- | -----------------------------------------------
|    |                                                
|    | Not applicable.                                
|    |                                                
|3.C | REASONS FOR THE OFFER AND USE OF
      PROCEEDS
|    |                                                
|    | Not applicable.                                
|    |                                                
|3.D | RISK FACTORS                                   
|    |                                                
|    | Overview                                       

You should carefully consider the
following factors in addition to the other information set forth in this Form
20-F. If any of the following risks actually occur, our business, financial
condition and results of operations and the value of our shareholders common
shares would likely suffer.

The Companys primary business
consists of the exploration and, if successful, the development of oil and gas
properties. There are a number of inherent risks associated with the
exploration, development and production of oil and gas reserves, many of these
risks are beyond the control of the Company.

Success in the junior oil and gas
sector is measured by a companys ability to raise funds and the ability to
secure properties of merit. Not all of these factors are within managements
control. The ability to raise funds is in part dependent on the state of the
junior resource stock market, which in turn is dependent on the economic
climate, oil and gas prices and perceptions as to which way the market is
headed. The ability to secure properties of merit is in large part dependent on
managements contacts and the vitality of the sector.

---

The risks and uncertainties below
are not the only issues facing Chelsea. Additional risks and uncertainties not
presently known to Chelsea or that Chelsea currently considers immaterial may
also impair the business and operations of Chelsea and cause the price of the
Chelsea Common Shares to decline.

**Exploration,
Development and Production Risks**

Oil and natural gas operations
involve many risks that even a combination of experience, knowledge and careful
evaluation may not be able to overcome. The long-term commercial success of
Chelsea depends on its ability to find, acquire, develop and commercially
produce oil and natural gas reserves. The future value of Chelsea is therefore
dependent on the success of Chelseas activities, which are principally directed
toward the exploration, appraisal and development of its properties in
Australia. Exploration, appraisal and development of oil and natural gas
properties is highly speculative and involves a significant degree of risk.
Without the continual addition of new reserves, any existing reserves that
Chelsea may discover or acquire at any particular time and the production
therefrom will decline over time as such existing reserves are exploited. Any
discovery of or future increase in Chelseas reserves will depend not only on
its ability to explore and develop any properties it may have from time to time,
but also on its ability to select and acquire suitable producing properties or
prospects. No assurance can be given that Chelsea will be able to continue to
locate satisfactory properties for acquisition or participation. Moreover, if
such acquisitions or participations are identified, Chelsea may determine that
current markets, terms of acquisition and participation or pricing conditions
make such acquisitions or participations uneconomical. There is no assurance
that commercial quantities of oil and natural gas will be discovered or acquired
by Chelsea.

Oil and natural gas exploration
may involve unprofitable efforts, not only from dry wells, but from wells that
are productive but do not produce sufficient revenues to return a profit after
drilling, operating and other costs. Completion of a well does not assure a
profit on the investment or recovery of drilling, completion and operating
costs. In addition, fixing drilling hazards or environmental damage caused by
operations could greatly increase the cost of those operations, and various
field operating conditions may adversely affect the production from successful
wells. These conditions include delays in obtaining governmental and other
approvals or consents, insufficient storage or transportation capacity or other
geological and mechanical conditions. While diligent well supervision and
effective maintenance operations can contribute to maximizing production rates
over time, production delays and declines from normal field operating conditions
cannot be eliminated and can be expected to adversely affect revenue and cash
flow levels to varying degrees.

**Additional Funding
Requirements**

Chelsea will have limited
financial resources and limited cash flow from operations, and therefore will
likely require additional financing in order to carry out its oil and natural
gas exploration, acquisition and development activities. There can be no
assurance that additional funding will be available, or available under terms
favourable to Chelsea. Failure to obtain such financing on a timely basis could
cause Chelsea to have limited ability to expend the capital necessary to
undertake or complete future drilling programs, forfeit its interest in certain
properties, miss certain acquisition opportunities and reduce or terminate its
operations. There can be no assurance that debt or equity financing or cash
generated by operations will be available or sufficient to meet these
requirements or for other corporate purposes or, if debt or equity financing is
available, that it will be on terms acceptable to Chelsea. Moreover, future
activities may require Chelsea to alter its capitalization significantly.
Financing by issuing additional securities from the Chelseas treasury may
result in a change of control of Chelsea and dilution to holders of Chelsea
Shares.

**History of Losses**

Chelsea has historically incurred
losses from operations. There can be no assurance that Chelsea will achieve
profitability in the future. In addition, should Chelsea be unable to continue
as a going concern, realization of assets and settlement of liabilities other
than in the normal course of business may be at amounts significantly different
from those in the financial statements.

- 7 -

---

**Investment Risks**

Revenues may not occur for some
time, if at all. The timing and extent of these is variable and uncertain and
accordingly the Corporation is unable to predict when, if at all, profitability
will be achieved. An investment in the Common Shares is highly speculative and
should only be made by persons who can afford a significant or total loss of
their investment.

**Commodity Prices**

Chelseas future revenue,
profitability, growth and the carrying value of its oil and natural gas
properties will be substantially dependent on prevailing prices of oil and
natural gas. Chelseas ability to borrow and to obtain additional capital on
attractive terms will also be substantially dependent upon oil and natural gas
prices. Prices for oil and natural gas are subject to large fluctuations in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors beyond the
control of Chelsea. These factors include economic conditions in Australia and
elsewhere in the world, the actions of the Organization of the Petroleum
Exporting Countries (OPEC), governmental regulation, political
stability in the Middle East and elsewhere, the foreign supply of oil and
natural gas, the price of foreign imports and the availability of alternative
fuel sources. Any substantial and extended decline in the price of oil and
natural gas could have an adverse effect in the future on Chelseas carrying
value of its proved reserves, borrowing capacity, revenues, profitability and
cash flows from operations, as applicable. There can be no assurance that recent
commodity prices will be sustained if and when Chelsea commences production or
over the life of the Chelseas operations. There is risk that commodity prices
may decline in the future, although it is not possible to predict the time or
extent of such decline.

**Early Stage of
Development, Limited Operating and Earnings History**

Chelseas business plan requires
significant expenditure, particularly capital expenditure, in its oil and gas
exploration phase. Any future profitability from Chelseas business will be
dependent upon the successful exploration and development of its petroleum
properties, and there can be no assurance that Chelsea will achieve
profitability in the future. Revenues may not occur for some time, if at all.
The timing and extent of these is variable and uncertain and accordingly Chelsea
is unable to predict when, if at all, profitability will be achieved.

**Ability to Execute
Exploration and Development Program**

It may not always be possible for
Chelsea to execute its exploration and development strategies in the manner in
which Chelsea considers optimal. Chelseas exploration and development programs
in onshore Australia involve the need to obtain approvals from the relevant
authorities, which may require conditions to be satisfied or the exercise of
discretion by the relevant authorities. It may not be possible for such
conditions to be satisfied.

**Operational
Experience**

The management and directors of
Chelsea have significant international experience in the oil and gas industry;
however, given the fact that the team was constituted recently, the team has, as
a group, limited direct experience operating in onshore Australia, aside from
its consultants and advisors.

**Assessments of
Value of Acquisitions**

Acquisitions of oil and natural
gas issuers and oil and natural gas assets are typically based on engineering
and economic assessments made by independent engineers and Chelseas own
assessments. These assessments will include a series of assumptions regarding
such factors as recoverability and marketability of oil and natural gas, future
prices of oil and natural gas and operating costs, future capital expenditures
and royalties and other government levies which will be imposed over the
producing life of the reserves. Many of these factors are subject to change and
are beyond Chelseas control. In particular, the prices of, and markets for, oil
and natural gas products may change from those anticipated at the time of making
such assessment. In addition, all such assessments involve a measure of geologic
and engineering uncertainty which could result in lower production and reserves
than anticipated. Initial assessments of acquisitions may be based on reports by
a firm of independent engineers that are not the same as the firm that
Chelsea may use for its year-end reserve evaluations. Because each of these
firms may have different evaluation methods and approaches, these initial
assessments may differ significantly from the assessments of the firm used by
Chelsea. Any such instance may offset the return on and value of the securities
of Chelsea.

- 8 -

---

**Availability of
Drilling Equipment**

Oil and natural gas exploration
and development activities are dependent on the availability of drilling and
related equipment in the particular areas where such activities will be
conducted. Demand for such limited equipment or access restrictions may affect
the availability of such equipment to Chelsea and may delay exploration and
development activities. Recent industry conditions have led to shortages of
drilling equipment in certain areas. To the extent that Chelsea is not the
operator of its oil and gas properties, Chelsea will be dependent on such
operators for the timing of activities related to such properties and will be
largely unable to direct or control the activities of the operators.

**Cash Outflow Used
In Operations**

The inability of Chelsea to
generate positive operating cash inflow in the future could have a material
adverse impact on Chelseas business, financial condition, results of operations
and prospects.

**Project Risks**

Chelsea will manage a variety of
projects in the conduct of its business. Project delays may delay expected
revenues from operations. Significant project cost over runs could make a
project uneconomic. Chelseas ability to execute projects and market oil and
natural gas depends upon numerous factors beyond Chelseas control, including:

| | the effects of inclement weather;                                                           
|- | --------------------------------------------------------------------------------------------
|  |                                                                                             
| | the availability of drilling and related
      equipment;                                   
|  |                                                                                             
| | unexpected cost increases;                                                                  
|  |                                                                                             
| | accidental events;                                                                          
|  |                                                                                             
| | currency fluctuations;                                                                      
|  |                                                                                             
| | changes in regulations;                                                                     
|  |                                                                                             
| | the availability and productivity of skilled
      labour;                                  
|  |                                                                                             
| | the regulation of the oil and natural gas
      industry by various levels of government and
|  |                                                                                             
| | governmental agencies.                                                                      

Because of these factors, Chelsea could be unable to execute
projects on time, on budget or at all.

**Access to
Infrastructure**

Chelseas ability to market
production from any potential oil and natural gas discoveries may depend on its
ability to secure transportation. Chelsea may also be affected by deliverability
uncertainties related to the proximity of its potential production to pipelines
and processing facilities and operational problems affecting such pipelines and
facilities.

- 9 -

---

**Delays in Business
Operations**

In addition to the usual delays
in payments by purchasers of oil and natural gas to Chelsea or to the operators,
and the delays by operators in remitting payment to Chelsea, payments between
these parties may be delayed due to restrictions imposed by lenders, accounting
delays, delays in the sale or delivery of products, delays in the connection of
wells to a gathering system, adjustment for prior periods, or recovery by the
operator of expenses incurred in the operation of the properties. Any of these
delays could reduce the amount of cash flow available for the business of
Chelsea in a given period and expose Chelsea to additional third party credit
risks.

**Hedging**

From time to time, Chelsea may
enter into agreements to receive fixed prices on any future oil and natural gas
production to offset the risk of revenue losses if commodity prices decline;
however, if commodity prices increase beyond the levels set in such agreements,
Chelsea would not benefit from such increases. Similarly, from time to time,
Chelsea may enter into agreements to fix the exchange rate of various currencies
used in its business in order to offset the risk of revenue or cost related
losses in the event of currency fluctuations. There is no certainty that any
such currency hedges which may be entered into will benefit Chelsea.

**Expiration of
Permits, Applications and Authorities**

Chelseas properties are and will
continue to be held in the form of permits, applications, authorities and
Working Interests in permits, applications and authorities. If Chelsea or the
holder of the permits, applications and authorities fails to meet the specific
requirement of the permits, applications or authorities (including any
requirements as to their renewal where renewal is available), the permits,
applications or authorities may terminate or expire. There can be no assurance
that the obligations required to maintain each of the permits, applications and
authorities will be met. The termination or expiration of Chelseas permits,
applications and authorities or the Working Interests relating to the permits,
applications and authorities could have a material adverse effect on Chelseas
business, financial condition, results of operations and prospects.

**Operational
Dependence**

In the future other companies may
operate some of the assets in which Chelsea has an interest. As a result,
Chelsea may have limited ability to exercise influence over the operation of
such assets or their associated costs, which could have a material adverse
effect on Chelseas business, financial condition, results of operations and
prospects. Therefore, Chelseas return on the assets operated by others will
depend upon a number of factors that may be outside of Chelseas control,
including the timing and amount of capital expenditures, the operators
expertise and financial resources, the approval of other participants, the
selection of technology and risk management practices.

**Markets and
Marketing**

The marketability and price of
oil and natural gas that may be discovered or acquired by Chelsea will be
affected by numerous factors beyond its control. Chelseas ability to market oil
and natural gas in the future, may depend upon its ability to acquire space on
pipelines that deliver natural gas to commercial markets including availability
of processing and refining facilities and transportation infrastructure,
including access to facilities, pipelines and pipeline capacity and economic
tariff rates over which Chelsea may have limited or no control. Chelsea may also
be affected by deliverability uncertainties related to the proximity of its
reserves to pipelines and processing facilities, and related to operational and
maintenance problems with such pipelines and facilities as well as extensive
government regulation relating to price, taxes, royalties, land tenure,
allowable production, the export of oil and natural gas and many other aspects
of the oil and natural gas business. Any delay or failure to acquire access to,
or improper operation or maintenance of, such pipelines and facilities could
have a material adverse effect on Chelseas business, financial condition,
results of operations and prospects.

**Competition**

Oil and gas exploration is
intensely competitive in all phases and involves a high degree of risk. Chelsea
competes with numerous other participants in the search for, and the acquisition
of, oil and natural gas properties.

- 10 -

---

Chelseas competitors include oil and natural gas companies
that have substantially greater financial resources, staff and facilities than
those of Chelsea. Currently Chelsea is insulated from competition on the lands
which it currently holds due to the nature of the proprietary exploration rights
granted by the governing bodies under the various licenses and permits, however
Chelsea may face competition on surrounding lands if it seeks to increase its
land position to acquire other prospective properties. Chelsea may also face
competition from competitors on lands which it currently holds a license or
permit for in the event that, as a condition of the license or permit, it is
required to partially relinquish certain of the lands. In this circumstance, if
Chelsea elects to re-apply for such permits or licenses, there are no assurances
that Chelsea will be successful. Chelseas ability to add reserves in the future
will depend not only on its ability to explore and develop its present
properties, but also on its ability to select and acquire suitable producing
properties or prospects for exploratory drilling. Competitive factors in the
distribution and marketing of oil and natural gas include price and methods and
reliability of delivery. Competition may also be presented by alternate fuel
sources.

**Reliance on Key
Personnel**

Chelseas success will depend in
large measure on the performance of its management and other key personnel. The
loss of the services of any of such persons could have a material adverse effect
on the Chelseas business, financial condition, results of operations and
prospects. Chelsea does not have key person insurance in effect for management.
The contributions of these individuals to the immediate operations of Chelsea
are likely to be of central importance. In addition, the competition for
qualified personnel in the oil and natural gas industry is intense and there can
be no assurance that Chelsea will be able to continue to attract and retain all
personnel necessary for the development and operation of its business. Investors
must rely upon the ability, expertise, judgment, discretion, integrity and good
faith of the management of Chelsea.

**Estimate of
Resources**

The Corporations historical
resource estimates, available in the Corporations disclosure documents filed on
SEDAR and on EDGAR, have been classified as undiscovered petroleum initially in
place and prospective resources. Any such resource estimates are estimates only.
There is no certainty that any portion of the resources will be discovered. If
discovered, there is no certainty that it will be commercially viable to produce
any portion of the resources. Readers are cautioned that the volumes presented
are estimates only and should not be construed as being exact quantities.
Chelseas proposed drilling and seismic program must be considered as a high
risk exploration play.

**Estimate of Fair
Market Value**

There are numerous uncertainties
inherent in an estimate of fair market value including many factors beyond the
Corporations control. The valuations herein represent estimates only. In
general, estimates are based upon a number of variable factors and assumptions,
such as engineering and geophysical information pertaining to hydrocarbon
potential, current material contracts of the Corporation, production history of
competitors on similar land positions, access to lands, availability, timing and
amount of capital expenditures, marketability of oil and natural gas, royalty
rates, the assumed effects of regulation by governmental agencies, and future
operating costs, all of which may vary from actual results. All such estimates
are to some degree speculative, and are only attempts to define the degree of
speculation involved.

**Third Party Credit
Risk**

Chelsea is or may be exposed to
third party credit risk through its contractual arrangements with its current or
future joint venture partners, marketers of its petroleum and natural gas
production and other parties. In the event such entities fail to meet their
contractual obligations to Chelsea, such failures could have a material adverse
effect on Chelseas business, financial condition, results of operations and
prospects.

**Management of
Growth**

Chelsea may be subject to
growth-related risks including capacity constraints and pressure on its internal
systems and controls. The ability of Chelsea to manage growth effectively will
require it to continue to implement and improve its operational and financial
systems and to expand, train and manage its employee base. The inability of Chelsea to deal with this growth could have a
material adverse effect on Chelseas business, financial condition, results of
operations and prospects.

- 11 -

---

**Market Price of
the Corporation s Securities**

The trading price of securities
of oil and natural gas companies is subject to substantial volatility, and such
trading prices have been particularly volatile in recent months. This volatility
is often based on factors both related and unrelated to the financial
performance or prospects of the companies involved. The market price of the
Common Shares could be subject to significant fluctuations in response to
variations in Chelseas operating results, financial condition, liquidity and
other internal factors. Factors that could affect the market price of the Common
Shares that are unrelated to Chelseas performance include domestic and global
commodity prices and market perceptions of the attractiveness of particular
industries. The price at which the Common Shares will trade cannot be accurately
predicted.

**Insurance**

Oil and natural gas exploration,
development and production operations are subject to all the risks and hazards
typically associated with such operations, including hazards such as fire,
explosion, blowouts, cratering, sour gas releases and spills, each of which
could result in substantial damage to oil and natural gas wells, production
facilities, other property and the environment or in personal injury. In
accordance with industry practice, Chelsea is not fully insured against all of
these risks, nor are all such risks insurable. Prior to drilling, Chelsea will
obtain insurance in accordance with industry standards to address certain of
these risks. However, such insurance has limitations on liability that may not
be sufficient to cover the full extent of such liabilities. In addition, such
risks may not be insurable in all circumstances or, in certain circumstances,
Chelsea may elect not to obtain insurance to deal with specific risks due to the
high premiums associated with such insurance or other reasons. The payment of
any such uninsured liabilities would reduce the funds available to Chelsea. The
occurrence of a significant event that Chelsea is not fully insured against, or
the insolvency of the insurer of such event, could have a material adverse
effect on Chelseas business, financial condition, results of operations and
prospects.

**Dividends**

Chelsea has not paid any
dividends on the Common Shares and it is not anticipated that Chelsea will pay
any dividends on the Common Shares for the foreseeable future.

**Conflicts of
Interest**

The directors or officers of
Chelsea may also be directors or officers of other oil and gas companies or
otherwise involved in natural resource exploration and development and
situations may arise where they are in a conflict of interest with Chelsea.
Conflicts of interest, if any, which arise will be subject to and governed by
procedures prescribed by the ABCA which require a director or officer of a
company who is a party to, or is a director or an officer of, or has some
material interest in any person who is a party to, a material contract or
proposed material contract with Chelsea to disclose his or her interest and, in
the case of directors, to refrain from voting on any matter in respect of such
contract unless otherwise permitted under the ABCA.

**Title to
Properties**

Title to oil and natural gas
interests is often not capable of conclusive determination without incurring
substantial expense. Although title reviews will be done according to industry
standards prior to the purchase of most oil and natural gas producing properties
or the commencement of drilling wells, such reviews do not guarantee or certify
that an unforeseen defect in the chain of title will not arise to defeat the
claim of Chelsea. To the extent title defects do exist, it is possible Chelsea
may lose all or a portion of its right, title, estate and interest in and to the
properties to which the title relates.

**Issuance of Debt**

From time to time, Chelsea may
enter into transactions to acquire assets or the shares of other corporations.
These transactions may be financed partially or wholly with debt, which may
increase Chelseas debt levels above industry standards. Depending on future
exploration and development plans, Chelsea may require additional equity and/or
debt financing that may not be available or, if available, may not be available
on favourable terms. Neither Chelseas articles nor its by-laws limit the amount
of indebtedness that Chelsea may incur. The level of Chelseas indebtedness from
time to time could impair Chelseas ability to obtain additional financing in
the future on a timely basis to take advantage of business opportunities that
may arise. If Chelsea becomes unable to pay its debt service charges or
otherwise commits an event of default, such as bankruptcy, lenders may foreclose
on or sell Chelseas properties.

- 12 -

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**Currency**

Many of the operational, capital
and other expenses incurred by Chelsea are paid in Australian dollars or US
dollars. If Chelsea achieves commercial production, the revenue from its
products will likely be denominated in US dollars or Australian dollars. The
assets and liabilities of Chelsea are recorded in Canadian dollars. As a result,
fluctuations in the Australian dollars or the US dollars against the Canadian
dollar could result in unanticipated and material fluctuations in the financial
results of Chelsea. Chelsea does not currently use derivative instruments to
hedge exposure to foreign exchange risks.

**Dilution**

Chelsea may make future
acquisitions or enter into financing or other transactions involving the
issuance of securities of Chelsea which may be dilutive to existing
securityholders.

**Regulatory**

Oil and natural gas operations
(exploration, production, pricing, marketing and transportation) are subject to
extensive controls and regulations imposed by various levels of government that
may be amended from time to time. Chelseas operations require licenses and
permits from various governmental authorities. There can be no assurance that
Chelsea will be able to obtain all necessary licenses and permits that may be
required to carry out exploration and development of its projects.

In Australia, while government
policies and regulations in relation to exploration, production and marketing
are similar in many respects, they ultimately vary between different states and
between different governing bodies. Chelseas activities will require compliance
with various laws, both state and those of the Commonwealth of Australia,
relating to, among other things, the protection of the environment, Aboriginal
cultural heritage, native title rights, the protection of workers and the
public. Changes in government, government policies and legislation could have a
material adverse effect on Chelseas business, financial condition, results of
operations and prospects.

In particular, in order to pursue
its exploration programs in Australia, Chelsea may require approval from
government and non-government bodies to facilitate access to any blocks and
tenements in which it has an interest. Any tenements residing within reserves,
including national parks and conservation reserves, which are subject to state
and Commonwealth legislation could be subject to a change in legislation that
could have a material adverse effect on Chelseas business, financial condition,
results of operations and prospects. In addition, any tenements residing in
areas which are subject to government policies regarding national defence or of
any other particular national interest to Australia may be subject to access
requirements that could result in a material adverse effect on Chelsea if they
are particularly onerous to Chelsea.

Chelseas licenses, permits and
authorizations will be subject to applications for renewal in accordance with
their terms. Where a licensee has not complied with the conditions to which an
exploration permit is subject, or any directions given by the relevant Minister
and the Minister is not satisfied that special circumstances exist that justify
the granting of the renewal of the permit, the Minister may refuse to grant a
renewal of a permit. Where a Minister is satisfied that a commercially
exploitable accumulation of petroleum may occur in an exploration permit area,
the Minister may require the licensee to apply for a production license or risk
losing the exploration permit. A Minister may also refuse to grant a production
license, or may grant a production license subject to such conditions as the
Minister sees fit but which are unfavourable or particularly onerous to Chelsea.
If a permit is not renewed or a production license is not granted or granted
subject to unfavourable conditions, Chelsea may suffer significant damage through loss of the opportunity to develop
and discover that tenement and this could have an adverse effect on Chelseas
business plan.

- 13 -

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Rights to licenses, permits and
  authorities held by Chelsea carry with them various obligations in regard to
  minimum expenditure levels, work commitments and responsibilities in respect of
  the environment and safety generally. Failure to observe such requirements could
prejudice the right to maintain title to a given area.

**Environmental
Risks and Regulations**

All phases of the oil and natural
gas business present potential environmental risks and hazards and are therefore
subject to environmental regulation pursuant to a variety of federal, state and
local laws and regulations. Environmental legislation provides for, among other
things, restrictions and prohibitions on spills, releases or emissions of
various substances produced in association with oil and natural gas operations.
The legislation also requires that wells and facility sites be operated,
maintained, abandoned and reclaimed to the satisfaction of applicable regulatory
authorities. Compliance with such legislation can require significant
expenditures and a breach may result in the imposition of fines and penalties,
some of which may be material. Environmental legislation is evolving in a manner
expected to result in stricter standards and enforcement, larger fines and
liability and the potential for increased capital expenditures and operating
costs. The discharge of oil, natural gas or other pollutants into the air, soil
or water may give rise to liabilities to governments and third parties and may
require Chelsea to incur costs to remedy such discharge. Generally, Australian
state and territory legislation and associated regulations include provisions
for the regulation of activities on petroleum tenement lands. Statutory
provisions require petroleum tenement lands to be protected and rehabilitated to
ensure that environmental damage is avoidable or minimal where authorized. These
provisions may require approvals and consents to be obtained before certain
lands may be accessed and explored. In addition, each state and territory
government may impose a wide range of obligations on tenement holders to ensure
that petroleum operations comply with various environmental standards and
requirements.

No assurance can be given that
environmental laws will not result in a curtailment of future production (if
any) or a material increase in the costs of production, development or
exploration activities or otherwise adversely affect the Corporations financial
condition, results of operations or prospects.

**Changes in
Legislation**

The return on an investment in
securities of Chelsea is subject to changes in Canadian and Australian tax laws
and government incentive programs and there can be no assurance that such laws
or programs will not be changed in a manner that adversely affects Chelsea or
the holding and disposing of the securities of Chelsea. Legislation, regulations
and policies continue to be introduced by government and government agencies
concerning the security of industrial facilities, including oil and natural gas
facilities. Chelseas operations may be subject to such laws and regulations.
Presently, it is not possible to accurately estimate the costs Chelsea could
incur to comply with any such laws or regulations, but such expenditures could
be substantial.

**Income Taxes**

Chelsea, and all of its
subsidiaries will file all required income tax returns and believes that it will
be in full compliance with the provisions of the Income Tax Act (Canada), United
States taxation laws and Australian taxation laws and all other applicable tax
legislation. However, such returns are subject to reassessment by applicable
taxation authorities. In the event of a successful reassessment of Chelsea, or
its subsidiaries, as the case may be, whether by re- characterization of
exploration and development expenditures or otherwise, such reassessment may
have an impact on current and future taxes payable. In Australia, Chelsea Oil
Australia pty will file any annual income tax returns required pursuant to the
Australian taxation laws. It will be assessed while in exploration and
production phases of its operation. While in exploration it will be assessed as
having no or negative income and will be able to retain a credit towards future
income in the event that it has an income from production in the future. In
other words, losses for the Australian subsidiaries will be able to be set-off
against future profits. The Corporations subsidiaries will still be required to
file annual income tax returns.

- 14 -

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**Climate Change**

Australia is a signatory to the
United Nations Framework Convention on Climate Change and has ratified the Kyoto
Protocol established thereunder to set legally binding targets to reduce
nationwide emissions of carbon dioxide, methane, nitrous oxide and other so
called greenhouse gases. Subsequently, representatives from approximately 170
countries met in Copenhagen, Denmark to attempt to negotiate a successor to the
Kyoto Protocol. The result of such meeting was the Copenhagen Accord, a
non-binding political consensus rather than a binding international treaty such
as the Kyoto Protocol.

Chelseas exploration and
production facilities and other operations and activities emit greenhouse gases
and Chelsea may therefore be required to comply with various laws under the
jurisdiction in which its activities are being carried out. For example, for its
Australian activities, it will be required to report its greenhouse gas
emissions to the Australian government where those emissions exceed the
thresholds prescribed under the National Greenhouse and Energy Reporting Act
2007 (Cwth). In addition, the Australian Energy Efficiency Opportunities Act
2006 (Cwth) requires persons using more than certain amounts of energy per year
to identify and implement opportunities for energy efficiency and to publicly
report the results of those measures. Additionally, the Australian government
also is proposing to set a national greenhouse emissions cap and introduce an
associated national greenhouse emissions trading scheme from 2011. Under such a
scheme, companies may face potentially significant costs to pay for the
greenhouse emissions associated with their operations and activities, as well as
face significant increases in energy costs generally.

The direct or indirect costs of
these laws and regulations could have a material adverse effect on Chelseas
business, financial condition, results of operations and prospects. The future
implementation or modification of greenhouse gases regulations, whether to meet
the limits required by the Kyoto Protocol, the Copenhagen Accord or as otherwise
determined, could have a material impact on the nature of oil and natural gas
operations, including those of Chelsea. Given the evolving nature of the debate
related to climate change and the control of greenhouse gases and resulting
requirements, it is not possible to predict the impact on Chelsea and its
operations and financial condition.

**Geo-Political
Risks**

The marketability and price of
oil and natural gas that may be acquired or discovered by Chelsea is and will
continue to be affected by political events throughout the world that cause
disruptions in the supply of oil. Conflicts, or conversely peaceful
developments, arising in the Middle East, and other areas of the world, have a
significant impact on the price of oil and natural gas. Any particular event
could result in a material decline in prices and therefore result in a reduction
of Chelseas net production revenue (if any).

In addition, Chelseas properties
and facilities could be subject to a terrorist attack. If any of Chelseas
properties, wells or facilities are the subject of terrorist attack it could
have a material adverse effect on Chelseas business, financial condition,
results of operations and prospects. Chelsea will not have insurance to protect
against the risk from terrorism.

**Native Title**

The requirement to comply with
the procedures provided for under the Native Title Act where native title has
not been extinguished is likely to be affected by exploration or production
activities have the potential to significantly delay the grant of petroleum
tenements in Australian jurisdictions. To the extent such requirements delay or
restrict the granting of any petroleum tenements to Chelsea, or petroleum
tenements are not granted to Chelsea, it could have a material adverse effect on
Chelsea. Indigenous Land Access Agreements with the relevant aboriginal have
been entered into and therefore, at present there are no further negotiations
currently required under the Native Title Act.

**Alternatives to
and Changing Demand for Hydrocarbon Products**

Fuel conservation measures,
alternative fuel requirements, increasing consumer demand for alternatives to
oil and natural gas, and technological advances in fuel economy and energy
generation devices could reduce the demand for crude oil and other liquid
hydrocarbons. The Corporation cannot predict the impact of changing demand for oil and natural gas products, and any major changes
may have a material adverse effect on the Corporations business, financial
condition, results of operations and cash flows and therefore on the dividends
declared on the Common Shares.

- 15 -

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**Forward-looking
Information May Prove Inaccurate**

Numerous statements containing
forward-looking information are found in this Form 20-F, documents incorporated
by reference herein and other documents forming part of the Corporations public
disclosure record. Such statements and information are subject to risks and
uncertainties and involve certain assumptions, some, but not all, of which are
discussed elsewhere in this document. The occurrence or non-occurrence, as the
case may be, of any of the events described in such risks could cause actual
results to differ materially from those expressed in the forward-looking
information.

**Government
Approval for Share Acquisitions**

There are circumstances in which
the acquisition of shares by a foreign person or corporation in a foreign
corporation which has an Australian subsidiary (such as Chelsea) may activate
the Australian Treasurers powers and, in order to avoid an adverse order by the
Australian Treasurer, require the foreign person or company to provide prior
notification of the proposed acquisition and seek a statement of no objections
in respect of that proposal. In such case, the associated risks include the
Australian Treasurer objecting to the acquisition, the Australian Treasurer
imposing conditions on a statement of no objection which are onerous,
prohibitive or uncommercial, having regard to the individual circumstances of
the foreign person or company and the time period for assessing the acquisition
being extended and unduly delaying the foreign persons or companys ability to
purchase the shares.

**Aboriginal
Heritage**

The procedures and regulatory
powers set forth in applicable laws relating to the protection of Aboriginal
cultural heritage in Australia may delay, limit or prevent oil and gas
exploration activities in Australia. Such procedures and powers, to the extent
they affect Chelsea, could have an adverse effect on Chelseas business,
financial condition, results of operations and prospects.

**Other Risks**

Chelsea also faces a number of
risk factors that are outside of its control, generally, including, without
limitation, terrorist activities, natural disasters, general economic and other
conditions.

ITEM 4. INFORMATION ON THE COMPANY

|4. **A** | THREE YEAR HISTORY AND DEVELOPMENT OF CHELSEA
|-------- | ---------------------------------------------

**Business
Development**

ACOR was incorporated April 28,
1997 in British Columbia, Canada. On October 1, 2013, ACOR amalgamated with
International TME Resources Inc. and was renamed Chelsea Oil and Gas Ltd. and
continued into the province of Alberta, Canada. The address of the Companys
head office is 127, 10th Ave NW, Calgary, AB Canada.

The Companys business plan is
the exploration and development of the Companys working interest properties in
Australia. The Company also holds and acquires and sells overriding royalty
interests in Australia. Current primary income sources are royalties earned on
overriding royalty interests held by the Company.

Our website address is
www.chelseaoilandgas.com. The information contained on, or that can be accessed
through, our website is not part of, and is not incorporated into, this Form
20-F.

- 16 -

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The Company has continued to be
active with its Working Interest and Overriding Royalty interests held in
Australia. The business of Chelsea during 2014 was to work on its existing
Working Interest projects as well as study the oil and gas exploration acreage
available in Australia in basins that demonstrate a high probability of success
with the maximum rate of return for dollars invested. For additional information
on our working and overriding royalty interests, see Item 4.D Property, Plant
and Equipment.

**Three Year History**

**2015**

On June 1, 2015, the Corporation
announced that the BCSC granted a full revocation of the cease trade order
issued by the BCSC on February 18, 1999 in respect of ITME, a predecessor
company to Chelsea.

**2016 and 2017**

Since 2016, the Companys efforts
were focused on obtaining financing through the issuance of equity or debt
instruments to existing and new investors, and monetizing assets held within the
portfolio.

**Current Business
Operations**

Throughout 2017 and to the date
of this AIF, the Corporation has continued to advance discussions with
investors, which if successful, is expected to enable the Corporation to fund
its operations and maintain its debt obligations for 2018 and 2019. There is no
certainty that any additional funding will be completed.

In tandem, the Corporation has
initiated discussions with multiple parties regarding the full or partial sale
of some of its assets. The proceeds of any sale would be used by the Corporation
to fund its operations and maintain its debt obligations for 2018 and 2019.
There is no certainty that any asset sale will be completed.

For further information on each
of the Companys interests, see Item 4.D Property, Plant and Equipment.

**Proposed Future
Business Operations**

The Companys strategy is three
fold: 1) to seek Overriding Royalty Interests in oil and gas concessions within
sedimentary basins in Australia, 2) to explore and develop the oil and gas
concessions in Queensland, Australia in which it holds a Working Interest and 3)
to seek other Working Interests in oil and gas concessions within other
sedimentary basins of Australia to promote oil and gas exploration through
seismic programs and drilling operations.

The Companys ability to explore
other oil and gas opportunities is dependent on adequate capital resources being
available and equity being obtained, and/or finding partners to fund the
exploration and drilling programs on the areas in which the Company holds
Working Interests.

For further information on each
of the Companys interests, see Item 4.D Property, Plant and Equipment.

**Competition**

The Company is competing with
other oil companies for oil and gas leases and concessions. The oil and gas
industry is highly competitive in all of its phases, with competition for
favorable producing royalties, overriding royalties, and good oil and gas leases
being particularly intense. The Company believes that the exploration program,
promised expenditures, geological and geophysical skill, and familiarity with an
area of operations are the primary competitive factors in the identification,
selection, and acquisition of desirable leases. When attempting to purchase
interests in such properties, the Company competes with independent operators
and major oil companies.

- 17 -

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**Foreign Taxes and
United States Tax Credits**

As a result of its Overriding
Royalty Interests attributable to properties outside the United States, the
Company is subject to the imposition of taxes by foreign governments upon the
Companys income derived from such foreign jurisdictions. These taxes are of
various types, with differing tax rates, and are subject to change. Generally,
the Companys income from a foreign jurisdiction will be taxed in the same
manner as that for other companies operating in the jurisdiction, but
discriminatory taxation by a particular jurisdiction may occur. The current
non-resident corporate income tax rate in Australia, for Overriding Royalty
Interests, is 30%.

As a Canadian corporation, the
Company is liable for income taxes under the laws of Canada. Under Canadian law
the Companys Australian-source income is subject to a 25% tax (on Canadian
income). We believe the 30% Australian tax should be a partial credit toward the
payment of the 25% Canadian tax under double taxation treaties between the
countries.

The Company is taxable in the
U.S. on U.S. source income. Because there has been neither U.S. source net
income nor any income effectively connected with a U.S. trade or business, there
have been no U.S. taxes incurred to date.

**Governmental
Regulation**

Oil and gas operations are
subject to federal, state and local laws and regulations governing waste,
environmental quality, pollution control, conservation and other measures
regarding environmental and ecological matters. It is impossible to predict the
impact of environmental legislation and regulations on the Companys operations
and earnings in the future.

The domestic production and sale
of oil and gas are subject to federal regulation by the Department of Energy and
the Federal Energy Regulation Commission. Rates of production of oil and gas
have for many years been subject to federal and state conservation laws and
regulations. In addition, oil and gas operations are subject to extensive
federal and state regulations concerning exploration, development, production,
transportation, and pricing, and even to interruption or termination by
governmental authorities.

In foreign countries, the Company
may be subject to governmental restrictions on production, pricing and export
controls. Regulations existing or imposed upon the Company or its properties at
the time of their acquisition may change to an unpredictable extent. The Company
will have little or no control over the change of regulations or imposition of
new regulations and restrictions, expropriation or nationalization by foreign
governments or the imposition of additional foreign taxes. Management believes
that these actions are unlikely to be undertaken by the state governments of
South Australia, Queensland or Victoria, where all of the foreign oil and gas
properties from which the Company receives royalty income are currently located.

**Foreign Currency**

Due to the nature of the
Companys activities in Australia, portions of the Companys operating capital
may at times be held in various foreign currencies. This subjects the Company to
the risk of currency fluctuations and changes in rates of conversion for
different currencies. The Company does not engage or expect to engage in any
hedging or other transactions, which are intended to manage risks relating to
foreign currency fluctuations. Additionally, revenues generated in foreign
countries in which the Company has or may acquire interests may be subject to
governmental regulations, which restrict the free convertibility of such funds,
and all remittances of funds out of these countries might require the approval
of the applicable governments exchange control agency. Presently, the Company
experiences no difficulties with the free convertibility of funds from
Australia. In the Companys opinion, the foreign exchange control laws currently
in effect in Australia, do not unreasonably delay the remittance of funds
generated in Australia to the United States and Canada. The exchange rate on
April 29, 2015 was $0.76201 Australian = $1.00 United States dollar and 0.79561
Canadian = $1.00 United States dollar

**Regulation of Oil
and Natural Gas Production**

Our oil and natural gas
exploration, production and related operations are subject to extensive rules
and regulations promulgated by federal, state and local authorities and
agencies. Failure to comply with such rules and regulations can result in substantial penalties. The
regulatory burden on the oil and natural gas industry increases our cost of
doing business and affects our profitability. Although we believe we are in
substantial compliance with all applicable laws and regulations, because such
rules and regulations are frequently amended or reinterpreted, we are unable to
predict the future cost or impact of complying with such laws.

- 18 -

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Many states require permits for
  drilling operations, drilling bonds and reports concerning operations, and
  impose other requirements relating to the exploration and production of oil and
  natural gas. Such states also have statutes or regulations addressing
  conservation matters, including provisions for the unitization or pooling of oil
  and natural gas properties, the establishment of maximum rates of production
  from wells, and the regulation of spacing, plugging and abandonment of such
wells.

**Environmental
Matters**

Our operations and properties
will be subject to extensive and changing federal, state and local laws and
regulations relating to environmental protection, including the generation,
storage, handling, emission, transportation and discharge of materials into the
environment, and relating to safety and health. The recent trend in
environmental legislation and regulation generally is toward stricter standards,
and this trend will likely continue. These laws and regulations may: (i) require
the acquisition of a permit or other authorization before construction or
drilling commences and for certain other activities; (ii) limit or prohibit
construction, drilling and other activities on certain lands lying within
wilderness and other protected areas; and (iii) impose substantial liabilities
for pollution resulting from our operations. The permits required for several of
our operations are subject to revocation, modification and renewal by issuing
authorities. Governmental authorities have the power to enforce their
regulations, and violations are subject to fines or injunctions, or both. In the
opinion of management, we are in substantial compliance with current applicable
environmental law and regulations, and we have no material commitments for
capital expenditures to comply with existing environmental requirements.
Nevertheless, changes in existing environmental laws and regulations or in
interpretations thereof could have a significant impact on our business
operations, as well as the oil and natural gas industry in general.

|4. **B** | BUSINESS OVERVIEW
|-------- | -----------------

The Companys principal
activities are the exploration, development and production of oil, natural gas,
and natural gas liquids in Australia. In addition, the Company has acquired and
sold ORRIs on production in Australia. The Company previously held ORRI on
natural gas production in the United States, however it has not received any
material revenues from these ORRIs since 2009.

For the past three years, all of
the Companys revenues were earned from ORRIs on Australian oil, natural gas
and natural gas liquids production.

The Company has WI operations and
ORRI interests in the States of Queensland, South Australia and Victoria in
Australia, and is subject to the laws and regulations of both the States and the
federal laws of Australia, where applicable.

The Company has ORRIs in Texas
and Kentucky, however it has not earned any revenues on these interests in
several years. The Company is subject to applicable State and federal laws of
the United States.

|4. **C** | ORGANIZATIONAL STRUCTURE
|-------- | ------------------------

**Significant
Subsidiaries**

The following table sets forth
each of our significant subsidiaries, the jurisdiction of organization and the
percentage ownership held by us:

- 19 -

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|                               | Jurisdiction of       | Percentage
|------------------------------ | --------------------- | ----------
|                               | Organization          | Ownership 
|Cooper-Eromanga Oil Inc.       | Texas, USA            | 100%      
|Chelsea Oil Australia Pty Ltd. | Queensland, Australia | 100%      
|1629518 Alberta Ltd.           | Alberta, Canada       | 100%      
|Cooper Basin Oil & Gas Inc.    | Texas, USA            | 20%       

**Organizational Charts**

The chart below presents a
summary of our ownership and organizational structure. Each subsidiary companies
Country or State of domicile is represented in parenthesis, and the ownership of
each subsidiary is represented as a percentage.



Chelsea is the parent and holding company for each of
its wholly-owned subsidiaries and minority interest in Cooper Basin Oil and Gas
Inc. Chelsea also directly holds all of the Corporations ORRIs.

Cooper-Eromanga Oil Inc. holds ATP 582 as its sole
asset.

Chelsea Oil Australia Pty Ltd. holds the Surat Basin
Petroleum Leases: PL 18, PL 40 and PL 280.

Cooper Basin Oil and Gas Inc. has no assets and is not
currently active. Chelsea has a 20% minority interest in this company.

1629518 Alberta Ltd. has no assets and is not currently
active.

|4. **D** | PROPERTY, PLANT AND
EQUIPMENT
|-------- | -----------------------------

The Companys principal office is
located at 127, 10th Ave NW, Calgary, Alberta, Canada, T2M 0B4.

The Company holds Working
Interests and ORRIs in Queensland, Victoria and South Australia. See Item 4.D
Property, Plant and Equipment  Working Interest Holdings, Item 4.D Property,
Plant and Equipment  Producing Overriding Royalty Interests and Item 4.D
Property, Plant and Equipment  Non-Producing Overriding Royalty Interests
below for an itemised listing of the Companys interests and associated
geographic region. Chelsea is an Australian focused exploration, development and
production company with approximately 5.2 million net Working Interest acres of
land onshore Australia. The Corporation has a portfolio of assets, as follows:

| | **Surat-Bowen**
      **Basin:** Six existing oil discoveries and one gas pool with
      independently evaluated reserves.
|- | ---------------------------------------------------------------------------------------------------------------------------

- 20 -

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| | Georgina and Simpson Basins:multi-billion barrel
      potential in two emerging unconventional resource plays.                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                      
| | Overriding Royalty Interests:In addition to its
      Working Interest lands, the Corporation also holds an ORRI in more than
      approximately 11.1 million gross acres (60,000 net acres) in both onshore
      and offshore basins in Australia.

During 2017 and 2016, the Company
received revenues from six of its ORRIs: PEL 111, PEL 115, ATP 267, ATP 299, ATP
560, and VIC/P54. For further information, see Item 5. Operating and Financial
Review and Prospects  Managements Discussion and Analysis of Financial
Condition and Results of Operation.

WORKING INTEREST HOLDINGS

|License |  |  | Basin              |  |  | Operator               |  |  | Gross Acres |  |  | WI    |  |  | Net WI Acres | 
|------- |  |  | ------------------ |  |  | ---------------------- |  |  | ----------- |  |  | ----- |  |  | ------------ | 
|PL 18   |  |  | Surat              |  |  | Chelsea
      Oil(1)   |  |  | 46,482      |  |  | 100%  |  |  | 46,482       | 
|PL 40   |  |  | Surat              |  |  | Chelsea Oil(1)         |  |  | 18,744      |  |  | 100%  |  |  | 18,744       | 
|PL 280  |  |  | Surat              |  |  | Chelsea
      Oil(1)   |  |  | 23,308      |  |  | 50%   |  |  | 11,654       | 
|ATP 582 |  |  | Georgina / Simpson |  |  | Cooper-Eromanga Oil(1) |  |  | 5,022,000   |  |  | 100%  |  |  | 5,022,000    | 
|PEL 100 |  |  | Cooper / Eromanga  |  |  | Cooper Energy          |  |  | 73,143      |  |  | 1.00% |  |  | 731          | 
|Total   |  |  |                    |  |  |                        |  |  | 5,183,677   |  |  |       |  |  | 5,099,611    | 

Note:

|1. | Wholly owned subsidiary of Chelsea Oil and
  Gas
|-- | ------------------------------------------------

PRODUCING OVERRIDING ROYALTY INTERESTS

|License    |  |  | Basin     |  |  | Operator     |  |  | Gross Acres |  |  | ORR Interest |  |  | Net Royalty Acres | 
|---------- |  |  | --------- |  |  | ------------ |  |  | ----------- |  |  | ------------ |  |  | ----------------- | 
|VIC P54    |  |  | Gippsland |  |  | Nexus Energy |  |  | 155,676     |  |  | 0.05%        |  |  | 78                | 
|PEL 111(1) |  |  | Cooper    |  |  | Senex Energy |  |  | 290,101     |  |  | 0.60%        |  |  | 1,741             | 
|PEL 115    |  |  | Cooper    |  |  | Senex Energy |  |  | 65,730      |  |  | 0.175%       |  |  | 115               | 
|ATP 267    |  |  | Cooper    |  |  | Santos       |  |  | 220,800     |  |  | 0.17%        |  |  | 379               | 
|ATP 299    |  |  | Cooper    |  |  | Santos       |  |  | 441,600     |  |  | 0.06%        |  |  | 254               | 
|ATP 560    |  |  | Cooper    |  |  | First Source |  |  | 625,600     |  |  | 0.25%        |  |  | 1,564             | 
|Total      |  |  |           |  |  |              |  |  | 1,799,507   |  |  |              |  |  | 4,131             | 

Note:

|1. | 1.0% Working Interest only in the Cleansweep field in
      addition to the ORRI held.
|-- | --------------------------------------------------------------------------------------

NON-PRODUCING OVERRIDING ROYALTY INTERESTS

|License |  |  | Basin    |  |  | Operator                 |  |  | Gross Acres |  |  | ORR Interest |  |  | Net Royalty Acres | 
|------- |  |  | -------- |  |  | ------------------------ |  |  | ----------- |  |  | ------------ |  |  | ----------------- | 
|PEL 88  |  |  | Cooper   |  |  | Senex Energy             |  |  | 816,436     |  |  | 0.30%        |  |  | 4,899             | 
|PEL 424 |  |  | Cooper   |  |  | Senex Energy             |  |  | 1,516,733   |  |  | 0.10%        |  |  | 1,517             | 
|PEL 444 |  |  | Cooper   |  |  | Terra Nova               |  |  | 582,674     |  |  | 0.67%        |  |  | 3,886             | 
|ATP 544 |  |  | Cooper   |  |  | Australia Pete           |  |  | 901,600     |  |  | 0.81%        |  |  | 7,285             | 
|ATP 550 |  |  | Cooper   |  |  | Discovery Geo            |  |  | 276,000     |  |  | 0.25%        |  |  | 690               | 
|ATP 582 |  |  | Georgina |  |  | Cooper-Eromanga Oil(1)   |  |  | 5,022,000   |  |  | 0.67%        |  |  | 33,698            | 
|ATP 616 |  |  | Cooper   |  |  | Sundance
      Resources |  |  | 147,200     |  |  | 3.33%        |  |  | 4,907             | 
|ATP 636 |  |  | Cooper   |  |  | Santos                   |  |  | 640,000     |  |  | 0.50%        |  |  | 3,200             | 
|Total   |  |  |          |  |  |                          |  |  | 9,319,969   |  |  |              |  |  | 56,195            | 

Note:

|1. | Wholly-owned subsidiary of
Chelsea.
|-- | -----------------------------------

TOTAL OVERRIDING ROYALTY INTERESTS

|                                             |  | Gross Acres |  |  | Avg. ORR Interest |  |  | Net Royalty Acres | 
|-------------------------------------------- |  | ----------- |  |  | ----------------- |  |  | ----------------- | 
|Producing Overriding Royalty
      Interests |  | 1,799,507   |  |  | 0.22%             |  |  | 4,131             | 
|Non-Producing Overriding Royalty interests   |  | 9,319,969   |  |  | 0.60%             |  |  | 56,195            | 
|Total Overriding Royalty
      Interests     |  | 11,119,476  |  |  | 0.55%             |  |  | 60,326            | 

- 21 -

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ASSET SUMMARY

Surat-Bowen Basin

The Surat-Bowen Basin is a
combination of Permian and Triassic age sediments of the deeper Bowen Basin,
overlain by the Jurassic and Cretaceous strata of the Surat Basin. Because
intervals of both sequences are prospective and have produced in close or even
over-lying proximity, operators tend to use the two names inter-changeably.

The Bowen Basin of eastern
Queensland is a foreland basin of Early Permian to Middle Triassic age
sediments. It occupies about 60,000km2, the southern half of which is covered by
the Surat Basin. It has a maximum sediment thickness of about 10,000 metres
concentrated in two north-trending depocentres, the Taroom Trough to the east
and the Denison Trough to the north-west. Deposition in the basin commenced
during an Early Permian extensional phase, with fluvial and lacustrine sediments
and volcanics being deposited in a series of half-grabens in the east while in
the west a thick succession of coals and nonmarine clastics were deposited.
Following rifting, there was a thermal subsidence phase extending from the mid
Early to Late Permian, during which a basin-wide transgression allowed
deposition of deltaic and shallow marine, predominantly clastic sediments as
well as extensive coal measures. Foreland loading of the basin spread from east
to west during the Late Permian, resulting in accelerated subsidence, which
allowed the deposition of a very thick succession of Late Permian marine and
fluvial clastics, again with coal and Early to Middle Triassic fluvial and
lacustrine clastics. Sedimentation in the basin was terminated by a Middle to
Late Triassic contractional event.

Over 100 hydrocarbon
accumulations have been discovered in the Bowen Basin, of which about one third
are producing fields. Accumulations occur throughout the succession, but the
most important reservoirs are in the Early Permian and Middle Triassic. Source
rocks have been identified throughout the Permian and in the Middle Triassic and
are mostly nonmarine. Proven plays comprise mostly anticlinal closures sometimes
enhanced by a stratigraphic component, as well as fault rollovers. Other plays
are largely untested. The Bowen Basin also has vast coal resources, with major
open cut and underground coal mines in the north of the basin. Large volumes of
methane gas are held at shallow depths within Permian coals in the north and
have potential for coal seam methane developments.

The Surat Basin is a large,
mature, intracratonic, Early Jurassic to Cretaceous basin occupying
approximately 300,000km2 of central southern Queensland and central northern New
South Wales. It has a maximum sediment thickness of 2500 metres and deposition
was relatively continuous and widespread. Deposition in the basin commenced with
the onset of a period of passive thermal subsidence of much of eastern
Australia. During the Early Jurassic, deposition was mostly fluviolacustrine,
while by the Middle Jurassic coal swamp environments predominated over much of
the basin, except in the north where fluvial sedimentation continued.

Towards the end of the Middle
Jurassic, fluvial deposition again predominated and continued until the earliest
Cretaceous. A marine transgression followed, depositing paralic and marine
sediments and reaching its peak in the Aptian. The subsequent regression caused
a fairly abrupt return to fluvial, lacustrine and paludal environments before
sedimentation ceased in the Aptian. About 100 hydrocarbon accumulations have
been discovered in the Surat Basin, of which about half are producing fields.
Most accumulations are reservoired in Early Jurassic sands, with occasional gas
occurrences in the Middle and Late Jurassic, but all are sourced from the
Permian nonmarine sediments of the underlying Bowen Basin. Proven plays comprise
mostly low amplitude anticlinal closures occasionally associated with thrust
faulting and drapes over basement highs. Because the basin is largely flat-lying
and sedimentation widespread and relatively uniform, other types of traps are
unlikely to be important. The upper part of the Surat Basin sequence comprises
the Great Artesian Basin of Australia, an enormous fresh water resource.

Chelsea holds a 100% Working
Interest in PL 18 and PL 40 as well as a 50% Working Interest in PL 280. The
Corporation is in the process of completing the transfer of the EA for PL 280.

The Corporations Surat-Bowen
Basin oil assets comprise six existing oil pools with 14 million barrels of
light, high quality (51°), high mobility DPIIP, of which, to date, only 6%, or
770,000 barrels has been recovered. As the oil is 51°, it exhibits high
mobility. There is no certainty that it will be commercially viable to produce
any portion of the resources. To date, exploration has been
directed at finding and drilling structural highs, usually the first phase of
exploration before more subtle stratigraphic prospects are tested. All
production has been primary, meaning that no secondary enhancements such as
pressure maintenance, water flooding, etc., have been implemented. Oil is
produced to single well batteries and trucked about 30 kilometres to Fairymount
where it enters the Santos pipeline carrying oil from the Cooper Basin to
Brisbane. The last production from the area was from the Yellowbank Creek pool
in 2010.

- 22 -

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Given the low overall recovery to
  date (0.770 mmbo or 6% of DPIIP) under primary production methods, there is an
  opportunity for a relatively low risk redevelopment of the proven productive oil
  pools. There are numerous water-flood projects in Western Canada, including some
  that recover as high as 40% OOIP. Good reservoir qualities of porosity and
  permeability, together with the high quality and mobility of the oil suggest
  that reservoir response should be similar to those observed when similar
procedures have been implemented in Western Canada.

On the PL 40 permit, also in the
Surat-Bowen Basin, bypassed gas has been identified in three wells on Chelseas
lands.

Georgina and Simpson Basins

The Georgina Basin is a large
(ca. 330,000 km2, 5.0mm acres) intracratonic sedimentary basin in central and
northern Australia, lying mostly within the Northern Territory and partly within
Queensland. It is named after the Georgina River which drains part of the basin.
Deposition of locally up to ca. 4 km of marine and non-marine sedimentary rocks
took place from the Neoproterozoic to the late Paleozoic (ca. 850-350 Ma). Along
with other nearby sedimentary basins of similar age (Amadeus Basin, Officer
Basin); the Georgina Basin is believed to have once been part of the
hypothetical Centralian Superbasin that was fragmented during episodes of
tectonic activity.

More recently, the Georgina Basin
has been recognized as having considerable potential for unconventional
hydrocarbons within the Arthur Creek Formation of Middle Cambrian age. This has
led to all the prospective parts of the basin now being held under exploration
permits and a new phase of exploration is under way. The deepest part of the
basin, known as the Toko Syncline, lies within Queensland and is considered by
many to have the most hydrocarbon potential.

The Simpson Basin extends over
100 000 km2 in South Australia, southeast part of Northern Territory, and
southwest part of Queensland. Approximately half lies in South Australia. It is
a circular, poorly defined depression with one major depo centre, the Poolowanna
Trough. The Simpson Basin has a known petroleum system within the Permian and
Triassic sequence and recently an operator in the adjacent Northern Territory
announced an in-house estimate of 12 to 25 Tcf of prospective unconventional gas
resource within its permit. Chelsea does not know if such estimate was prepared
by a qualified reserves evaluator or auditor or in accordance with the COGE
Handbook. There is no certainty that any portion of the resources will be
discovered. If discovered, there is no certainty that it will be commercially
viable to produce any portion of the resources. Validation of this resource is
likely to increase exploration activity in this area. The basin overlies older
Pedirka Basin strata, also considered prospective, and is overlain by the
younger Eromanga Basin sediments.

In the Georgina Basin, more
specifically the Toko Syncline, three vertical wells have been drilled to
basement and one other was abandoned before reaching total depth for mechanical
reasons. This well did, however, encounter natural gas which flowed against a
full column of drilling fluid at an estimated 200 Mcf per day. This well is
important in that it confirms the presence of movable hydrocarbons in the basin.
Each of the basement penetrations are on ATP 582 and serve to define the play
model and the thermal maturity windows encountered within the Arthur Creek in
the wells. These wells are Todd-1 (1991), Netting Fence-1 (1964), Mirrica-1
(1980), and Ethabuka-1 (1974), the well that encountered the gas flow but did
not reach what is now the unconventional target. Based on these wells, fairways
have been defined within the Toko Syncline as being prospective for oil, gas and
liquids, and dry natural gas.

All previous seismic and drilling
was for conventional structural traps, particularly near the basin-defining
Toomba Fault. Approximately 200 kilometres of legacy seismic exists on ATP 582
from 1977 through 1981 vintage. This data is of limited value for any possible
defining of hydrocarbon indicators but does serve to define gross structural
features.

- 23 -

---

At the southern portion of ATP
582, thought to contain Simpson Basin strata, management has identified several
untested four-way dip closed structures on the basis of similar vintage 2D
seismic. No wells have tested this part of ATP 582.

No reserves are attributed to ATP
582.

Overriding Royalty Interests

Chelsea has ORRIs over more than
approximately 9.3 million gross acres (60,000 net acres) in the Cooper,
Gippsland (Offshore) and Victoria (Offshore VIC P54) basins. These interests
have generated small amounts of revenue for the Corporation.

Outlook

Along with a 3D seismic survey of
the productive trend, Chelseas future development plans call for conversion of
Yellowbank Creek 1 to a water injection well, re-pressuring the reservoir at
least partially, and reestablishing production from Yellowbank Creek 2 and 3.
These wells were producing at an approximate 8% oil cut when shut-in, which
should be able to be maintained at higher volumes upon re-pressuring and is in
line with oil cuts experienced in western Canadian pools such as the Dina and
Taber pools in Alberta, Canada.

Concurrent with this, the already
permitted 3D program will further define the existing pools and possibly further
develop additional drilling locations, as well as new pool prospects. This
improved reservoir definition will also greatly aid in the design and
implementation enhanced recovery through additional water-flood and horizontal
drilling of the current pools.

Further, Chelsea believes that
similar opportunities exist for further exploitation of mature pools within the
basin generally, and has one or more in sight at present.

See also the information
contained under Item 3.D Risk Factors and Item 5 Operating and Financial
Review and Prospects.

|4. **E** | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following Managements
Discussion and Analysis (MD&A) dated April 30, 2018 is a review of the
results of operations and the liquidity and capital resources of Chelsea Oil and
Gas Ltd. (Chelsea or the Company) for the years ended December 31, 2017,
2016 and 2015.

The audited consolidated
financial statements of the Company and its subsidiaries have been prepared in
accordance with IFRS as issued by the International Accounting Standards Board
(IASB).

Certain information contained
herein is forward-looking and based upon assumptions and anticipated results
that are subject to risks, uncertainties and other factors. Should one or more
of these uncertainties materialize or should the underlying assumptions prove
incorrect, actual results may vary materially from those expected. For
additional information, refer to Forward Looking Statements.

- 24 -

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**General Discussion**

**Georgina Basin**

In 2012, Total entered into the
Georgina Basin through a farm-in whereby it would spend up to A$190.0 million by
2016 to earn a 68% Working Interest in an offsetting operators Georgina Basin
lands. As well in 2012, Statoil entered into the Georgina Basin through a
farm-in whereby it would spend up to A$210.0 million in separate offsetting
Georgina Basin lands to earn an 80% Working Interest.

In 2014, Statoil terminated its
farm-in, and in 2017 Total terminated its farm-in. The termination of these
farm-ins follows unsuccessful exploration results. Although the Corporation
continues to see significant potential in ATP 582, with the termination of these
farm-ins its ability to fund future exploration on this concession is in doubt.

**Surat-Bowen Basin**

Chelseas lower risk exploitation
and development assets in the Surat-Bowen Basin will be the focus of our efforts
in the near future as we strive to build cashflow. Our technical team believes
that while the Surat-Bowen basins are considered mature by Australian standards,
much potential remains for not only secondary and enhanced recovery projects as
typically applied in North America, but also for significant low risk
exploration and development in areas and formations previously considered
uneconomic.

Further, the fiscal regime for
oil and, especially natural gas is very attractive to producers. Unlike North
American where natural gas prices have fluctuated wildly the past decade,
Australia and particularly Queensland has a long term demand for natural gas to
supply its existing and planned LNG exports to Asia. This Asian demand and the
under- performance of the coal seam gas sector has resulted in current prices of
$8-$10 per GJ.

The environment for oil is
currently subdued due to world pricing but remains attractive longer term. Plans
for redevelopment of our light oil assets have been deferred in favour of
furthering our natural gas opportunities, as gas markets in Australia remain
highly attractive.

**Funding and
Capitalization**

While the Companys commitments
are modest considering the scope and potential of its asset base, funding is
required to advance the projects. To this end, Chelsea continues its financing
process in what is and has been a difficult capital market for junior energy
companies. While continuing to assemble an investor group, Chelsea has raised
funds necessary to continue operations through a rationalization of certain
minor assets including the Companys non-operated interests in the Cooper Basin
and deploying those funds to advance our primary high working interest assets.
Response from the investment community continues to be very positive with regard
to the Companys assets and in spite of current challenging market conditions
for small cap energy ventures, we have made significant progress and are
optimistic that a significant financing can be secured in the near term,
sufficient to meet our work obligations and advance our current Surat-Bowen
projects to cash generating status. Particulars of any transaction will be
released immediately in accordance with applicable securities laws.

**Summary**

Management and the Board continue
to believe strongly in the quality of Chelseas asset base. Ongoing technical
work continues to add value to existing assets and define new opportunities for
growth.

However without access to capital
or a partner to fund the obligations and development of these assets, the
company will be unable to realise this value. To that end, the Companys current
principle focus is securing finance or a funding partner.

- 25 -

---

**Overall Performance**

ACOR was incorporated April 28,
1997 in British Columbia, Canada. On September 27, 2013 ACOR was continued into
the province of Alberta. On October 1, 2013, ACOR amalgamated with ITME and was
renamed Chelsea Oil and Gas Ltd.. The address of the Companys head office is
127, 10th Ave NW, Calgary, AB Canada.

This MD&A and accompanying
financial statements for the years ended December 31, 2017, 2016 and 2015 are
prepared in accordance with IFRS as the Company is considered a Canadian
Reporting Issuer. Chelsea reported under USGAAP and filed as a US Reporting
Issuer until June 30, 2012, when the Company became a Foreign Private Issuer
under applicable US Securities Laws.

With the completion of the
acquisition of International TME Resources Inc. (ITME) on October 1, 2013, the
Company became a Canadian Reporting Issuer and files its continuing disclosure
obligations required under MI 51-105 Issuers Quoted in the U.S.
Over-The-Counter Markets.

**2017 Highlights**

For the year ended December 31,
2017 the Companys main operations were the advancement of the Companys
fundraising and continued technical development of the portfolio. These efforts
have continued through 2018.

**Results of Operations**

**Royalty Income**

For the year ended December 31,
2017, the Company received $19,899 (2016  $36,701, 2015 $68,974) in freehold
royalties from its ORRI both onshore and offshore Australia. The decrease over
prior years is attributable to lower commodity prices over the comparative
periods.

**General and
administrative**

For the year ended December 31,
2017, the Company incurred $133,211 (2016  $186,416, 2015  $242,410) in
general and administrative (G&A) expenses. The decrease over 2016 and 2015
is attributable to reduced travel, professional and shareholder reporting costs
in the current year.

**Depletion**

For the year ended December 31,
2017, the Company incurred $112,482 in depletion expense (2016  $112,482, 2015
 $112,482). Depletion in 2017 is consistent with prior years as there has been
no change in the depleatable base and the Company uses straight-line
amortization as described in Note 3 of the audited consolidated financial
statements.

**Impairment**

At December 31, 2017, management
identified impairment indicators in its Georgina and Surat assets as a result of
significantly reduced access to debt and equity financings in the Australian
exploration and production sector. The recoverable amounts of the assets was
estimated using fair value less costs of disposal based on comparable market
transactions and multiples. The recoverable amount of the Surat asset was
estimated to be A$1.25 million resulting in an impairment of $6.2 million (A$8.0
million). The recoverable amount of the Georgina asset was estimated to be $Nil
resulting in an impairment of $3.0 million (A$3.9 million).

No impairment was booked for the
years ended December 31, 2016 and 2015.

- 26 -

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**Finance expense**

For the year ended December 31,
2017, the Company incurred $355,401 in finance expense (2016  $327,401, 2015 
$302,244). The increase over prior years is attributable to compounding interest
on the shareholder loan balance.

**Expense reimbursements**

During the year, the Company
received $79,228 (2016 - $87,652, 2015 - $nil) from an arms length party (the
Sponsor. These receipts relate to ongoing travel and general and
administrative expenses the Sponsor has agreed to fund during 2017 and 2016. The
purpose of the reimbursements is for facilitating funding and restructuring
efforts for the Company. There is no obligation to repay these unsecured
advances.

**Foreign exchange (gain)
loss**

For the year ended December 31,
2017 the Company experienced a foreign exchange loss of $68,588 (2016  loss of
$37,623, 2015  gain of $125,515). The loss in the current year is attributable
to weakness in the US dollar. The gains in the prior year were realized on the
Companys accounts payable as both the Australian and Canadian dollars
depreciated against the US dollar during the period.

**Current income tax
expense**

For the year ended December 31,
2017, the Company incurred current income tax expenses of $2,142 (2016  $3,369,
2015  $5,046). Current income tax expense is derived from withholding taxes on
the Companys overriding and interest revenue received directly from Australian
sources. The change over the prior years is commensurate with the change in
revenue received from those sources over the same period.

**Net loss**

For the year ended December 31,
2017, the Company incurred a net loss of $9,923,195 (2016  $542,938, 2015 
$467,693). The loss in 2017 is attributable to the $9.3 million impairment
relating to the Companys E&E assets. The loss in 2016 and 2015 was
attributable to interest expenses and general and administrative costs.

**Foreign currency
translation adjustment**

Both of the Companys
wholly-owned subsidiaries operate exclusively in Australia, and utilize the
Australian dollar as their functional currency. Assets and liabilities of the
Companys Australian operations are translated into US dollars at period end
exchange rates while revenues and expenses are translated using average rates
for the period. Gains and losses from the translation are deferred and included
in accumulated other comprehensive loss on the consolidated statements of
financial position.

For the year ended December 31,
2017, the Companys foreign currency translation adjustment was a gain of
$827,678 (2016  loss of $135,245, 2015  loss of $1,167,320). The adjustment in
2017 is attributable to the appreciation in the Australian dollar compared to
the US dollar over the year. The adjustment in 2015 and 2014 is attributable to
the decline in the Australian dollar compared to the US dollar over each
comparable year.

**Liquidity and Capital Resources**

At December 31, 2017, the Company
had $15,118 (2016  $15,341, 2015  $121,620) in cash held in the Companys bank
accounts. The Companys total accounts receivable as at December 31, 2017 was
$3,481 (2016  $6,527, 2015  $9,048). The Companys trade accounts payable and
shareholder loans outstanding as at December 31, 2017 was $5.4 million (2016 
$4.9 million, 2015  $4.5 million). The Companys net working capital deficiency
as at December 31, 2017 was $5.6 million (2016  $4.9 million, 2015  $4.3
million).

During 2017 the Company received
$79,228 (2016 - $87,652, 2015 - $nil) from an arms length party (the Sponsor.
These receipts relate to ongoing travel and general and administrative expenses
the Sponsor has agreed to fund during 2016 and 2017. The purpose of the
reimbursements is for facilitating funding and restructuring efforts for the
Company. There is no obligation to repay these unsecured advances. Refer to Item
5 for additional disclosures.

- 27 -

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The Company has several projects
  in development. These include the exploration of the Georgina Basin on ATP 582,
  the exploitation of the Surat-Bowen Basin oilfields, and the development of the
  Louise gas field. In aggregate, the Companys work commitments for these
projects is estimated at $19.0 million Australian dollars.

The Company has financed its
operations to date through the issuance of common shares to founding directors
and other shareholders. Refer to 2017 Highlights herein and note 2 of the
audited consolidated financial statements for the year ended December 31, 2017
for additional discussion of the Companys liquidity and capital resources. The
following table outlines the timing of the Companys debt and commitments:

|Debt /           | February  | August     | August    | September | August    |           
|---------------- | --------- | ---------- | --------- | --------- | --------- | ----------
|Commitment       | 2016      | 2020       | 2024      | 2029      | 2031      | Total     
|                 |           |            |           |           |           |           
|US$              |           |            |           |           |           |           
|Shareholder loan | 4,201,120 | -          | -         | -         | -         | 4,201,120 
|Total US$        | 4,201,120 | -          | -         | -         | -         | 4,201,120 
|                 |           |            |           |           |           |           
|A$               |           |            |           |           |           |           
|ATP 582          | -         | 11,000,000 | -         | -         | -         | 11,000,000
|PL 18            | -         | -          | 5,000,000 | -         | -         | 5,000,000 
|PL 40            | -         | -          | -         | 2,000,000 | -         | 2,000,000 
|PL 280           | -         | -          | -         | -         | 1,000,000 | 1,000,000 
|Total A$         | -         | 11,000,000 | 5,000,000 | 2,000,000 | 1,000,000 | 19,000,000

**Plan of Operation and Funding**

The Company plans to seek
additional oil and gas concessions in Australia on a ground level basis and will
seek partners to join in this process. The Company has been successful in
entering into farm-out arrangements to defer the exploration commitments on six
Australian concessions to joint venture partners and is confident of being able
to repeat this process in the event the Company is successful in acquiring other
concessions in Australia.

**Material Commitments**

The Company has material
financial commitments on several of its working interest properties located in
Australia. PL 18, PL40, PL 280 and ATP 582 have expenditure requirements that
may exceed the Companys Carried Working Interest in each of these
concessions.

ATP 582, PL 18 and PL 40 are
owned 100% by the Company, PL 280 is 50% owned by Chelsea. Expenditures on these
concessions will require additional funding or securing a WI partner. See Item
5. Operating and Financial Review and Prospects  Contractual Obligations for
additional information.

**Purchase of Significant Equipment**

The Company does not intend to
purchase any significant equipment during the next 12 months.

**Subsequent Events**

No undisclosed subsequent events
from December 31, 2017 to the date of this 20-F.

- 28 -

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Recent Accounting Pronouncements

IFRS 15  Revenue from contracts
with customers, replaces International Accounting Standard 11, Construction
Contracts (IAS 11), IAS 18, Revenue (IAS 18), and several revenue-related
interpretations. IFRS 15 establishes a single revenue recognition framework that
applies to contracts with customers. The standard requires an entity to
recognize revenue to reflect the transfer of goods and services for the amount
it expects to receive, when control is transferred to the purchaser. Disclosure
requirements have also been expanded. This IFRS became effective for periods
beginning on or after January 1, 2018 and the Company has evaluated the impact
of the standard on its consolidated financial statements and determined the
impact will not be significant. The Company will adopt the additional disclosure
requirements.

IFRS 9  Financial Instruments,
which is the result of the first phase of the IASBs project to replace IAS 39 
Financial Instruments: Recognition and Measurement. The new standard replaces
the current multiple classification and measurement models for financial assets
and liabilities with a single model that has only two classification categories:
amortized cost and fair value. This IFRS became effective for periods beginning
on or after January 1, 2018 and the Company has evaluated the impact of the
standard on its consolidated financial statements and determined the impact will
not be significant. The Company will adopt the additional disclosure
requirements.

In January 2016, the IASB issued
the complete IFRS 16 Leases ("IFRS 16") which replaces IAS 17, Leases. The
effective date of IFRS 16 is for annual periods beginning on or after January 1,
2019 and early adoption is permitted. Under IFRS 16, a single recognition and
measurement model will apply for lessees which will require recognition of
assets and liabilities for most leases. The extent of the impact of adoption of
the standard has not yet been determined.

Dividend Policy

No dividends have ever been
declared by the Board of Directors on our common stock. Our losses do not
currently indicate the ability to pay any cash dividends, and the Company does
not indicate the intention of paying cash dividends on our common stock in the
foreseeable future.

Securities Authorized For Issuance Under Compensation Plans

**Share options**

The Company has a share option
plan (Option Plan) whereby it can issue up to 10% of its common shares
to directors, management and consultants at a price in the context of the market
price of the shares, or such a price as determined by the directors. As at the
date of this 20-F, the Company has not issued any options pursuant to the Option
Plan.

**Warrants**

On January 9, 2013, the Company
issued 5.0 million warrants to directors, officers and consultants. These
performance warrants have an exercise price of $0.25 per warrant, but are only
exercisable if the share price of the Company exceeds $1.00 per share for ten
consecutive trading days, with a minimum of 100,000 shares traded over the same
period. On January 18, 2015, the Company extended the warrants for two years,
expiring January 18, 2017. All other terms remained the same. On January 18,
2017 all 5.0 million of the warrants expired out of the money.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Overview

The Company's primary business
consists of the exploration and, if successful, the development of oil and gas
properties. There are a number of inherent risks associated with the
exploration, development and production of oil and gas reserves, many of these
risks are beyond the control of the Company.

- 29 -

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Success in the junior oil and gas
sector is measured by a Companys ability to raise funds and the ability to
secure properties of merit. Not all of these factors are within managements
control. The ability to raise funds is in part dependent on the state of the
junior resource stock market, which in turn is dependent on the economic
climate, oil and gas prices and perceptions as to which way the market is
headed. The ability to secure properties of merit is in large part dependent on
managements contacts and the vitality of the sector.

For a detailed discussion of the
Companys risk factors, refer to 3.D Risk Factors.

Business Risks and Risk Mitigation

There are a number of risks
facing participants in the upstream oil and gas industry. Some of the risks are
common to all businesses, while others are specific to the sector. The most
important of these risks are set out below, together with the strategies Chelsea
employs to mitigate and minimize these risks.

**Inherent Industry Risks 
Risks of Failing to Discover Economic Reserves Additions**

The Companys strategies include
focusing on oil and gas prone selected areas in Australia, utilizing a team of
highly qualified professionals with expertise and experience in these areas,
expanding operations in core areas, continuously assessing new exploration
opportunities to complement existing activities and striving for a balance
between higher risk exploratory drilling, and lower risk development drilling.

Beyond exploration risk, there is
the potential that the Companys oil and natural gas reserves may not be
economically produced at prevailing prices. Chelsea minimizes this risk by
generating exploration prospects internally, targeting high quality projects and
by attempting to operate the projects and the infrastructure used to access the
sales markets.

**Financial Commodity
Price, Capital Expenditure Requirements, Liquidity and Environmental
Risks**

Commodity prices are driven by
supply, demand and market conditions outside the Companys influence and
control. Chelsea manages this risk by constantly monitoring the forecasted price
given by aggregators, banks, and third party engineering firms.

Chelsea manages capital
expenditures by two separate tracking systems: a historical accounting system
that records the actual costs and a perpetual forecasting model that is
constantly updated based on real-time information. Chelseas capital investment
process is based on risk analysis to ensure capital expenditures balance the
objectives of immediate cash flow growth in development activities and future
cash flow from the discovery of reserves through exploration.

It is likely that in the future,
Chelsea will be required to raise additional capital through debt and equity
financings in order to fully realize the Companys strategic goals and business
plans. Chelseas ability to raise additional capital will depend on a number of
factors, such as general economic and market conditions that are beyond the
Companys control. If the Company is unable to obtain additional financing or to
obtain it on favourable terms, Chelsea may be required to forego attractive
business opportunities. However, as Chelsea strives to be the operator of
virtually all of its operations at a high working interest position, the Company
should be able to be flexible in the timing of operations to ensure a continued
strong financial position. The Company is committed to maintaining a strong
balance sheet combined with an adaptable capital expenditures program that can
be adjusted to capitalize on or reflect acquisition opportunities or a
tightening of liquidity sources if necessary.

The Company manages operational
risks by employing skilled professionals utilizing leading-edge technology and
conducting regular maintenance and training programs. Chelsea has updated its
operational emergency response plan to address these operational issues. In
addition, a comprehensive insurance program is maintained to mitigate risks and
protect against significant losses where possible. Chelsea operates in
accordance with all applicable environmental legislation and strives to maintain
compliance with such regulations.

- 30 -

---

CONTRACTUAL OBLIGATIONS

The table below outlines our
contractual obligations as at December 31, 2017 in millions of Australian
dollars:

|        |  |                |  |   | Remaining Work |  |  | Minimum Work |  |  |                | 
|------- |  | -------------- |  | - | -------------- |  |  | ------------ |  |  | -------------- | 
|        |  | Current        |  |   | Commitment     |  |  | Commitment   |  |  |                | 
|License |  | Phase Expiry   |  |   | ($ million)    |  |  | (A$ million) |  |  | License Term   | 
|PL 18   |  | July 2020      |  | $ | 13.9           |  |  | AUD 5.0      |  |  | August 2024    | 
|PL 40   |  | September 2018 |  | $ | 1.6            |  |  | AUD 2.0      |  |  | September 2029 | 
|PL 280  |  | August 2015    |  | $ | 0.8            |  |  | AUD 1.0      |  |  | August 2031    | 
|ATP 582 |  | August 2016    |  | $ | 8.6            |  |  | AUD 11.0     |  |  | August 2020    | 
|        |  |                |  | $ | 14.8           |  |  | AUD 19.0     |  |  |                | 

OFF-BALANCE SHEET ARRANGEMENTS

Chelsea does not have any
off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS

Concurrent with the acquisition
of the assets in the Surat Basin in Australia, on March 1, 2012 the Company
agreed to pay certain vendors $3.0 million within 12 months and 8.57 million
shares of the Company. The loan was non-interest bearing and was recorded at net
present value of $2,770,084 and is secured by the Surat assets. On March 25,
2013, the Company agreed to amend the terms of the loan so that interest would
accrue at 8% per annum, with interest accruing from September 1, 2012. On
February 28, 2015, the Company and shareholder agreed to extend the loan to
February 28, 2016. At the date of these consolidated financial statements the
shareholder has the right to demand repayment. The debt continues to accrue
interest on the same terms as previously agreed. The Company is in discussions
with the debtholder to further extend maturity of the debt.

On January 9, 2013, the Company
issued 5.0 million warrants to directors, officers and consultants. These
performance warrants have an exercise price of $0.25 per warrant, but are only
exercisable if the share price of the Company exceeds $1.00 per share for ten
consecutive trading days, with a minimum of 100,000 shares traded over the same
period. On January 18, 2015, the Company extended the warrants for two years,
expiring January 18, 2017. All other terms remained the same.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the
consolidated financial statements in conformity with IFRS requires management to
make estimates and use judgment regarding the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as at the date
of the consolidated financial statements and the reported amounts of revenues,
expenses and impairment during the year. By their nature, estimates are subject
to measurement uncertainty and changes in such estimates in future periods could
require a material change in the financial statements. Accordingly, actual
results may differ from the estimated amounts as future confirming events occur.
Significant estimates and judgments made by management in the preparation of
these consolidated financial statements are as follows:

**Recoverability of asset
carrying values**

The recoverability of development
and production asset carrying values are assessed at a cash generating unit
(CGU) level. Determination of what constitutes a CGU is subject to management
judgments. The asset composition of a CGU can directly impact the recoverability
of the assets included therein. Judgments are required to assess when impairment
indicators exist and impairment testing is required. The key estimates used in
the determination of cash flows from oil and natural gas reserves include the
following:

Reserves  Assumptions that are
valid at the time of reserve estimation may change significantly when new
information becomes available. Changes in forward price estimates, production
costs or recovery rates may change the economic status of reserves and may ultimately
result in reserves being restated. The Company has obtained an independently
evaluated reserves report in respect of certain of its assets which is complaint
with the Canadian Securities Administrators National Instrument 51-101:
Standards for Disclosure for Oil and Gas Activities.

- 31 -

---

Oil and natural gas prices 
  Forward price estimates are used in the cash flow model. Commodity prices can
  fluctuate for a variety of reasons including supply and demand fundamentals,
  inventory levels, exchanges rates, weather, and economic and geopolitical
factors.

Discount rate  The discount rate
used to calculate the net present value of cash flows is based on estimates of
an approximate industry peer group weighted average cost of capital. Changes in
the general economic environment could result in significant changes to this
estimate.

**Depletion and
depreciation**

Amounts recorded for depletion
and depreciation and amounts used for impairment calculations are based on
estimates of total proved and probable petroleum and natural gas reserves and
future development capital. By their nature, the estimates of reserves,
including the estimates of future prices, costs and future cash flows, are
subject to measurement uncertainty. Accordingly, the impact to the consolidated
financial statements in future periods could be material.

Market conditions, discovery and
analysis of site conditions and changes in technology. Other provisions are
recognized in the period when it becomes probable that there will be a future
cash outflow.

**Share-based compensation**

Compensation costs recognized for
share based compensation plans are subject to the estimation of what the
ultimate payout will be using pricing models such as the Black-Scholes model
which is based on significant assumptions such as volatility, dividend yield and
expected term. Several compensation plans are also performance based and are
subject to managements judgment as to whether or not performance criteria will
be met.

**Deferred taxes**

Tax interpretations, regulations
and legislation in the various jurisdictions in which the Company operates are
subject to change. As such income taxes are subject to measurement uncertainty.
Deferred income tax assets are assessed by management at the end of the
reporting period to determine the likelihood that they will be realized from
future taxable earnings.

**Financial Instruments**

A financial instrument is any
contract that gives rise to a financial asset of one party and a financial
liability or equity instrument of another party. A financial asset is any asset
that is (i) cash; (ii) a contractual right to receive cash or another financial
asset from another party; (iii) a contractual right to exchange financial
instruments with another party under conditions that are potentially favourable
to the entity; or (iv) an equity instrument of another entity. A financial
liability is any liability that is a contractual obligation to (i) deliver cash
or another financial asset to another party; or (ii) exchange financial
instruments with another party under conditions that are potentially
unfavourable to the entity. An equity instrument is any contract that evidences
a residual interest in the assets of an entity after deducting all of its
liabilities.

As at December 31, 2017, the
Companys financial instruments are cash, accounts receivable and accounts
payable and accrued liabilities and shareholder loans. The carrying amounts
reflected in the balance sheet are carrying amounts and approximate their fair
values due to the short-term nature and negligible credit losses.

The Company does not use
derivative instruments or hedges to manage risks because the Companys exposure
to credit risk and interest rate risk is insignificant.

- 32 -

---

ITEM 6. DIRECTORS AND SENIOR MANAGEMENT

|6. **A** | DIRECTORS AND SENIOR
MANAGEMENT
|-------- | -------------------------------

The following table sets out the
names and municipalities of residence of the directors and executive officers of
the Corporation, their present position(s) and offices with the Corporation,
their principal occupations during the last five years and their holdings of
Common Shares as at the date hereof.

The term of office of the
directors expires annually at the time of the Corporations annual shareholder
meeting or when or until their successor is duly appointed or elected. The term
of office of the Corporations executive officers expires at the discretion of
the Corporations directors.

|Name, Residence
      and Position |  | Principal Occupation For The Past Five Years                               |  | Director/Officer Since    
|---------------------------------- |  | -------------------------------------------------------------------------- |  | --------------------------
|William H. Petrie Sr.(1)(2)(3)     |  | Executive Chairman and a Director of Chelsea
      since March 1, 2012     |  | March 1, 2012 (Director)  
|Cochrane, Alberta                  |  | and Director of Chelsea Oil Australia Pty since
      November 2011.       |  | October 1, 2013 (Executive
|Executive Chairman                 |  | Chief Executive Officer and Director of Birch
      Lake Energy Inc. since |  | Chairman)                 
|                                   |  | December 5, 2007.                                                          |  |                           
|                                   |  |                                                                            |  |                           
|Jesse D. Meidl(1)(2)(3)            |  | Chief Executive Officer of Chelsea since
      January 2014, Vice          |  | March 1, 2012 (Director)  
|Calgary, Alberta                   |  | President, Finance and Chief Financial Officer
      of Caithness          |  | January 30, 2014         
|Chief Executive Officer            |  | Petroleum Limited April 2010. Investment Banker
      with Westwind        |  | December 7, 2017 (Chief   
|                                   |  | Partners and Thomas Weisel Partners
      International from June          |  | Executive Officer)        
|                                   |  | 2007.                                                                      |  |                           
|                                   |  |                                                                            |  |                           
|William H. Petrie, Jr. (1)(2)(3)   |  | Chief Exploration Officer, Former
      Vice-President Exploration for     |  | October 1, 2013           
|Calgary, Alberta                   |  | Windtalker Energy Corp., Former Technical
      Manager at ENVOI           |  |                           
|Chief Exploration Officer          |  | Ltd., UK based firm providing marketing and
      A&D services.            |  |                           

Notes:

|1. | Member of the Audit Committee.                                      
|-- | --------------------------------------------------------------------
|2. | Member of the Corporate Governance and Compensation
      Committee.
|3. | Member of the Reserves Committee.                                   

**Audit Committee Financial
Expert**

Our board of directors has
determined that Jesse Meidl possesses specific accounting and financial
management expertise, that he is the audit committee financial expert as defined
by the U.S. Securities and Exchange Commission, and that he is independent
within the meaning of the rules of the NYSE. Our board of directors has also
determined that other members of our audit committee have sufficient experience
and ability in finance and compliance matters to enable them to adequately
discharge their responsibilities.

**Cease Trade Orders**

To the knowledge of the
Corporation, other than as disclosed below, no director or executive officer is,
as of the date of this Form 20-F, or was within 10 years prior to the date of
this Form 20-F, a director, chief executive officer or chief financial officer
of any company (including the Corporation) that: (i) was subject to a cease
trade order, an order similar to a cease trade order or an order that denied the
Corporation access to any exemption under securities legislation and which order
was in effect for a period of more than 30 consecutive days while he was acting
in the capacity as director, chief executive officer or chief financial officer
of such company; or (ii) was subject to any of the foregoing orders for a period
of more than 30 consecutive days after he ceased to be a director, chief
executive officer or chief financial officer of such company and which resulted
from an event that occurred while he was acting in such capacity.

William Petrie Sr. and Jesse
Meidl were each directors of Birch Lake Energy Inc (Birch Lake), which
was subject to cease trade orders in the province of Alberta for failure to file
financial statements for the financial year ended December 30, 2014 and
subsequent periods. The Toronto Stock Exchange (TSX) delisted Birch
Lakes common shares for failure to meet the continue disclosure obligations of
the TSX on April 5, 2015.

A cease trade order was issued by
the British Columbia Securities Commission (BCSC) under Section 164 of
the Securities Act (British Columbia) against ITME on February 18, 1999
for failure to file certain continuous disclosure documents. Upon completion of the
Arrangement, such cease trade order applies in the province of British Columbia
to Chelsea. On June 1, 2015, the Corporation announced that the BCSC granted a
full revocation of the cease trade order.

- 33 -

---

**Bankruptcies**

To the knowledge of the
Corporation, no director, executive officer or shareholder holding a sufficient
number of securities to affect materially the control of the Corporation, is, as
of the date of this Form 20-F, or was within 10 years prior to the date of this
Form 20-F, a director or executive officer of any company that, while such
person was acting in that capacity, or within a year of that person ceasing to
act in that capacity, became bankrupt, made a proposal under any legislation
relating to bankruptcy or insolvency or was subject to or instituted any
proceedings, arrangement or compromise with creditors or had a receiver,
receiver-manager or trustee appointed to hold its assets.

To the knowledge of the
Corporation, no director or executive officer of the Corporation, or shareholder
holding a sufficient number of securities to affect materially the control of
the Corporation has, within the 10 years before the date of this Form 20-F,
become bankrupt, made a proposal under any legislation relating to bankruptcy or
insolvency, or become subject to or instituted any proceedings, arrangement or
compromise with creditors, or had a receiver, receiver manager or trustee
appointed to hold the assets of the director, executive officer or Shareholder.

**Penalties or Sanctions**

To the knowledge of the
Corporation, no director or executive officer of the Corporation, or shareholder
holding a sufficient number of securities to affect materially the control of
the Corporation has been subject to any penalties or sanctions imposed by a
court relating to securities legislation or by a securities regulatory authority
or has entered into a settlement agreement with a securities regulatory
authority, or has been subject to any other penalties or sanctions imposed by a
court or regulatory body that would likely be considered important to a
reasonable investor in making an investment decision.

**Conflicts of Interest**

To the knowledge of the
Corporation, there are no conflicts of interest between the Corporation and its
officers, Board of Directors and senior management.

|6. **B** | COMPENSATION
|-------- | ------------

The remuneration of directors and
key executives is determined by the Board of Directors having regard to the
performance of individuals and market trends. During 2017, 2016 and 2015, the
Company did not incur any salaries and no key management or Director received
any salary or consulting fees.

|6. **C** | BOARD PRACTICES
|-------- | ---------------

Each director holds office until
the next annual general meeting of the Company unless his or her office is
earlier vacated in accordance with the Articles of the Company (the Articles)
or the ABCA.

During the most recently
completed fiscal year, there were no arrangements (standard or otherwise) under
which directors of the Company were compensated by the Company or its
subsidiaries for services rendered in their capacity as directors, nor were any
amounts paid to the directors for committee participation or special
assignments. There were no arrangements under which the directors of the Company
would receive compensation or benefits in the event of the termination of that
office.

The current members of the Audit
Committee are Messrs. Meidl (Chairman), Petrie Sr. and Petrie Jr., all of whom
are financially literate and each of Messrs. Meidl and Petrie Jr. are
considered to be independent under NI 52-110. Mr. Petrie Sr. is the Chief
Executive Officer of the Corporation and is therefore not considered to be
independent.

- 34 -

---

The audit committee is
responsible for selecting, evaluating and recommending the Companys auditors to
the Board of Directors for shareholder approval; evaluating the scope and
general extent of the auditors review; overseeing the work of the auditors;
recommending the auditors compensation to the Board of Directors; and assisting
with the resolution of any disputes between management and the auditors
regarding financial reporting. The audit committee is also responsible for
reviewing the Companys annual and interim financial statements and recommending
their approval to the Board of Directors; reviewing the Companys policies and
procedures with respect to internal controls and financial reporting; and
establishing procedures for dealing with complaints regarding accounting,
internal controls or auditing matters.

|6. **D** | EMPLOYEES
|-------- | ---------

The Company does not have any
full-time employees. The Company also engages consultants and professionals on
an as needed basis.

|6. **E** | SHARE OWNERSHIP
|-------- | ---------------

As of the date of this Form 20-F,
the Corporations directors and executive officers, including the directors and
officers of the Corporations subsidiaries, as a group beneficially own,
directly or indirectly, or exercise control or direction over, an aggregate of
14,171,400 of the issued and outstanding Common Shares representing 22.1% of the
outstanding Common Shares.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

|7. **A** | MAJOR SHAREHOLDERS
|-------- | ------------------

The following table sets forth
information regarding the beneficial ownership of the common stock of the
Company as of the date of this 20-F, by each of the Companys officers and
directors, each person who is known by the Company to own beneficially more than
5% of the outstanding common stock and all officers and directors of the Company
as a group. The title of the class is common stock, no par value.

|                                      |  | # of Shares  |  |  |               | 
|------------------------------------- |  | ------------ |  |  | ------------- | 
|                                      |  | Beneficially |  |  | Percentage of | 
|Name and
      Address of Stockholder |  | Owned        |  |  | Class         | 
|                                      |  |              |  |  |               | 
|Robert Kamon                          |  | 5,012,717    |  |  | 7.72%         | 
|PO Box 1629                           |  |              |  |  |               | 
|Cisco TX 76437                        |  |              |  |  |               | 
|USA                                   |  |              |  |  |               | 
|                                      |  |              |  |  |               | 
|Brisbane Petroleum Ltd.               |  | 4,668,319    |  |  | 7.32%         | 
|65 Burswood Road                      |  |              |  |  |               | 
|Burswood WA 6100                      |  |              |  |  |               | 
|Australia                             |  |              |  |  |               | 
|                                      |  |              |  |  |               | 
|Ely Sakhai                            |  | 3,801,571    |  |  | 5.93%         | 
|10 Windsor Drive                      |  |              |  |  |               | 
|Old Westbury NY 11568                 |  |              |  |  |               | 
|USA                                   |  |              |  |  |               | 
|                                      |  |              |  |  |               | 
|Jesse Meidl                           |  | 3,771,400    |  |  | 5.89%         | 
|127  10thAvenue NW                   |  |              |  |  |               | 
|Calgary, Alberta, Canada T2M 0B4      |  |              |  |  |               | 
|                                      |  |              |  |  |               | 
|William Petrie, Sr.                   |  | 3,700,000    |  |  | 5.78%         | 
|P. O. Box 1359                        |  |              |  |  |               | 
|Cochrane, Alberta Canada T4C 1B3      |  |              |  |  |               | 
|                                      |  |              |  |  |               | 
|William Petrie, Jr.                   |  | 3,700,000    |  |  | 5.78%         | 
|P. O. Box 1359                        |  |              |  |  |               | 
|Cochrane, Alberta Canada T4C 1B3      |  |              |  |  |               | 

Note: The stockholders identified
in this table have sole voting and investment power with respect to the shares
beneficially owned by them.

- 35 -

---

The shareholders listed in the
table above (i) have no rights to acquire additional shares through options,
warrants, rights, or conversion privileges within the next sixty days, and (ii)
do not have voting rights different from other holders of our common shares.

As of the date of this 20-F, 31%
shares of the Companys outstanding common stock were held by 339 holders of
record in the United States, not including The Depository Trust Company (DTC).
As of April 30, 2018, DTC was the holder of record of 16.1 million shares.

|7. | B RELATED PARTY
TRANSACTIONS
|-- | ----------------------------

**Shareholder loans**

The Companys shareholder loans
are described in note 8 on the audited consolidated financial statements for the
year ended December 31, 2017. The loans were negotiated between the Company and
the shareholders on terms comparable to arms-length transactions of similar
type. The fair value of the shareholder loans approximates their carrying value
at December 31, 2017 and 2016.

For disclosure about common
shares awarded to directors, see Item 5. Operating and Financial Review and
Prospects  Related Party Transactions and Item 6.B Compensation.

|7. | C INTEREST OF EXPERTS AND
COUNSEL
|-- | ---------------------------------

No director, officer or employee
of any of the experts referred to herein is or is expected to be elected,
appointed or employed as a director, officer or employee of Chelsea or of any
associate or affiliate of Chelsea.

ITEM 8. FINANCIAL INFORMATION

|8. **A** | CONSOLIDATED STATEMENTS AND OTHER FINANCIAL
      INFORMATION
|-------- | -------------------------------------------------------------

Please see Item 18. Financial
Statements for additional information required to be disclosed under this Item.

|8. **B** | SIGNIFICANT CHANGES
|-------- | -------------------

Please see Item 3. Key
Information, Item 4 Information on the Company and Item 5. Operating and
Financial Review and Prospects for additional information.

ITEM 9. THE OFFER AND LISTING

|9. **A** | PRICING HISTORY
|-------- | ---------------

The principal trading market for
the common equity securities of the Company is the National Association of
Securities Dealers OTC Quotation Board (the OTCQB) quotation system
under the symbol COGLF. These quotations reflect inter-dealer prices, without
retail mark-up, mark- down or commissions, and may not represent actual
transactions.

The following table summarizes
the annual high and low market prices for the five most recent full financial
years:

US$High
    
    
    Low2017
    
    0.025
    
    
    0.00032016
    
    0.04
    
    
    0.012015
    
    0.11
    
    
    0.012014
    
    0.30
    
    
    0.042013
    
    0.35
    
    
    0.04


- 36 -

---

The following table summarizes
the quarterly high and low market prices for each full financial quarter over
the two most recent full financial years:

2017
    
    
    2016US$
    
    High
    
    
    Low
    
    
    High
    
    
    Low1st Quarter
    
    0.0153
    
    
    0.0052
    
    
    0.04
    
    
    0.012nd Quarter
    
    0.019
    
    
    0.0026
    
    
    0.02
    
    
    0.013rd Quarter
    
    0.0089
    
    
    0.0003
    
    
    0.02
    
    
    0.014th Quarter
    
    0.025
    
    
    0.0015
    
    
    0.02
    
    
    0.01


The following table summarizes
monthly high and low market prices for each of the most recent six months:

US$High
    
    
    LowApril 2018
    
    0.075
    
    
    0.0035March 2018
    
    0.01
    
    
    0.005February 2018
    
    0.01
    
    
    0.005January 2018
    
    0.015
    
    
    0.0035December 2017
    
    0.025
    
    
    0.0035November 2017
    
    0.075
    
    
    0.0015


The approximate number of
securities holders of record of the Company as at the date of this 20-F was 390
of record, which does not include stockholders whose shares are held in street
or nominee names. We have no outstanding stock options. See Item 5. Operating
and Financial Review and Prospects  Warrants for additional information.

|9. **B** | PLAN OF DISTRIBUTION                                                   
|-------- | -----------------------------------------------------------------------
|         |                                                                        
|         | Not applicable.                                                        
|         |                                                                        
|9. **C** | MARKET                                                                 
|         |                                                                        
|         | Our common shares are listed on the OTCQB under the
      symbol COGLF.
|         |                                                                        
|9. **D** | SELLING SHAREHOLDERS                                                   
|         |                                                                        
|         | Not applicable.                                                        
|         |                                                                        
|9. **E** | DILUTION                                                               
|         |                                                                        
|         | Not applicable.                                                        
|         |                                                                        
|9. **F** | EXPENSES OF THE ISSUE                                                  
|         |                                                                        
|         | Not applicable.                                                        

ITEM 10. ADDITIONAL INFORMATION

|10. **A** | SHARE CAPITAL  
|--------- | ---------------
|          |                
|          | Not applicable.

- 37 -

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|10. **B** | ARTICLES OF AMALGAMATION
|--------- | ------------------------

The Company is registered under
the ABCA. The Articles do not contain any limitations on the Companys objects
or purposes.

With respect to directors, under
the Articles, a director who is in any way, directly or indirectly, interested
in an existing or proposed contract or transaction with the Company or who holds
any office or possesses any property whereby, directly or indirectly, a duty or
interest might be created to conflict with his or her duty or interest as a
director must disclose the nature and extent of his or her interest in such
contract or transaction or of the conflict or potential conflict with his or her
duty and interest as a director, as the case may be. An interested director can
vote on only a limited number of such matters (securing a loan to the Company, a
contract with an affiliate of which a director is a director or officer, a
contract to subscribe for or underwrite debentures to be issued, a contract
where all other directors are also interested in the contract, compensation of
the directors or insurance or indemnity) provided the interest is disclosed.
Otherwise, even with disclosure of the interest, such a director cannot vote on
a material contract or proposed material contract.

Subject to the ABCA, there is no
restriction in the Articles on the power of the board of directors to have the
Company borrow money, issue debt obligations, secure debt or other obligations
of the Company or give financial assistance to any person. The Articles contain
no provision for the retirement or non-retirement of directors under an age
limit requirement. A director is not required to hold any shares of the Company
in order to be a director.

The Articles provide for the
issuance of an unlimited number of common shares, without par value, and an
unlimited number preferred shares, without par value. All holders of common
shares have equal voting rights (one vote per share), equal rights to dividends
when and if declared, and equal rights to share in assets upon liquidation of
the Company. The common shares are not subject to any redemption or sinking fund
provisions or any purchase or pre-emptive rights. All issued and outstanding
shares are fully paid and non-assessable securities.

The Company may alter the
Articles, by special resolution, to create, define and attach special rights or
restrictions to any common shares as well as to vary or abrogate any special
rights and restrictions attached to any common shares.

An annual meeting of shareholders
must be called by the board of directors not later than 15 months after the last
annual meeting. The directors at any time may call an extraordinary general
meeting of shareholders. Notice of any meeting must be sent in accordance with
the ABCA. All shareholders entitled to vote are entitled to be present at a
shareholders meeting. A quorum is the presence in person or by proxy of the
holders of at least 10% of the issued shares entitled to be voted at the
meeting.

Except under the Investment
Canada Act (the ICA), there are no limitations specific to the rights of
non-Canadians to hold or vote our shares under the laws of Canada or our
organizational documents. The ICA requires a non-Canadian making an investment
which would result in the acquisition of control of a Canadian business, the
gross value of the assets of which exceed certain threshold levels or the
business activity of which is related to Canadas cultural heritage or national
identity, to either notify, or file an application for review with, Investment
Canada, the federal agency created by the ICA. The notification procedure
involves a brief statement of information about the investment on a prescribed
form which is required to be filed with Investment Canada by the investor at any
time up to 30 days after implementation of the investment. It is intended that
investments requiring only notification will proceed without intervention by
government unless the investment is in a specific type of business related to
the scope of the ICA. If an investment is reviewable under the ICA, an
application for review in the prescribed form normally is required to be filed
with Investment Canada before the investment is made and it cannot be
implemented until completion of review and Investment Canada has determined that
the investment is likely to be of net benefit to Canada. If the agency is not so
satisfied, the investment cannot be implemented if not made, or if made, it must
be unwound.

- 38 -

---

|10. **C** | MATERIAL CONTRACTS
|--------- | ------------------

Except as set forth below, no
director or executive officer of the Corporation or a person or company that
beneficially owns, or controls or directs, directly or indirectly, more than ten
percent (10%) of any class or series of voting securities of the Corporation, or
any associate or affiliate of any such person, has had any material interest,
direct or indirect, in any transaction within the three (3) most recently
completed financial years or the current financial year that has materially
affected or is reasonable expected to materially affect the Corporation.

Each of Jesse Meidl, William H.
Petrie, Sr. and William H. Petrie, Jr. were directors, officers and significant
shareholders of 1629518 Alberta Ltd., which company was acquired by Chelsea in
exchange for the issuance of an aggregate of 13,278,571 Common Shares on
February 29, 2012. Concurrently with such acquisition, Chelsea acquired a 100%
Working Interest in PL 18 and 40 and a 50% Working Interest in PL 280 and
completed the Non-Brokered Private Placement. Each of Messrs. Meidl and Petrie,
Sr. were also added to the Board of Directors on such date.

On November 17, 2011, 1629518
Alberta Ltd. (Newco), the Company and the registered and beneficial
owners of all the issued and outstanding shares of Newco (the Newco
Securityholders) entered into a share exchange agreement (the Share
Exchange Agreement). Pursuant to the Share Exchange Agreement, the Company
and the Newco Securityholders exchanged common shares on a one for one basis.
The common shares of the Company that were issued pursuant to the Share Exchange
Agreement were subject to an indefinite hold period in Canada. The Newco
Securityholders were required to surrender the certificates representing their
shares and, in return, were entitled to receive a certificate representing the
Company's common shares. From the date of the Share Exchange Agreement until the
date of closing, the Company had to use its commercially reasonable efforts to
conduct its business in the ordinary course, as well as obtain all necessary
regulatory approvals and financing.

On November 17, 2011, Brisbane
Petroleum Ltd., Delbaere Associates Pty. Limited (both parties together, the
Vendor), Chelsea Oil Australia Pty Ltd (the Purchaser) and the
Company entered into a purchase and sale agreement (the Purchase and Sale
Agreement). Pursuant to the Purchase and Sale Agreement, the Vendor sold and
transferred certain assets to the Purchaser in exchange for the Company issuing
a total of 8,571,429 of its common shares to the Vendor. In order to close the
transaction certain conditions were to be met, including obtaining certain
approvals and consents, passing of certain resolutions and the completing of
financing.

|10. **D** | EXCHANGE CONTROLS
|--------- | -----------------

There are currently no
governmental laws, decrees, regulations or other legislation of Canada or the
United States which restrict the import or export of capital or the remittance
of dividends, interest or other payments to non-residents of Canada or the
United States holding our securities, except as otherwise described in this
annual report on Form 20-F under Item 10.E Taxation.

|10. **E** | TAXATION
|--------- | --------

As a result of its Overriding
Royalty Interests attributable to properties outside the United States, the
Company is subject to the imposition of taxes by foreign governments upon the
Companys income derived from such foreign jurisdictions. These taxes are of
various types, with differing tax rates, and are subject to change. Generally,
the Companys income from a foreign jurisdiction will be taxed in the same
manner as that for other companies operating in the jurisdiction, but
discriminatory taxation by a particular jurisdiction may occur. The current
non-resident corporate income tax rate in Australia, for Overriding Royalty
Interests, is 30%.

As a Canadian corporation, the
Company is liable for income taxes under the laws of Canada. Under Canadian law
the Companys Australian-source income is subject to a 25% tax (on Canadian
income). We believe the 30% Australian tax should be a partial credit toward the
payment of the 25% Canadian tax under double taxation treaties between the
countries.

- 39 -

---

The Company is taxable in the
U.S. on U.S. source income. Because there has been neither U.S. source net
income nor any income effectively connected with a U.S. trade or business, there
have been no U.S. taxes incurred to date.

|10. **F** | DIVIDENDS AND PAYING AGENTS
|--------- | ---------------------------
|          |                            
|          | Not applicable.            
|          |                            
|10. **G** | STATEMENT BY EXPERTS       
|          |                            
|          | Not applicable.            
|          |                            
|10. **H** | DOCUMENTS ON DISPLAY       

Any statement in this Form 20-F
about any of our contracts or other documents is not necessarily complete. If
the contract or document is filed as an exhibit to this Form 20-F, the contract
or document is deemed to modify the description contained in this Form 20-F. You
must review the exhibits themselves for a complete description of the contract
or document.

We are subject to the information
filing requirements of the Exchange Act, and accordingly are required to file
periodic reports and other information with the SEC. As a foreign private issuer
under the SECs regulations, we file annual reports on Form 20-F and other
reports on Form 6-K. The information disclosed in our reports may be less
extensive than that required to be disclosed in annual and quarterly reports on
Forms 10-K and 10-Q required to be filed with the SEC by U.S. issuers.

Moreover, as a foreign private
issuer, we are not subject to the proxy solicitation or disclosure requirements
under Section 14 of the Exchange Act, and our directors and principal
shareholders are not subject to the insider short swing profit reporting and
recovery rules under Section 16 of the Exchange Act. Our SEC filings are
available at the SECs website at www.sec.gov. You may also read and copy any
document we file with the SEC at the public reference facilities maintained by
the SEC at SEC Headquarters, Public Reference Section, 100 F Street, N.E.,
Washington D.C. 20549. You may obtain information on the operation of the SECs
public reference facilities by calling the SEC at 1-800-SEC-0330.

|10. **I** | SUBSIDIARY INFORMATION
|--------- | ----------------------
|          |                       
|          | Not applicable.       

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
NON-PRODUCT RELATED MARKET RISK

See Item 5. Operating and
Financial Review and Prospects  Quantitative and Qualitative Disclosures About
Market Risks.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not applicable.

- 40 -

---

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

In connection with the
preparation of this Form 20-F, an evaluation was carried out by our management,
with the participation of the Chief Executive Officer, of the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)) as
of December 31, 2017. Disclosure controls and procedures are designed to ensure
that information required to be disclosed in reports filed or submitted under
the Exchange Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC rules and forms and that such information is
accumulated and communicated to management, including the Chief Executive
Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, our
management concluded that our disclosure controls and procedures were effective
in reporting information required to be disclosed within the time periods
specified in the SECs rules and forms.

Managements Annual Report on Internal Control Over
Financial Reporting

Management of our company is
responsible for establishing and maintaining adequate internal control over
financial reporting. Our companys internal control over financial reporting is
a process, under the supervision of the Chief Executive Officer, designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Companys financial statements for external purposes
in accordance with IFRS accounting principles. Internal control over financial
reporting includes those policies and procedures that:

| |  | Pertain to the maintenance of records that in reasonable
      detail accurately and fairly reflect the transactions and dispositions of
      the Companys assets;                                                                                                                                                                                  
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | Provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of the financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures are being made only in accordance with
      authorizations of management and the Board of Directors; and
| |   |                                                                                                                                                                                                                                                                                                                                                       
| |  | Provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use, or disposition of the
      Companys assets that could have a material effect on the financial
      statements.                                                                                                                       

Our management conducted an
assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2016, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, our
management concluded that there was no material weakness in our internal
controls over financial reporting, and accordingly, our controls are effective.

---

Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
all misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions or that the degree of compliance with the
policies or procedures may deteriorate.

Report of Independent Registered Chartered
Accountants

This Form 20−F does not include
an attestation report of our registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject
to attestation by our registered public accounting firm under confirming rules
of the SEC adopted pursuant to the 2010 Dodd−Frank Wall Street Reform and
Consumer Protection Act.

Changes in Internal Control

There was no change in our
internal control over financial reporting during the year ended December 31,
2017, that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

ITEM 16. AUDIT COMMITTEE FINANCIAL EXPERTS

|16. **A** | AUDIT COMMITTEE FINANCIAL
EXPERTS
|--------- | ---------------------------------

The Audit Committee has been
structured to comply with the requirements of Canadian National Instrument 52-
110 - Audit Committee (NI 52-110) as it relates to OTC reporting
issuers. The Board has determined that the Audit Committee members have the
appropriate level of financial understanding and industry specific knowledge to
be able to perform the duties of the position and in particular are financially
literate as defined in NI 52-110.

The Audit Committee periodically
assesses the adequacy of procedures for the public disclosure of financial
information and review, on behalf of the Board, and reports to the Board the
results of its review and its recommendations regarding all material matters of
a financial reporting and audit nature, including, but not limited to:

| | oversight of the nature and scope of the annual
      audit;                                                           
|- | -----------------------------------------------------------------------------------------------------------------------
| | oversight of managements reporting on internal
      accounting standards and practices; and                          
| | review of financial information, accounting systems and
      procedures, financial reporting and financial statements.

The primary objectives of the Audit Committee are as follows:

| | assist directors in meeting their responsibilities
      (especially for accountability) in respect of the preparation and
      disclosure of the financial statements of the Corporation and related
      matters;
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provide better communication between directors
      and external auditors;                                                                                                                                          
| | enhance the external auditors independence;                                                                                                                                                                         
| | increase the credibility and objectivity of
      financial reports; and                                                                                                                                             
| | strengthen the role of the outside directors by
      facilitating in-depth discussions between directors on the Audit
      Committee, management and external auditors.                                            

The Audit Committee ensures
satisfactory procedures for (i) receipt, retention and treatment of complaints
received by the Corporation regarding any accounting, internal accounting
controls or auditing matters and (ii) the confidential anonymous submission of
concerns by employees regarding questionable accounting or auditing matters. The
Board is kept informed of the Audit Committees activities by a report delivered
at each regular meeting of the Board of Directors.

- 42 -

---

The Audit Committee shall
recommend the appointment and terms of engagement of the external auditor
annually and reviews and evaluates the external auditor. The external auditor
reports directly to the Audit Committee. In addition, the Audit Committee
pre-approves non-audit services undertaken by the external auditor and on an
annual basis, reviews and discusses with the external auditors all significant
relationships such auditors have with the Corporation to determine the auditors
independence.

The Audit Committee has direct
responsibility for overseeing the work of the external auditor engaged for the
purpose of preparing or issuing an auditors report or performing other audit,
review or attest services, including the resolution of disagreements between the
external auditor and management.

The Audit Committee meets at
least once per financial quarter to fulfill its mandate. A copy of the Audit
Committee Charter is attached as Appendix A to this Form 20-F.

**Composition of the Audit
Committee**

The current members of the Audit
Committee are Messrs. Meidl (Chairman), Petrie Sr. and Petrie Jr., all of whom
are financially literate and each of Messrs. Meidl and Petrie Jr. are
considered to be independent under NI 52-110. Mr. Petrie Sr. is the Chief
Executive Officer of the Corporation and is therefore not considered to be
independent.

**Relevant Education and
Experience**

The following relevant education
and experience of the current and proposed members of the Audit Committee have
been used in assessing their financial literacy:

***Jesse Meidl
(Chairman)***

Mr. Meidl has over 18 years of
experience in the oil and gas sector. He was previously Chief Financial Officer
of a private international energy company, headquartered in London, England.
Prior thereto, he was an investment banker in the International Oil & Gas
group of Thomas Weisel Partners in London (now Stifel Nicolas). Mr. Meidl was
previously the Chief Financial Officer for Arsenal Energy Inc., an international
exploration company listed on the Toronto Stock Exchange, which held production
assets in Canada and the USA and exploration assets in Egypt, Colombia and
Uzbekistan. He qualified as a Chartered Accountant with KPMG in Calgary, where
he specialized in oil and gas exploration and production and services. He also
holds the ICAEW Corporate Finance qualification and a B. Comm. degree from the
University of Saskatchewan (Canada).

***Bill Petrie Jr.***

Director, Former Vice-President
Exploration for Windtalker Energy Corp., Former Technical Manager at ENVOI Ltd.,
UK based firm providing marketing and A&D services.

***Bill Petrie Sr.***

Executive Chairman, CEO and a
Director of Chelsea since March 1, 2012 and Director of Chelsea Oil Australia
Pty since November 2011. Chief Executive Officer and Director of Birch Lake
Energy Inc. since December 5, 2007.

**Audit Committee Over
sight**

At no time was a recommendation
of the Audit Committee to nominate or compensate an external auditor not adopted
by the board of directors.

- 43 -

---

**Pre-Approval Policies and
Procedures**

Any proposed audit and permitted
non-audit services (as identified by the Audit Committee at the time the annual
audit engagement is approved) to be provided by the external auditor to the
Corporation or its subsidiaries must receive prior approval from the Audit
Committee. The Corporation has not adopted specific policies and procedures for
the engagement of non-audit services. The Audit Committee will review the
engagement of non-audit services as may be required.

The Chief Executive Officer shall
act as the primary contact to receive and assess any proposed engagements from
the external auditor. Following receipt and initial review for eligibility by
the primary contact, a proposal would then be forwarded to the Audit Committee
for review and confirmation that a proposed engagement is permitted. In the
majority of such instances, proposals may be received and considered by the
Chair of the Audit Committee (or such other member of the Audit Committee who
may be delegated authority to approve audit and permitted non-audit services),
for approval of the proposal on behalf of the Audit Committee. The Audit
Committee Chair will then inform the Audit Committee of any approvals granted at
the next scheduled meeting.

Our board of directors has
determined that Toby Pierce possesses specific accounting and financial
management expertise, that he is the audit committee financial expert as defined
by the U.S. Securities and Exchange Commission, and that he is independent
within the meaning of the rules of the NYSE. Our board of directors has also
determined that other members of our audit committee have sufficient experience
and ability in finance and compliance matters to enable them to adequately
discharge their responsibilities.

|16. **B** | CODE OF ETHICS
|--------- | --------------

The Company has not adopted a
code of ethics that applies to its principal executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions because it does not believe that, given its small
size and limited operations, a code of ethics is warranted. However, as the
Company grows and it continues to develop its operations it may consider
adopting a code of ethics.

|16. **C** | PRINCIPAL ACCOUNTANT FEES AND
  SERVICES
|--------- | ----------------------------------------

MNP LLP was appointed as the
Corporations auditor on April 12, 2017. Prior thereto, KPMG LLP was the auditor
of the Corporation from March 31, 2014. The following table provides information
about the fees billed to the Corporation for professional services rendered by
KPMG LLP and MNP LLP during the three prior fiscal years:

|                   |   | 2017   |  |   | 2016   |  |   | 2015   | 
|------------------ | - | ------ |  | - | ------ |  | - | ------ | 
|Audit Fees         | $ | 25,000 |  | $ | 30,000 |  | $ | 10,000 | 
|Audit-Related Fees |   | -      |  |   | -      |  | $ | 50,000 | 
|Tax Fees           |   | -      |  |   | -      |  | $ | 7,500  | 
|All Other Fees     |   | -      |  |   | -      |  |   | -      | 
|Total:             | $ | 25,000 |  | $ | 30,000 |  | $ | 67,500 | 

|          | Our audit committee pre-approves all audit and non-audit
      services provided to the Company.
|--------- | ------------------------------------------------------------------------------------------------
|          |                                                                                                 
|16. **D** | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      COMMITTEE                                 
|          |                                                                                                 
|          | None.                                                                                           

- 44 -

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|16. **E** | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
      AFFILIATED PURCHASER
|--------- | ---------------------------------------------------------------------------

We may from time-to-time, subject
to applicable law, purchase our common shares for cancellation in the open
market, provided that any necessary approval has been obtained.

In the year ended December 31,
2017, none of our common shares were repurchased and cancelled.

|16. **F** | CHANGE IN REGISTRANTS CERTIFYING
  ACCOUNTANT
|--------- | ----------------------------------------------

Effective April 10, 2017, our
board of directors resolved to appoint MNP LLP (MNP) as the Companys
independent registered public accounting firm, and KPMG LLP (KPMG) was
dismissed on the same day. We reported the change in our independent registered
public accounting firm to appropriate Canadian regulators on April 19, 2017. The
change was not made due to any disagreements with KPMG LLP.

The report of KPMG on our
consolidated financial statements as at December 31, 2015 and 2014 and for each
of the years in the three year period ended December 31, 2015 contained no
adverse opinion or a disclaimer of opinion, and were not qualified or modified
as to audit scope, or accounting principles. The report of KPMG did contain an
emphasis of matter paragraph in relation to the Companys working capital
deficiency as at December 31, 2015, which included shareholder loans that had
matured and were in default, and the negative cash flow from operation for the
year ended December 31, 2015, which events casted significant doubt about the
Companys ability to continue as a going concern.

During the two fiscal years ended
December 31, 2014 and 2015, and the subsequent interim period through April 12,
2017, the date of resignation of KPMG, there have been no disagreements with
KPMG on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of KPMG, would have caused it to make reference thereto in
their reports on the consolidated financial statements for such years.

During the two fiscal years ended
December 31, 2014 and 2015, and the subsequent interim period through April 12,
2017, there have been no reportable events requiring disclosure pursuant to Item
16F(a)(1)(v) of Form 20-F.

We provided a copy of the above
disclosure under this Item 16F to KPMG and requested that KPMG furnish a letter
stating whether it agrees with the above statements, and if not, stating the
respects in which it does not agree. A copy of the letter from KPMG was filed as
Exhibit 16.1 along with Form-20F dated April 28, 2017.

During the two fiscal years ended
December 31, 2014 and 2015, and the subsequent interim period prior to our
engagement of MNP, neither we nor anyone on our behalf consulted MNP regarding
either (i) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on our financial statements, or (ii) any matter that was either the
subject of a disagreement with MNP or a reportable event. Also, during the two
fiscal years ended December 31, 2014 and 2015, and the subsequent interim period
prior to our engagement of MNP, we have not obtained any written report or oral
advice that MNP concluded was an important factor considered by us in reaching a
decision as to the accounting, auditing or financial reporting issue.

As used herein, the term
reportable event means any of the items listed in paragraphs (a)(1)(v)(A)-(D)
of Item 16F of Form 20-F, and the term disagreement shall be interpreted in
accordance with Item 16F(a)(1)(iv) of Form 20-F and related instructions to Item
16-F of Form 20-F filed April 28, 2017.

- 45 -

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|16. **G** | CORPORATE GOVERNANCE
|--------- | --------------------

Our corporate practices are not
materially different from those required of domestic corporations under the NYSE
listing standards.

|16. **H** | MINE SAFETY DISCLOSURES
|--------- | -----------------------

Pursuant to Section 1503(a) of
the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(Dodd−Frank Act), issuers that are operators, or that have a subsidiary that
is an operator, of a coal or other mine in the United States are required to
disclose in their periodic reports filed with the SEC information regarding
specified health and safety violations, orders and citations, related
assessments and legal actions, and mining-related fatalities under the
regulation of the Federal Mine Safety and Health Administration (MSHA) under
the Federal Mine Safety and Health Act of 1977, as amended (the Mine Act).
During the fiscal year ended December 31, 2016, we did not have any mines in the
United States subject to regulation by MSHA under the Mine Act.

- 46 -

---

PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

See the list of financial
statements on page F-1 which are filed as part of this annual report on Form
20-F.

ITEM 19. EXHIBITS

The following exhibits are
incorporated by reference or filed with this 20-F as denoted below:

|Number |  | Description                                                                                                                                                                                                                                                                                     
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |  |                                                                                                                                                                                                                                                                                                 
|1.1    |  | Certificate of Amalgamation of Chelsea Oil and Gas Ltd.
      dated October 1, 2013                                                                                                                                                                                                             
|       |  |                                                                                                                                                                                                                                                                                                 
|1.2    |  | Articles of Amalgamation of Chelsea Oil and Gas Ltd.
      dated October 1, 2013                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                 
|4.1    |  | Voting Agreement entered into as of February 29, 2012 by
      and among Australian-Canadian Oil Royalties, Ltd. and Jessie Meidl and
      William Petrie, Sr.                                                                                                                                 
|       |  |                                                                                                                                                                                                                                                                                                 
|4.2    |  | Share Exchange Agreement among Australian-Canadian Oil
      Royalties Ltd., 1629518 Alberta Ltd. and its individual security holders,
      incorporated by reference to Exhibit 10-1 to ACORs Current Report on Form
      8K filed November 23, 2011                                        
|       |  |                                                                                                                                                                                                                                                                                                 
|4.3    |  | Purchase and Sale Agreement among Australian-Canadian Oil
      Royalties Ltd., Brisbane Petroleum Ltd., Delbaere Associates Pty. Limited
      and Chelsea Oil Australia Pty, Ltd., incorporated by reference to Exhibit
      10-2 to ACORs Current Report on Form 8K filed November 23, 2011
|       |  |                                                                                                                                                                                                                                                                                                 
|8.1    |  | Significant Subsidiaries (as defined in (210.1-02(w) of
      Regulation S-X) of Chelsea Oil & Gas Ltd. (incorporated by reference
      to Item 4 Information on the Company)                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                 
|12.1   |  | Certification of Chief Executive Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002(1)                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                 
|12.2   |  | Certification of Chief Financial Officer pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002(1)                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                 
|12.3   |  | Certification of Chief Executive Officer and Chief
      Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002(1)                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                 
|16.1   |  | Letter from KPMG LLP regarding Notice of Change of
      Auditors of Chelsea Oil and Gas Ltd. (1)                                                                                                                                                                                               
|       |  |                                                                                                                                                                                                                                                                                                 
|16.2   |  | Consent letter from MNP LLP (1)                                                                                                                                                                                                                                                                 

| | (1) | Filed as an exhibit to the 20-F date April 28,
  2017
| | --- | -----------------------------------------------------

---

SIGNATURE

The registrant hereby certifies
that it meets all of the requirements for filing an annual report on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual
report on its behalf.

Dated: April 30, 2018

Chelsea Oil and Gas Ltd.By:
    /s/
      Jesse MeidlName: Jesse MeidlTitle: Director


- 48 -

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APPENDIX AAUDIT COMMITTEE CHARTER

Role and Obligations

The Audit Committee (the Committee) is a committee of
the board of directors (the Board) of Chelsea Oil and Gas Ltd. (the
Corporation) to which the Board has delegated its responsibility for
the oversight of the nature and scope of the annual audit, the oversight of
managements reporting on internal accounting standards and practices, the
review of financial information, accounting systems and procedures, financial
reporting and financial statements and has charged the Committee with the
responsibility of recommending, for approval of the Board, the audited financial
statements, interim financial statements and other mandatory disclosure releases
containing financial information.

The primary objectives of the Audit Committee are as follows:

|1. | assist directors in meeting their responsibilities
      (especially for accountability) in respect of the preparation and
      disclosure of the financial statements of the Corporation and related
      matters;
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                      
|2. | provide better communication between directors and
      external auditors;                                                                                                                                          
|   |                                                                                                                                                                                                                      
|3. | enhance the external auditors independence;                                                                                                                                                                         
|   |                                                                                                                                                                                                                      
|4. | increase the credibility and objectivity of financial
      reports; and                                                                                                                                             
|   |                                                                                                                                                                                                                      
|5. | strengthen the role of the outside directors by
      facilitating in depth discussions between directors on the Audit
      Committee, management and external auditors.                                            

Membership of Committee

|6. | The Committee will be comprised of at least three (3)
      directors of the Corporation, none of whom are members of management of
      the Corporation and all of whom are independent (as such term is used in
      National Instrument 52-110 - Audit Committees(NI 52-110)
      unless the Board determines that the exemption contained in NI 52-110 is
      available and determines to rely thereon.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                     
|7. | The Board of Directors may from time to time designate
      one of the members of the Committee to be the Chairman of the Committee
      (the Committee Chairman).                                                                                                                                                                                                                                              

All of the members of the Committee must be financially
literate (as defined in NI 52-110) unless the Board determines that an
exemption under NI 52-110 from such requirement in respect of any particular
member is available and determines to rely thereon in accordance with the
provisions of NI 52-110.

Mandate and Responsibilities Committee

It is the responsibility of the Committee to:

|8. | Oversee the work of the external auditors, including the
      resolution of any disagreements between management and the external
      auditors regarding financial reporting.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                 
|9. | Satisfy itself on behalf of the Board with respect to
      Corporations internal control systems:                                                                             

| | (a) | identifying, monitoring and mitigating business risks;
      and          
| | --- | --------------------------------------------------------------------------
| |     |                                                                           
| | (b) | ensuring compliance with legal, ethical and regulatory
      requirements.

|10. | Review the annual and interim financial statements of the
      Corporation and related managements discussion and analysis
      (MD&A) prior to their submission to the Board for approval.
      The process should include but not be limited
to:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | (a) | reviewing changes in accounting principles and policies,
      or in their application, which may have a material impact on the current
      or future years financial statements;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                     
| | (b) | reviewing significant accruals, reserves or other
      estimates such as the ceiling test calculation;                                                                             
| |     |                                                                                                                                                                                     
| | (c) | reviewing accounting treatment of unusual or
      non-recurring transactions; (d)ascertaining compliance with covenants
      under loan agreements;                               
| |     |                                                                                                                                                                                     
| | (d) | reviewing disclosure requirements for commitments and
      contingencies;                                                                                                          
| |     |                                                                                                                                                                                     
| | (e) | reviewing adjustments raised by the external auditors,
      whether or not included in the financial statements;                                                                   
| |     |                                                                                                                                                                                     
| | (f) | reviewing unresolved differences between management and
      the external auditors; and                                                                                            
| |     |                                                                                                                                                                                     
| | (g) | obtain explanations of significant variances with
      comparative reporting periods.                                                                                              

|11. | Review the financial statements, prospectuses, MD&A,
      annual information forms (AlF) and all public disclosure
      containing unaudited financial information (including, without limitation,
      annual and interim press releases and any other press releases disclosing
      earnings or financial results) before release and prior to Board approval.
      The Committee must be satisfied that adequate procedures are in place for
      the review of the Corporations disclosure of all other financial
      information and will periodically assess the accuracy of those
      procedures.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|12. | With respect to the appointment of external auditors by
      the Board:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | (a) | recommend to the Board the external auditors to be
      nominated;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (b) | recommend to the Board the terms of engagement of the
      external auditor, including the compensation of the auditors and a
      confirmation that the external auditors will report directly to the
      Committee;                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (c) | on an annual basis, review and discuss with the external
      auditors all significant relationships such auditors have with the
      Corporation to determine the auditors independence;                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (d) | when there is to be a change in auditors, review the
      issues related to the change and the information to be included in the
      required notice to securities regulators of such change; and                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (e) | review and pre-approve any non-audit services to be
      provided to the Corporation or its subsidiaries by the external auditors
      and consider the impact on the independence of such auditors. The
      Committee may delegate to one or more independent members the authority to
      pre-approve non-audit services, provided that the member(s) report to the
      Committee at the next scheduled meeting such pre-approval and the
      member(s) comply with such other procedures as may be established by the
      Committee from time to time.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (f) | recommend to the Board the external auditors to be
      nominated;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (g) | recommend to the Board the terms of engagement of the
      external auditor, including the compensation of the auditors and a
      confirmation that the external auditors will report directly to the
      Committee;                                                                                                                                                                                                                                                                                                                                            

- 50 -

---

|13. | Review with external auditors (and internal auditor if
      one is appointed by the Corporation) their assessment of the internal
      controls of the Corporation, their written reports containing
      recommendations for improvement, and managements response and follow-up
      to any identified weaknesses. The Committee will also review annually with
      the external auditors their plan for their audit and, upon completion of
      the audit, their reports upon the financial statements of the Corporation
      and its subsidiaries.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|14. | Review risk management policies and procedures of the
      Corporation (i.e., hedging, litigation and insurance).                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|15. | Establish a procedure for:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| | (a) | the receipt, retention and treatment of complaints
      received by the Corporation regarding accounting, internal accounting
      controls or auditing matters; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                       
| | (b) | the confidential anonymous submission by employees of the
      Corporation of concerns regarding questionable accounting or auditing
      matters.                  

|16. | Review and approve the Corporations hiring policies
      regarding partners and employees and former partners and employees of the
      present and former external auditors of the
Corporation.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Committee has authority to communicate directly with the
internal auditors (if any) and the external auditors of the Corporation. The
Committee will also have the authority to investigate any financial activity of
the Corporation. All employees of the Corporation are to cooperate as requested
by the Committee. The Committee may also retain persons having special expertise
and/or obtain independent professional advice to assist in filling their
responsibilities at such compensation as established by the Committee and at the
expense of the Corporation without any further approval of the Board.

Meetings and Administrative Matters

|17. | At all meetings of the Committee every question shall be
      decided by a majority of the votes cast. In case of an equality of votes,
      the Committee Chairman shall be entitled to a second or casting
    vote.                                                                      
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                               
|18. | The Committee Chairman will preside at all meetings of
      the Committee, unless the Committee Chairman is not present in which case
      the members of the Committee that are present will designate from among
      such members a Committee Chairman for purposes of the meeting.     
|    |                                                                                                                                                                                                                                                                                               
|19. | A quorum for meetings of the Committee will be a majority
      of its members, and the rules for calling, holding, conducting and
      adjourning meetings of the Committee will be the same as those governing
      the Board unless otherwise determined by the Committee or the
  Board.
|    |                                                                                                                                                                                                                                                                                               
|20. | Meetings of the Committee should be scheduled to take
      place at least four times per year.                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                               
|21. | Minutes of all meetings of the Committee will be taken.
      The Chief Financial Officer will attend meetings of the Committee, unless
      otherwise excused from all or part of any such meeting by the Committee
      Chairman.                                                         
|    |                                                                                                                                                                                                                                                                                               
|22. | The Committee will meet with the external auditor at
      least once per year (in connection with the preparation of the year-end
      financial statements) and at such other-times as the external auditor and
      the Committee consider appropriate.                                  
|    |                                                                                                                                                                                                                                                                                               
|23. | Agendas, approved by the Committee Chairman, will be
      circulated to Committee members along with background information on a
      timely basis prior to the Committee meetings.                                                                                                         

- 51 -

---

|24. | The Committee may invite such officers, directors and
      employees of the Corporation as it sees fit from time, to time to attend
      at meetings of the Committee and assist in the discussion and
      consideration of the matters being considered by the Committee.                                                                                                                                                                                                                                                                                                                        
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|25. | Minutes of the Committee will be recorded and maintained
      and circulated to directors who are not members of the Committee or
      otherwise made available at a subsequent meeting of the Board.                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|26. | The Committee may retain persons having special expertise
      and may obtain independent professional advice to assist in fulfilling its
      responsibilities at the expense of the Corporation.                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|27. | Any members of the Committee may be removed or replaced
      at any time by the Board and will cease to be a member of the Committee as
      soon as such member ceases to be a director. The Board may fill vacancies
      on the Committee by appointment from among its members. If and whenever a
      vacancy exists on the Committee, the remaining members may exercise all
      its powers so long as a quorum remains. Subject to the foregoing,
      following appointment as a member of the Committee, each member will hold
      such office until the Committee is reconstituted.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|28. | Any issues arising from these meetings that bear on the
      relationship between the Board and management should be communicated to
      the Chairman of the Board by the Committee
Chairman.                                                                                                                                                                                                                                                                                                                                                                                                      

- 52 -

---

|Chelsea Oil and Gas Ltd.                            
|----------------------------------------------------
|                                                    
|Consolidated Financial Statements                   
|For the years ended December 31, 2017, 2016 and 2015

---

|REPORT OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|-------------------------------------------------------------

To the shareholders and Directors of Chelsea Oil and Gas Ltd.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated financial
statements of Chelsea Oil and Gas Ltd. (the Company), which comprise the
consolidated statements of financial position as at December 31, 2017 and 2016,
and the consolidated statements of comprehensive loss, changes in equity
(deficiency) and cash flows for each of the three years in the period ended
December 31, 2017 including the related notes, comprising a summary of
significant accounting policies and other explanatory information (collectively
referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company as at December 31, 2017 and 2016, and its consolidated financial
performance and its consolidated cash flows for each of the three years in the
period ended December 31, 2017 in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards
Board.

Material Uncertainty Related to Going Concern

Without modifying our opinion, we draw attention to Note 2 to
the consolidated financial statements, which indicates that the Company incurred
a consolidated net loss of $9,925,337 during the year ended December 31, 2017
and, as of that date, the Companys consolidated current liabilities exceeded
its total assets by $3,405,090. As stated in Note 2 to the consolidated
financial statements, these events or conditions, along with other matters as
set forth in Note 2, indicate that a material uncertainty exists that casts
substantial doubt on the Companys ability to continue as a going concern.

Basis for Opinion

Managements Responsibility for the Consolidated Financial
Statements

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

Auditors Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States)
(PCAOB). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement, whether due to error or fraud. Those standards
also require that we comply with ethical requirements, including independence.
We are required to be independent with respect to the Company in accordance with
the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada, the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB. We are a public accounting firm registered with the PCAOB.



---

An audit includes performing procedures to assess the risks of
material misstatements of the consolidated financial statements, whether due to
error or fraud, and performing procedures to respond to those risks. Such
procedures include obtaining and examining, on a test basis, audit evidence
regarding the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether
due to error or fraud. In making those risk assessments, we consider internal
control relevant to the entitys preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entitys internal control. The Company is
not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Accordingly, we express no such opinion.

An audit also includes evaluating the appropriateness of
accounting policies and principles used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.

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



We have served as the Company's auditor since 2017.

Calgary, Canada

April 30, 2018



---

|Chelsea Oil and Gas Ltd.                                  
|----------------------------------------------------------
|Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015

|Consolidated
      Statements of Financial Position             | F-3       
|--------------------------------------------------------------- | ----------
|                                                                |           
|Consolidated
      Statements of Comprehensive Loss             | F-4       
|                                                                |           
|Consolidated
      Statements of Changes in Equity (Deficiency) | F-5       
|`                                                               |           
|Consolidated
      Statements of Cash Flows                     | F-6       
|                                                                |           
|Notes
      to the Consolidated Financial Statements            | F-7 - F-26

---

|Chelsea Oil and Gas Ltd.                     
|---------------------------------------------
|Consolidated Statements of Financial Position
|(US Dollars)                                 

|                                                  |  |       |  |   | December 31, |   |   | December 31, |  
|------------------------------------------------- |  | ----- |  | - | ------------ | - | - | ------------ | -
|                                                  |  | Notes |  |   | 2017         |   |   | 2016         |  
|                                                  |  |       |  |   |              |   |   |              |  
|Assets                                            |  |       |  |   |              |   |   |              |  
|Current Assets                                    |  |       |  |   |              |   |   |              |  
|Cash and cash equivalents                         |  | 7     |  | $ | 15,118       |   | $ | 15,341       |  
|Accounts receivable                               |  |       |  |   | 3,481        |   |   | 6,527        |  
|Current Assets                                    |  |       |  |   | 18,599       |   |   | 21,868       |  
|                                                  |  |       |  |   |              |   |   |              |  
|Restricted Cash                                   |  | 7     |  |   | 187,098      |   |   | 172,703      |  
|Property, Plant and equipment                     |  | 9     |  |   | 674,795      |   |   | 787,278      |  
|Exploration and evaluation assets                 |  | 10    |  |   | 1,084,497    |   |   | 9,551,099    |  
|Non-current assets                                |  |       |  |   | 1,946,390    |   |   | 10,511,080   |  
|Assets                                            |  |       |  | $ | 1,964,989    |   | $ | 10,532,948   |  
|                                                  |  |       |  |   |              |   |   |              |  
|Liabilities                                       |  |       |  |   |              |   |   |              |  
|Current Liabilities                               |  |       |  |   |              |   |   |              |  
|Shareholder loans                                 |  | 8     |  | $ | 4,547,427    |   | $ | 4,201,120    |  
|Trade and other payables                          |  |       |  |   | 822,652      |   |   | 675,142      |  
|Current Liabilities                               |  |       |  |   | 5,370,079    |   |   | 4,876,262    |  
|                                                  |  |       |  |   |              |   |   |              |  
|Decommissioning
      liabilities                 |  | 11    |  |   | 402,400      |   |   | 366,517      |  
|                                                  |  |       |  |   |              |   |   |              |  
|Shareholders equity
      (deficiency)           |  |       |  |   |              |   |   |              |  
|Common shares                                     |  | 12    |  |   | 14,056,459   |   |   | 14,056,459   |  
|Warrants                                          |  | 12    |  |   | -            |   |   | 254,938      |  
|Contributed surplus                               |  | 12    |  |   | 431,690      |   |   | 176,752      |  
|Accumulated deficit                               |  |       |  |   | (16,069,619  | ) |   | (6,144,282   | )
|Accumulated other comprehensive loss              |  |       |  |   | (2,226,020   | ) |   | (3,053,698   | )
|Shareholders equity
      (deficiency)           |  |       |  |   | (3,807,490   | ) |   | 5,290,169    |  
|                                                  |  |       |  |   |              |   |   |              |  
|                                                  |  |       |  |   |              |   |   |              |  
|Shareholders equity (deficiency) and liabilities |  |       |  | $ | 1,964,989    |   | $ | 10,532,948   |  
|                                                  |  |       |  |   |              |   |   |              |  
|                                                  |  |       |  |   |              |   |   |              |  
|Going concern                                     |  | 2     |  |   |              |   |   |              |  
|Commitments                                       |  | 18    |  |   |              |   |   |              |  

The notes are an integral part of these consolidated financial
statements.

Approved on behalf of the Board of Directors:

|/s/ Bill Petrie SR |  | /s/
      Jesse Meidl | 
|------------------ |  | --------------------- | 
|William Petrie SR  |  | Jesse Meidl           | 

F-3

---

|Chelsea Oil and Gas Ltd.                     
|---------------------------------------------
|Consolidated Statements of Comprehensive Loss
|(US Dollars)                                 

|For the years ended                          |  | Notes |  |   | 2017       |   |   | 2016     |   |   | 2015       |  
|-------------------------------------------- |  | ----- |  | - | ---------- | - | - | -------- | - | - | ---------- | -
|                                             |  |       |  |   |            |   |   |          |   |   |            |  
|                                             |  |       |  |   |            |   |   |          |   |   |            |  
|Revenue                                      |  |       |  |   |            |   |   |          |   |   |            |  
|Royalty income                               |  |       |  | $ | 19,899     |   | $ | 36,702   |   | $ | 68,974     |  
|                                             |  |       |  |   | 19,899     |   |   | 36,701   |   |   | 68,974     |  
|Expenses                                     |  |       |  |   |            |   |   |          |   |   |            |  
|General and administrative                   |  |       |  |   | 133,211    |   |   | 186,416  |   |   | 242,410    |  
|Depletion                                    |  | 9     |  |   | 112,482    |   |   | 112,482  |   |   | 112,482    |  
|Impairment                                   |  | 10    |  |   | 9,352,640  |   |   | -        |   |   | -          |  
|Finance expense                              |  | 13    |  |   | 355,401    |   |   | 327,401  |   |   | 302,244    |  
|Expense reimbursements                       |  | 19    |  |   | (79,228    | ) |   | (87,652  | ) |   | -          |  
|Foreign exchange (gain) loss                 |  |       |  |   | 68,588     |   |   | 37,623   |   |   | (125,515   | )
|                                             |  |       |  |   | 9,943,094  |   |   | 576,270  |   |   | 531,621    |  
|                                             |  |       |  |   |            |   |   |          |   |   |            |  
|Net loss before tax                          |  |       |  |   | (9,923,195 | ) |   | (539,569 | ) |   | (462,647   | )
|Current income tax expense                   |  | 14    |  |   | (2,142     | ) |   | (3,369   | ) |   | (5,046     | )
|Deferred income tax expense                  |  | 14    |  |   | -          |   |   | -        |   |   | -          |  
|Net loss                                     |  |       |  |   | (9,925,337 | ) |   | (542,938 | ) |   | (467,693   | )
|                                             |  |       |  |   |            |   |   |          |   |   |            |  
|Foreign currency translation adjustment      |  |       |  |   | (827,678   | ) |   | 135,245  |   |   | 1,167,320  |  
|Comprehensive loss                           |  |       |  | $ | (9,097,659 | ) | $ | (678,183 | ) | $ | (1,635,013 | )
|                                             |  |       |  |   |            |   |   |          |   |   |            |  
|Net loss per share (basic
      and diluted) |  | 16    |  | $ | (0.15      | ) | $ | (0.01    | ) | $ | (0.01      | )

The notes are an integral part of these consolidated financial
statements

F-4

---

|Chelsea Oil and Gas Ltd.                                 
|---------------------------------------------------------
|Consolidated Statements of Changes in Equity (Deficiency)
|(US Dollars)                                             

|                                           |  |       |  |   | December 31, |   |   | December 31, |   |   | December 31, |  
|------------------------------------------ |  | ----- |  | - | ------------ | - | - | ------------ | - | - | ------------ | -
|As at                                      |  | Notes |  |   | 2017         |   |   | 2016         |   |   | 2015         |  
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Common shares                              |  |       |  |   |              |   |   |              |   |   |              |  
|Balance, beginning and end of year         |  | 12    |  | $ | 14,056,459   |   | $ | 14,056,459   |   | $ | 14,056,459   |  
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Warrants                                   |  |       |  |   |              |   |   |              |   |   |              |  
|Balance, beginning of year                 |  | 12    |  |   | 254,938      |   |   | 254,938      |   |   | 254,938      |  
|Expired and transferred to contributed     |  |       |  |   | (254,938     | ) |   |              |   |   |              |  
|surplus                                    |  |       |  |   |              |   |   | -            |   |   | -            |  
|Balance, end of year                       |  |       |  |   | -            |   |   | 254,938      |   |   | 254,938      |  
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Contributed surplus                        |  |       |  |   |              |   |   |              |   |   |              |  
|Balance, beginning of year                 |  | 12    |  |   | 176,752      |   |   | 176,752      |   |   | 176,752      |  
|Warrant transfer                           |  | 12    |  |   | 254,938      |   |   | -            |   |   | -            |  
|Balance, end of year                       |  |       |  |   | 431,690      |   |   | 176,752      | ) |   | 176,752      |  
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Accumulated other
      comprehensive loss |  |       |  |   |              |   |   |              |   |   |              |  
|Balance, beginning of year                 |  |       |  |   | (3,053,698   | ) |   | (2,918,453   | ) |   | (1,751,133   | )
|Foreign currency translation adjustment    |  |       |  |   | 827,678      |   |   | (135,245     | ) |   | (1,167,320   | )
|Balance, end of year                       |  |       |  |   | (2,226,020   | ) |   | (3,053,698   | ) |   | (2,918,453   | )
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Accumulated deficit                        |  |       |  |   |              |   |   |              |   |   |              |  
|Balance, beginning of year                 |  |       |  |   | (6,144,282   | ) |   | (5,601,344   | ) |   | (5,133,651   | )
|Loss
      for the year                    |  |       |  |   | (9,925,337   | ) |   | (542,938     | ) |   | (467,693     | )
|Balance, end of year                       |  |       |  |   | (16,069,619  | ) |   | (6,144,282   | ) |   | (5,601,344   | )
|                                           |  |       |  |   |              |   |   |              |   |   |              |  
|Total equity (deficiency)                  |  |       |  | $ | (3,807,490   | ) | $ | 5,290,169    |   | $ | 5,968,352    |  

The notes are an integral part of these consolidated financial
statements

F-5

---

|Chelsea Oil and Gas Ltd.             
|-------------------------------------
|Consolidated Statements of Cash Flows
|(US Dollars)                         

|                                                  |   | December 31, |   |   | December 31, |   |   | December 31, |  
|------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
|For the years ended                               |   | 2017         |   |   | 2016         |   |   | 2015         |  
|                                                  |   |              |   |   |              |   |   |              |  
|                                                  |   |              |   |   |              |   |   |              |  
|Operating activities                              |   |              |   |   |              |   |   |              |  
|Net loss                                          | $ | (9,925,337   | ) | $ | (542,938     | ) | $ | (467,693     | )
|                                                  |   |              |   |   |              |   |   |              |  
|Items not affecting cash                          |   |              |   |   |              |   |   |              |  
|Depletion                                         |   | 112,482      |   |   | 112,482      |   |   | 112,482      |  
|Impairment                                        |   | 9,352,640    |   |   | -            |   |   | -            |  
|Interest on
      shareholder loans (Note 13)     |   | 346,307      |   |   | 319,934      |   |   | 295,570      |  
|Accretion on decommissioning
      obligations    |   |              |   |   |              |   |   |              |  
|(Note 13)                                         |   | 11,698       |   |   | 10,545       |   |   | 10,494       |  
|Unrealized foreign exchange (gain) loss           |   | 68,588       |   |   | 37,623       |   |   | (125,515     | )
|                                                  |   | (33,621      | ) |   | (62,354      | ) |   | (174,662     | )
|Change in non-cash working capital                |   | 47,795       |   |   | 55,080       |   |   | (49,033      | )
|                                                  |   | 14,173       |   |   | (7,273       | ) |   | (223,695     | )
|Financing activities                              |   |              |   |   |              |   |   |              |  
|Decrease (Increase) in restricted cash            |   | (14,395      | ) |   | 2,156        |   |   | 20,552       |  
|                                                  |   | (14,395      | ) |   | 2,156        |   |   | 20,552       |  
|Investing activities                              |   |              |   |   |              |   |   |              |  
|Net
      exploration and evaluations expenditure |   | -            |   |   | (93,383      | ) |   | (141,960     | )
|                                                  |   | -            |   |   | (93,383      | ) |   | (141,960     | )
|Increase (decrease) in cash                       |   | (222         | ) |   | (98,500      | ) |   | (345,103     | )
|Foreign exchange gain (loss)
      on cash        |   |              |   |   |              |   |   |              |  
|denominated in a foreign currency                 |   | -            |   |   | (7,779       | ) |   | 3,177        |  
|Cash, beginning of year                           |   | 15,341       |   |   | 121,620      |   |   | 463,546      |  
|Cash, end of year                                 | $ | 15,118       |   | $ | 15,341       |   | $ | 121,620      |  
|                                                  |   |              |   |   |              |   |   |              |  
|Cash interest received                            | $ | 2,604        |   | $ | 3,079        |   | $ | 3,873        |  
|Taxes paid                                        | $ | (2,142       | ) | $ | (3,369       | ) | $ | 5,046        |  

F-6

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|1. | Reporting entity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Australian-Canadian Oil Royalties Ltd. was incorporated
      April 28, 1997 in British Columbia, Canada. On October 1, 2013,
      Australian-Canadian Oil Royalties Ltd. amalgamated with International TME
      Resources Inc. and was renamed Chelsea Oil and Gas Ltd. (Chelsea or the
      Company). The address of the Companys head office is 127, 10thAve NW, Calgary, AB Canada. The Companys business plan is the
      exploration and development of the Companys working interest properties
      in Australia. The Company also holds and acquires and sells overriding
      royalty interests in Australia. Current primary income sources are
      royalties earned on overriding royalty interests held by the
    Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | Going concern:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The accompanying consolidated financial statements have
      been prepared on a going concern basis. The going concern basis of
      presentation assumes that the Company will continue in operation for the
      foreseeable future and will be able to realize its assets and discharge
      its liabilities and commitments in the normal course of business. The
      Companys properties are principally in the exploration and development
      stage and, as a result, the Company has minimal sources of operating cash
      flow. The continued operations, and exploration and development activities
      (including commitments in note 18) depend on the ability of the Company to
      obtain financing. For the year ended December 31, 2017, the Company has
      negative cash flow from operations. Company incurred a consolidated net
      loss of $9,925,337 during the year ended December 31, 2017 and, as of that
      date, the Companys consolidated current liabilities exceeded its total
      assets by $3,405,090. These conditions create a material uncertainty that
      casts significant doubt on the Companys ability to continue as a going
      concern.                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Additional funds will be required to explore and develop
      the Companys properties and to place them into commercial production.
      Since 2016 the Company has received reimbursements from an arms length
      party (the Sponsor) for facilitating funding and restructuring efforts.
      There is no obligation to repay these reimbursements (note 19).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The only other source of future funds presently available
      to the Company is through the issuance of share capital, or by the sale of
      an interest in any of its working and royalty interests in whole or in
      part. The Company is in discussions with the note holder to extend the
      maturity date of the shareholder loan. The ability of the Company to
      arrange such financing or sale of an interest in the future will depend in
      part upon the prevailing market conditions as well as the business
      performance of the Company. There can be no assurance that the Company
      will be successful in its efforts to arrange additional financing, if
      needed, on terms satisfactory to the Company or at all. If additional
      financing is raised through the issuance of shares, control of the Company
      may change and shareholders may suffer dilution. If adequate financing is
      not available, the Company may be required to delay, reduce the scope of,
      or eliminate one or more exploration activities or relinquish rights to
      certain of its interests.                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The amounts shown as property, plant and equipment and
      exploration and evaluation assets represent acquisition costs net of
      recoveries to date, less amounts written off or impaired, and do not
      necessarily represent present or future values. Recoverability of the
      amounts shown for property, plant and equipment and exploration and
      evaluation assets is dependent upon the discovery of economically
      recoverable reserves, securing and maintaining title and beneficial
      interest in the properties, the ability of the Company to obtain financing
      necessary to complete the exploration and development of its exploration
      and evaluation assets, and on future profitable production or proceeds
      from the disposition of the property, plant and equipment and exploration
      and evaluation interests. The consolidated financial statements do not
      reflect adjustments that would be necessary if the going concern basis was
      not appropriate. If the going concern basis was not appropriate for these
      consolidated financial statements, then significant adjustments would be
      necessary in the carrying value of assets and liabilities, the reported
      revenues and expenses, and the classifications used in the statement of
      financial position. The appropriateness of the going concern basis is
      dependent upon the events and circumstances outlined
  above.

F-7

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|3. | Basis of preparation:
|-- | ---------------------

| | a) | Statement of compliance:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | These consolidated financial statements of the Company
      have been prepared in accordance with International Financial Reporting
      Standards and interpretations (collectively referred to as IFRS) as
      issued by the International Accounting Standards Board (IASB). These
      consolidated financial statements were approved by the Board of Directors
      on April 30, 2018.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | b) | Basis of preparation:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The consolidated financial statements have been prepared
      on the historical cost basis. The Companys accounting policies have been
      applied consistently to all periods presented in these consolidated
      financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | c) | Functional and presentation currency:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | These consolidated financial statements are expressed in
      US dollars ($ or US$), which is the Companys functional currency. The
      Companys wholly owned subsidiaries Cooper-Eromanga Oil Inc. and Chelsea
      Oil Australia Pty have a functional currency of Australian dollars (A$
      or AUD).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | d) | Use of estimates and judgments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The preparation of the consolidated financial statements
      in conformity with IFRS requires management to make estimates and use
      judgment regarding the reported amounts of assets and liabilities and
      disclosures of contingent assets and liabilities as at the date of the
      consolidated financial statements and the reported amounts of revenues and
      expenses during the year. By their nature, estimates are subject to
      measurement uncertainty and changes in such estimates in future periods
      could require a material change in the financial statements. Accordingly,
      actual results may differ from the estimated amounts as future confirming
      events occur. Significant estimates and judgments made by management in
      the preparation of these consolidated financial statements are as
      follows:
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Recoverability of asset carrying values                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | The recoverability of oil and gas asset carrying values
      are assessed at a cash generating unit (CGU) level. Determination of
      what constitutes a CGU is subject to management judgments. The asset
      composition of a CGU can directly impact the recoverability of the assets
      included therein. The key estimates used in the determination of cash
      flows from oil and natural gas reserves include the
  following:                                                                                                                                                                                                                                                                                                                                                                                                                         

| | i)   | Reserves  Assumptions that are valid at the time of
      reserve estimation may change significantly when new information becomes
      available. Changes in forward price estimates, production costs or
      recovery rates may change the economic status of reserves and may
      ultimately result in reserves being restated.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                         
| | ii)  | Oil and natural gas prices  Forward price estimates are
      used in the cash flow model. Commodity prices can fluctuate for a variety
      of reasons including supply and demand fundamentals, inventory levels,
      exchanges rates, weather, economic and geopolitical factors.                                                
| |      |                                                                                                                                                                                                                                                                                                                                         
| | iii) | Discount rate  The discount rate used to calculate the
      net present value of cash flows is based on estimates of an approximate
      industry peer group weighted average cost of capital. Changes in the
      general economic environment could result in significant changes to this
      estimate.                         

F-8

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|3. | Basis of preparation
(continued):
|-- | ---------------------------------

Impairment, depletion and
depreciation

Amounts recorded for depletion and
depreciation and amounts used for impairment calculations are based on estimates
of total proved and probable petroleum and natural gas reserves and future
development capital. By their nature, the estimates of reserves, including the
estimates of future prices, costs and future cash flows, are subject to
measurement uncertainty. Accordingly, the impact to the consolidated financial
statements in future periods could be material.

Decommissioning obligations

Amounts recorded for decommissioning
obligations and the related accretion expense requires the use of estimates with
respect to the amount and timing of decommissioning expenditures. Actual costs
and cash outflows can differ from estimates because of changes in laws and
regulations, public expectations, market conditions, discovery and analysis of
site conditions and changes in technology. Other provisions are recognized in
the period when it becomes probable that there will be a future cash outflow.

Share-based compensation

Compensation costs recognized for
share based compensation plans are subject to the estimation of what the
ultimate payout will be using pricing models such as the Black-Scholes model
which is based on significant assumptions such as volatility, dividend yield and
expected term. Several compensation plans are also performance based and are
subject to managements judgment as to whether or not performance criteria will
be met.

Deferred income taxes

Tax interpretations, regulations and
legislation in the various jurisdictions in which the Company operates are
subject to change. As such income taxes are subject to measurement uncertainty.
Deferred income tax assets are assessed by management at the end of the
reporting period to determine the likelihood that they will be realized from
future taxable earnings.

|4. | Significant accounting policies:                                                                                                                                                                                                   
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                    
|   | The accounting policies set out below have been applied
      consistently to all periods presented in these consolidated financial
      statements, and have been applied consistently by the Company and its
      subsidiaries.

| | a) | Basis of consolidation:
| | -- | -----------------------

(i) Subsidiaries:

Subsidiaries are entities controlled
by the Company. Control exists when an entity is exposed to, or has rights to
variable returns from its involvement with the entity and has the ability to
affect these returns through its power over the entity. The financial statements
of subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases.

Transaction costs that are incurred in
connection with a business combination, other than those costs associated with
the issue of debt or equity securities, or recognized in profit or loss.

F-9

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------

| | a) | Basis of consolidation
  (continued):
| | -- | -------------------------------------

(ii) Jointly owned operations and
jointly owned assets:

The Company conducts many of its oil
and gas production activities through jointly controlled operations and the
consolidated financial statements reflect only the Companys proportionate
interest in such activities. Joint control exists for contractual arrangements
governing the Company's assets whereby the Company has less than 100 per cent
working interest, all of the partners have control of the arrangement
collectively, and spending on the project requires unanimous consent of all
parties that collectively control the arrangement and share the associated
risks. The Company does not have any joint arrangements that are structured
through joint venture arrangements.

(iii) Transactions eliminated on
consolidation:

Intercompany balances and
transactions, and any unrealized income and expenses arising from intercompany
transactions are eliminated in preparing the consolidated financial statements.

| | b) | Foreign currency:
| | -- | -----------------

| | i)  | Transactions in foreign currencies are generally
      translated to the entities functional currency at the average exchange
      rate for the period. Monetary assets and liabilities denominated in
      foreign currencies are translated to the functional currency at the period
      end exchange rate. Non-monetary assets and liabilities denominated in
      foreign currencies that are carried at fair value are translated to the
      functional currency at the exchange rate at the date that the fair value
      was determined. Non- monetary assets held at historical cost are not
      retranslated subsequent to initial recognition. Foreign currency
      differences arising on translation are recognized in earnings in the
      period in which they arise.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ii) | Assets and liabilities of the Companys Australian
      operations are translated into US dollars at period- end exchange rates
      while revenues and expenses are translated using average rates for the
      period. Gains and losses from the translation are deferred and included in
      accumulated other comprehensive loss (AOCI).                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | c) | Financial instruments:
| | -- | ----------------------

(i) Non-derivativefinancial instruments:

Non-derivative financial instruments
comprise cash and restricted cash, accounts receivable, shareholder loans and
trade and other payables. Non-derivative financial instruments are recognized
initially at fair value. Subsequent to initial recognition non-derivative
financial instruments are measured as described below. Financial assets and
liabilities are recognized when the Company becomes a party to the contractual
provisions of the instrument. Financial assets are derecognized when the rights
to receive cash flows from the assets have expired or have been transferred and
the Company has transferred substantially all risks and rewards of ownership.

Financial assets and liabilities are
offset and the net amount is reported when there is a legally enforceable right
to offset the recognized amounts and there is an intention to settle on a net
basis, or realize the asset and settle the liability simultaneously.

F-10

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------

| | c) | Financial instruments (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Cash and cash equivalents are comprised of cash on hand,
      term deposits held with banks, and other short-term highly liquid
      investments with original maturities of three months or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Financial assets at fair value through profit or
    loss:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | An instrument is classified at fair value through profit
      or loss if it is held for trading or is designated as such upon initial
      recognition. Financial instruments are designated at fair value through
      profit or loss if the Company manages such investments and makes purchase
      and sale decisions based on their fair value in accordance with the
      Companys risk management or investment strategy. Upon initial recognition
      attributable transaction costs are recognized in profit or loss when
      incurred. Financial instruments are measured at fair value and changes
      therein are recognized in profit or loss.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Other:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Other non-derivative financial instruments, such as
      accounts receivable, shareholder loans and trade and other payables, are
      measured at amortized cost using the effective interest method, less any
      impairment losses for financial assets.                                                                                                                                                                                                                                                                                                                                                                                                        

(ii) Equity instruments:

Equity instruments including common
shares, options and warrants are classified as equity. Incremental costs
directly attributable to the issue of common shares and share options are
recognized as a deduction from equity, net of any tax effects, if any.

| | d) | Property, plant and equipment and exploration and
      evaluation assets:
| | -- | --------------------------------------------------------------------------

(i) Recognition and measurement:

Development and production
(D&P) costs:

Property, plant and equipment is
stated at cost, less accumulated depletion and depreciation and accumulated
impairment losses. The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the asset into
operation, the initial estimate of any decommissioning obligation, if any, and,
for qualifying assets, borrowing costs. The purchase price or construction cost
is the aggregate amount paid and the fair value of any other consideration given
to acquire the asset.

Expenditures on major maintenance,
inspections or overhauls are capitalized when the item enhances the life or
performance of an asset above its original standard. Such capitalized oil and
natural gas interests generally represent costs incurred in developing proved
and/or probable reserves and bringing in or enhancing production from such
reserves, and are accumulated on a field or geotechnical area basis. The
carrying amount of any replaced or sold component is derecognized. The costs of
the day-today servicing of property, plant and equipment are recognized in
profit or loss as incurred. Where an asset or part of an asset that was
separately depreciated is replaced and it is probable that future economic
benefits associated with the item will flow to the Company, the expenditure is
capitalized and the carrying amount of the replaced asset is derecognized.

General and administrative costs
associated with property acquisition development activities are capitalized.

F-11

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------

| | d) | Property, plant and equipment and exploration and
      evaluation assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Exploration and evaluation (E&E)
      expenditures:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Pre-licence costs are recognized in the statement of loss
      as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Exploration and evaluation expenditures, including the
      costs of acquiring licences and directly attributable general and
      administrative costs, geological and geophysical costs, other direct costs
      of exploration (drilling, trenching, sampling and evaluating the technical
      feasibility and commercial viability of extraction) and appraisal are
      accumulated and capitalized as E&E assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | On a quarterly basis, a review of any areas classified
      and accounted for as E&E is performed to determine whether enough
      information exists to make a determination of the technical feasibility
      and commercial viability of the area. Where appropriate, review may
      indicate that an area should be further sub-divided due to a significant
      portion having been explored whilst a significant undeveloped portion with
      different traits (i.e. different zone, technical approach, play type,
      etc.) remains that requires additional E&E activities to arrive at the
      point where it can be assessed for technical feasibility and commercial
      viability.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The assessment of technical feasibility and commercial
      viability is performed on an area level basis unless further sub-division
      is merited. Depending on the extent and complexity of the prospective
      play, many wells may need to be drilled and potentially significant
      E&E costs accumulated prior to obtaining enough information to make
      the determination of technical feasibility and commercial viability
      possible. E&E costs are not amortized prior to the conclusion of
      appraisal activities. At the completion of appraisal activities, if
      technical feasibility is demonstrated and commercial reserves are
      discovered, then, the carrying value of the relevant E&E asset will be
      reclassified as a D&P asset into the CGU to which it relates, but only
      after the carrying value of the relevant E&E asset has been assessed
      for impairment, and where appropriate, its carrying value adjusted.
      Typically, technical feasibility and commercial viability of extracting a
      mineral resource is considered to be demonstrable when proved or probable
      reserves are determined to exist. However, if the Company determines the
      area or portion thereof is not technically feasible and commercially
      viable, accumulated E&E costs are expensed.

(ii) Depletion and depreciation:

The net carrying value of working
interest development and production assets is depleted using the unit of
production method by reference to the ratio of production in the year to the
related proven and probable reserves, taking into account estimated future
development costs necessary to bring those reserves into production. These
estimates are reviewed by independent reserve engineers at least annually.
Natural gas reserves are converted to barrels of oil equivalent based on
relative energy content of 6:1.

For other assets, depreciation is
recognized in profit or loss on a straight-line basis over the estimated useful
lives of each part of an item of property, plant and equipment. Leased assets
are depreciated over the shorter of the lease term and their useful lives unless
it is reasonably certain that the Company will obtain ownership by the end of
the lease term.

The estimated useful lives for other
assets for the current and comparative years are as follows:

| | Office equipment 5  12 years     
| | ----------------------------------
| | Fixtures and fittings 5  10 years

Depreciation methods, useful lives and
residual values are reviewed at each reporting date.

F-12

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
(continued):
|-- | --------------------------------------------

| | d) | Property, plant and equipment and exploration and
      evaluation assets:
| | -- | --------------------------------------------------------------------------

iii) Subsequent costs:

Costs incurred subsequent to the
determination of technical feasibility and commercial viability and the costs of
replacing parts of property, plant and equipment are recognized as oil and
natural gas interests only when they increase the future economic benefits
embodied in the specific asset to which they relate. All other expenditures are
recognized in earnings as incurred. Such capitalized oil and natural gas
interests generally represent costs incurred in developing proved and/or
probable reserves and bringing in or enhancing production from such reserves,
and are accumulated on a field or geotechnical area basis. The carrying amount
of any replaced or sold component is derecognized. The costs of the periodic
servicing of property, plant and equipment are recognized in earnings as
incurred.

| | e) | Impairment:
| | -- | -----------

(i) Financial assets:

A financial asset is assessed at each
reporting date to determine whether there is any objective evidence that it is
impaired. A financial asset is considered to be impaired if objective evidence
indicates that one or more events have had a negative effect on the estimated
future cash flows of that asset.

An impairment loss in respect of a
financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash
flows discounted at the original effective interest rate.

Individually significant financial
assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk
characteristics.

All impairment losses are recognized
in profit or loss. An impairment loss is reversed when there is a significant
change in the underlying estimates or other objective evidence. For financial
assets measured at amortized cost the reversal is recognized in profit or loss.

(ii) Non-financial
assets:

Exploration and evaluation assets are
tested for impairment when reclassified to D&P assets or whenever facts and
circumstances indicate potential impairment. Exploration and evaluation assets
are tested separately for impairment or grouped with the associated cash
generating unit. An impairment loss is recognized for the amount by which the
exploration and evaluation expenditures carrying amount exceeds its recoverable
amount.

The carrying amount of D&P assets
are reviewed for impairment when indicators of such impairment exist. If any
indication of impairment exists an estimate of the assets recoverable amount is
calculated. Assets are grouped for impairment assessment purposes at CGU level
at which there are identifiable cash inflows that are largely independent of the
cash inflows of other groups of assets. The recoverable amount of an asset or
CGU is the greater of its fair value less costs of disposal and its value in
use. Where the carrying amount of an asset group exceeds its recoverable amount,
the asset group is considered impaired and is written down to its recoverable
amount. An impairment loss is charged to the statement of comprehensive
loss.

F-13

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------

| | e) | Impairment:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | In assessing value in use, the estimated future cash
      flows are adjusted for the risks specific to the asset group and are
      discounted to their present value using a pre-tax discount rate that
      reflects current market assessments of the time value of money. Fair value
      less costs of disposal is generally determined at the current market bid
      price, when an active market exists. The intent is that this represents
      what a market participant would pay to acquire control of the
  CGU.                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | For assets excluding goodwill, an assessment is made at
      each reporting date as to whether there is any indication that previously
      recognized impairment losses may no longer exist or may have decreased. If
      such indication exists, the Company makes an estimate of the recoverable
      amount. A previously recognized impairment loss is reversed only if there
      has been a change in the estimates used to determine the assets
      recoverable amount since the last impairment loss was recognized. If that
      is the case the carrying amount of the asset is increased to its
      recoverable amount. The increased amount cannot exceed the carrying amount
      that would have been determined, net of depreciation, had no impairment
      loss been recognized for the asset in prior years.                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | f) | Business combinations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The acquisition method of accounting is used to account
      for acquisitions of subsidiaries and assets that meet the definition of a
      business under IFRS. The cost of an acquisition is measured as the fair
      value of the assets given, equity instruments issued and liabilities
      incurred or assumed at the date of exchange. The recognized amount of
      identifiable assets acquired and liabilities and contingent liabilities
      assumed in a business combination are measured mostly at fair value at the
      acquisition date. The excess of the cost of acquisition over the
      recognized amount of identifiable assets, liabilities and contingent
      liabilities acquired is recorded as goodwill. If the cost of acquisition
      is less than the recognized amount of the net assets of the subsidiary
      acquired, the difference is recognized immediately in earnings.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | g) | Share-based payments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The grant date fair value of equity-settled options and
      warrants granted to employees is recognized as share-based compensation
      expense, with a corresponding increase in contributed surplus over the
      vesting period. Each tranche granted is considered a separate grant and is
      fair valued independently. A forfeiture rate is estimated on the grant
      date and is adjusted to reflect the actual number of options that
    vest.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | h) | Provisions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | A provision is recognized if, as a result of a past
      event, the Company has a present legal or constructive obligation that can
      be estimated reliably, and it is probable that an out flow of economic
      benefits will be required to settle the obligation. Provisions are
      determined by discounting the expected future cash flows at a pre-tax rate
      that reflects current market assessments of the time value of money and
      the risks specific to the liability. Provisions are not recognized for
      future operating losses.                                                                                                                                                                                                                                                                                                                                                          

F-14

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|4. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------

| |    | Decommissioning obligations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Companys activities can give rise to dismantling,
      decommissioning and site disturbance re-mediation activities. Provision is
      made for the estimated cost of site restoration and capitalized in the
      relevant asset category.                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Decommissioning obligations are measured at the present
      value of managements best estimate of expenditure required to settle the
      present obligation at the statement of financial position date. Subsequent
      to the initial measurement, the obligation is adjusted at the end of each
      period to reflect the passage of time and changes in the estimated future
      cash flows underlying the obligation.                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The increase in the provision due to the passage of time
      is recognized as finance costs whereas increases/decreases due to changes
      in the estimated future cash flows are capitalized. Actual costs incurred
      upon settlement of the asset retirement obligations are charged against
      the provision to the extent the provision was established.                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | i) | Revenue:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Revenue from the sale of oil and natural gas is recorded
      when the significant risks and rewards of ownership of the product is
      transferred to the buyer which is usually when legal title passes to the
      external party. This is generally at the time product enters the pipeline
      or delivered to the refinery.                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Revenue is measured net of discounts, customs duties and
      royalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Tariffs and tolls charged to other entities for use of
      pipelines and facilities owned by the Company are recognized as revenue as
      they accrue in accordance with the terms of the service or tariff and
      tolling agreements.                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Royalty income is recognized as it accrues in accordance
      with the terms of the overriding royalty agreements. Interest income is
      recognized as it is earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | j) | Finance income and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Finance expense comprises interest expense on borrowings,
      accretion of the discount on provisions and transaction costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Borrowing costs incurred for the construction of
      qualifying assets are capitalized during the period of time that is
      required to complete and prepare the assets for their intended use or
      sale. All other borrowing costs are recognized in profit or loss using the
      effective interest method.                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Finance income is recognized as it accrues in profit or
      loss, using the effective interest method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | k) | Per share amounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | Basic loss per share is calculated by dividing the profit
      or loss attributable to common shareholders of the Company by the weighted
      average number of common shares outstanding during the period. Diluted
      earnings per share is determined by adjusting the profit attributable to
      common shareholders and the weighted average number of common shares
      outstanding for the effects of dilutive instruments such as options
      granted to employees. The calculation assumes that the proceeds on
      exercise of options are used to repurchase shares at the current market
      price.

F-15

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

| | l) | Segment reporting:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | A segment is a distinguishable component of the Company
      that is engaged either in providing related products or services (business
      segment), or in providing products or services within a particular
      economic environment (geographic segment), which is subject to risks and
      returns that are different from those of other segments. The Company has
      one reportable segment, which comprises all property, plant and equipment
      and exploration and evaluation assets in Australia. Property, plant and
      equipment is comprised primarily of overriding royalty interests, which
      are the only revenue generating assets of the Company.                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | m) | Recent accounting pronouncements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | IFRS 15  Revenue from contracts with customers,
      replaces International Accounting Standard 11, Construction Contracts
      (IAS 11), IAS 18, Revenue (IAS 18), and several revenue-related
      interpretations. IFRS 15 establishes a single revenue recognition
      framework that applies to contracts with customers. The standard requires
      an entity to recognize revenue to reflect the transfer of goods and
      services for the amount it expects to receive, when control is transferred
      to the purchaser. Disclosure requirements have also been expanded. This
      IFRS became effective for periods beginning on or after January 1, 2018
      and the Company has evaluated the impact of the standard on its
      consolidated financial statements and determined the impact will not be
      significant. The Company will adopt the additional disclosure
      requirements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | IFRS 9  Financial Instruments, which is the result of
      the first phase of the IASBs project to replace IAS 39  Financial
      Instruments: Recognition and Measurement. The new standard replaces the
      current multiple classification and measurement models for financial
      assets and liabilities with a single model that has only two
      classification categories: amortized cost and fair value. This IFRS became
      effective for periods beginning on or after January 1, 2018 and the
      Company has evaluated the impact of the standard on its consolidated
      financial statements and determined the impact will not be significant.
      The Company will adopt the additional disclosure requirements.                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In January 2016, the IASB issued the complete IFRS 16
      Leases ("IFRS 16") which replaces IAS 17, Leases. The effective date of
      IFRS 16 is for annual periods beginning on or after January 1, 2019 and
      early adoption is permitted. Under IFRS 16, a single recognition and
      measurement model will apply for lessees which will require recognition of
      assets and liabilities for most leases. The extent of the impact of
      adoption of the standard has not yet been
determined.                                                                                                                                                                                                                                                                                                                                                                                                                    

F-16

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|5. | Determination of fair values:                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | A number of the Companys accounting policies and
      disclosures require the determination of fair value, both for financial
      and non-financial assets and liabilities. Fair values have been determined
      for measurement and/or disclosure purposes based on the following methods.
      When applicable, further information about the assumptions made in
      determining fair values is disclosed in the notes specific to that asset
      or liability.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The different levels of financial instrument valuation
      methods have been defined as follows:                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Level 1 fair value measurements are based on unadjusted
      quoted market prices.                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Level 2 fair value measurements are based on valuation
      models and techniques where the significant inputs are derived from quoted
      indices.                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | Level 3 fair value measurements are based on unobservable
      information.                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The carrying value of cash and restricted cash, accounts
      receivables, shareholder loans and trade and other payables included in
      the consolidated statements of financial position approximate fair value
      due to the short term nature of those instruments.                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The fair value of warrants is measured using a
      BlackScholes option pricing model. Measurement inputs include share price
      on measurement date, exercise price of the instrument, expected volatility
      based on peer comparisons weighted average expected life of the
      instruments based on historical experience and general option holder
      behavior, expected dividends, and the riskfree interest rate.                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|6. | Financial risk management:                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The Companys activities expose it to a variety of
      financial risks that arise as a result of its exploration, development,
      production, and financing activities such as:                                                                                                                                                                                                                                                                                         

| |  | Credit risk   
| | - | --------------
| |  | Liquidity risk
| |  | Market risk   

This note presents information about
the Companys exposure to each of the above risks, the Companys objectives,
policies and processes for measuring and managing risk, and the Companys
management of capital. Further quantitative disclosures are included throughout
these consolidated financial statements.

The Board of Directors oversees
managements establishment and execution of the Companys risk management
framework. Management has implemented and monitors compliance with risk
management policies. The Companys risk management policies are established to
identify and analyze the risks faced by the Company, to set appropriate risk
limits and controls, and to monitor risks and adherence to market conditions and
the Companys activities.

F-17

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|6. | Financial risk management
  (continued):
|-- | ----------------------------------------

| | a) | Credit risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The Company is exposed to credit risk in relation to its
      cash, restricted cash and accounts receivable. The Company maintains cash
      with highly rated international banks and therefore considers these assets
      to have negligible credit risk. Credit risk is the potential financial
      loss to the Company if a customer is unable to meet its contractual
      obligations and arises principally from the Company's accounts
      receivables. The Company's accounts receivable is comprised
  of:

| |  | Overriding royalty payments
| | - | ---------------------------
| |  | Customers                  
| |  | Joint venture partners     

| |    | The Companys accounts receivable are with overriding
      royalty owners, customers and joint arrangement partners who are in the
      petroleum and natural gas business and are subject to normal credit risks.
      Concentration of credit risk is mitigated by marketing production to
      purchasers under normal industry sale and payment terms. The Company
      routinely assesses the financial strength of its customers and joint
      venture partners. The Companys maximum exposure to credit risk relates to
      its cash and cash equivalents and accounts receivable.                                                                                
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Accounts receivable:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Companys operations are primarily in Australia. The
      Companys exposure to credit risk is influenced mainly by the individual
      characteristics of each counter party. The Company expects to collect the
      outstanding receivables in the normal course of operations. As at December
      31, 2017 the Companys accounts receivables are current and due within 90
      days.                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Cash and cash equivalents:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | The Company limits its exposure to credit risk by only
      investing in liquid securities and only with highly rated counterparties.
      The Companys cash is currently held by banks with AA or equivalent credit
      ratings or better. Given these credit ratings, management does not expect
      any counterparty to fail to meet its obligations.                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | b) | Liquidity risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Liquidity risk is the risk that the Company will not be
      able to meet its financial obligations as they fall due. The Companys
      approach to managing liquidity is to ensure, as far as possible, that it
      will always have sufficient liquidity to meet its liabilities when due,
      under both normal and stressed conditions, without incurring unacceptable
      losses or risking damage to the Companys reputation.                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Typically the Company ensures that it has sufficient cash
      on demand to meet expected operational expenses, including the servicing
      of financial obligations; this excludes the potential impact of extreme
      circumstances that cannot reasonably be predicted, such as natural
      disasters and political unrest. To achieve this objective, the Company
      prepares annual capital expenditure budgets, which are regularly monitored
      and updated as considered necessary. As at December 31, 2017, the
      Companys financial liabilities being trade and other payables and
      shareholder loans are due within one year (refer to note
  2).

F-18

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|6. | Financial risk management
  (continued):
|-- | ----------------------------------------

| | c) | Market risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Market risk is the risk that changes in market prices,
      such as foreign exchange rates, commodity prices and interest rates will
      affect the Companys net earnings or the value of financial instruments.
      The objective of market risk management is to manage and control market
      risk exposures within acceptable limits, while maximizing
  returns.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Interest rate risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Interest rate risk is the risk that future cash flows
      will fluctuate as a result of changes in market interest rates. The
      shareholder loans bear interest at the prescribed rate in the debenture
      agreements. The effect of interest rate fluctuations would not have had a
      significant effect on the Companys reported net loss for the years ended
      December 31, 2017, 2016, and 2015.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Commodity price risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Commodity price risk is the risk that the fair value of
      financial instruments or future cash flows will fluctuate as a result of
      changes in commodity prices. Petroleum and natural gas prices are impacted
      by not only the relationship between the Australian and US dollar but also
      world economic events that dictate the levels of supply and demand. At
      this time production from the Companys oil and gas properties are not
      sufficient to justify the utilisation of financial instruments including
      derivatives, or physical instruments including forward sales contracts.
      The Company will continually evaluate its exposure to commodity price
      risks, and if production and associated revenues increase, the Company
      will consider the use of derivatives and other instruments to mitigate its
      risk exposure.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Foreign currency risk:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Currency risk is the risk that the fair value of future
      cash flows will fluctuate as a result of changes in foreign exchange
      rates. The reporting and functional currency of the Company is US$. A
      material proportion of the Companys capital expenditures and major
      service contracts related to the exploration and development in Australia
      are denominated in A$, and as such the Company holds a significant
      proportion of its cash in A$ in order to mitigate against foreign currency
      risk.                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The Companys operations are in foreign jurisdictions,
      therefore the Company is exposed to foreign currency exchange rate risk on
      some of its activities. General and administrative expenses, are
      denominated in currencies other than US$ including A$ and Canadian dollars
      (C$). The Company also settles certain capital expenditures in A$. To
      match the foreign currency on the trade payables related to these
      activities the Company may hold cash in the currency of the
      transaction.                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | The following table contains an analysis of US$
      equivalent cash balances, trade receivables and trade payables denominated
      in each currency:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                             |   | Cash and        |  |   | Trade       |  |   | Trade   | 
| | --------------------------- | - | --------------- |  | - | ----------- |  | - | ------- | 
| |                             |   | Restricted Cash |  |   | Receivables |  |   | Payable | 
| | As at December 31, **2017** |   |                 |  |   |             |  |   |         | 
| | Denominated in US$          | $ | 10,747          |  | $ | 1,238       |  | $ | 344,045 | 
| | Denominated in A$           |   | 189,913         |  |   | 1,628       |  |   | 149,019 | 
| | Denominated in C$           |   | 1,556           |  |   | 615         |  |   | 329,588 | 
| |                             | $ | 202,216         |  | $ | 3,481       |  | $ | 822,652 | 

F-19

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|6. | Financial risk management
  (continued):
|-- | ----------------------------------------

| | d) | Capital management:
| | -- | -------------------

The Company's objectives when managing
capital are to safeguard the Company's ability to continue as a going concern
and to maintain a flexible capital structure which will allow it to pursue the
development of its oil and gas properties. Therefore, the Company monitors the
level of risk incurred in its oil and gas property expenditures relative to its
capital structure. The Company considers its capital structure to include
working capital and shareholders' equity. The Company monitors its capital
structure and makes adjustments in light of changes in economic conditions and
the risk characteristics of the underlying assets.

The Company is dependent on external
financing to fund its activities. In order to carry out the planned exploration
and pay for administrative costs, the Company will raise additional amounts to
meet working capital needs. Management reviews its capital management approach
on an ongoing basis and believes that this approach, given the relative size of
the Company, is reasonable. The Company is not subject to any capital
restrictions.

|7. | Cash and restricted cash:                                                                                                                                                                                                                                                                                                                                                                     
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                               
|   | At December 31, 2017, the Company held cash of $15,118
      (2016  $15,341). Cash at banks earn interest at floating rates based on
      daily bank deposit rates. Short term deposits are made for varying periods
      of between one day and three months, depending on the cash requirements of
      the Company, and earn interest at the respective short term deposit
      rates.
|   |                                                                                                                                                                                                                                                                                                                                                                                               
|   | At December 31, 2017, the Company held restricted cash of
      $187,098 (2016  $172,703). Restricted cash is cash held on deposit with a
      chartered Australian bank which will be returned to the Company when it
      satisfies the capital commitments pertaining to the licenses.                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                               
|8. | Shareholder loans:                                                                                                                                                                                                                                                                                                                                                                            

| |                                                      |   | 2017      |  |   | 2016      |  |   | 2015      | 
| | ---------------------------------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| | Loans on acquisition of Surat
      Basin properties | $ | 3,000,000 |  | $ | 3,000,000 |  | $ | 3,000,000 | 
| | Accrued and unpaid interest thereon                  |   | 1,547,427 |  |   | 1,201,120 |  |   | 881,185   | 
| |                                                      | $ | 4,547,427 |  | $ | 4,201,120 |  | $ | 3,881,185 | 

Concurrent with the acquisition of the
assets in the Surat Basin in Australia, on March 1, 2012 the Company agreed to
pay certain vendors $3.0 million within 12 months and 8.57 million shares of the
Company. The loan was non-interest bearing and was recorded at net present value
of $2,770,084 and is secured by the Surat assets.

On March 25, 2013, the Company agreed
to amend the terms of the loan so that interest would accrue at 8% per annum,
with interest accruing from September 1, 2012.

On February 28, 2015, the Company and
shareholder agreed to extend the loan to February 28, 2016. At the date of these
consolidate financial statements the shareholder has the right to demand
repayment. The debt continues to accrue interest on the same terms as previously
agreed. The Company is in discussions with the debtholder to further extend
maturity of the debt.

F-20

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|9. | Property, Plant and
Equipment:
|-- | ------------------------------

| | Cost or deemed cost                         |   |           | 
| | ------------------------------------------- | - | --------- | 
| | Balance at December 31, 2017, 2016 and 2015 | $ | 1,178,999 | 
| |                                             |   |           | 
| | Accumulated depletion and depreciation      |   |           | 
| | Balance at January 31, 2015                 | $ | 166,757   | 
| | Depletion and depreciation expense          |   | 112,482   | 
| | Balance at December 31, 2015                |   | 279,239   | 
| | Depletion and depreciation expense          |   | 112,482   | 
| | Balance at December 31, 2016                |   | 391,721   | 
| | Depletion and depreciation expense          |   | 112,482   | 
| | Balance at December 31, 2017                |   | 504,203   | 
| |                                             |   |           | 
| | Net book value                              | $ |           | 
| | As at December 31, 2015                     |   | 899,760   | 
| | As at December 31, 2016                     |   | 787,278   | 
| | As at December 31, 2017                     | $ | 674,795   | 

The Companys property, plant and
equipment is comprised primarily of its overriding royalty interests (Royalty
CGU) in Australia. These interests are currently the Companys only revenue
generating asset.

At December 31, 2017 and 2016, there
were no indicators of impairment identified. As a result no impairment testing
was conducted.

At December 31, 2015, management
identified impairment indicators in its Royalty CGU as a result of a decline in
global commodity prices and significantly reduced access to debt and equity
financings in the exploration and production sector. The recoverable amount of
the CGU was estimated using fair value less costs of disposal based on
comparable market transactions and multiples. It was determined that no
impairment was required as the recoverable amount was higher than the carrying
amount.

F-21

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|10. | Exploration and evaluation
  assets:
|--- | ------------------------------------

| | Balance at January 1, 2015   | $ | 10,597,994 |  
| | ---------------------------- | - | ---------- | -
| | Additions                    |   | 141,960    |  
| | Foreign exchange translation |   | (1,158,884 | )
| | Balance at December 31, 2015 | $ | 9,581,070  |  
| | Additions                    |   | 93,383     |  
| | Foreign exchange translation |   | (123,354   | )
| | Balance at December 31, 2016 | $ | 9,551,099  |  
| | Additions                    |   | 58,568     |  
| | Impairment                   |   | (9,352,640 | )
| | Foreign exchange translation |   | 827,470    |  
| | Balance at December 31, 2017 | $ | 1,084,497  |  

Intangible exploration and evaluation
assets consist of the Companys exploration projects which are pending the
determination of proven or probable reserves, or pending the decision by the
Company to elect to proceed with the development of a project.

At December 31, 2017, management
identified impairment indicators in its Georgina and Surat CGUs as a result of
significantly reduced access to debt and equity financings in the Australian
exploration and production sector. The recoverable amounts of the CGUs was
estimated using fair value less costs of disposal based on comparable market
transactions and multiples. The recoverable amount of the Surat CGU was
estimated to be A$1.25 million resulting in an impairment of $6.2 million (A$8.0
million). The recoverable amount of the Georgina CGU was estimated to be $Nil
resulting in an impairment of $3.1 million (A$3.9 million).

|11. | Decommissioning liability:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    | The Companys decommissioning liability results from the
      ownership interest in oil and natural gas assets. The Company has
      estimated the net present value of the decommissioning liability to be
      $402,400 as at December 31, 2017 (2016  $366,517, 2015 $360,283) based
      on an undiscounted inflation-adjusted total future liability of A$671,718
      (2016 and 2015  A$671,718). These payments are expected to be made over
      the next 25 years with the majority of costs to be incurred between 2025
      and 2030. At December 31, 2017, the liability has been calculated using an
      inflation rate of 3.0% (2016 and 2015  3.0%) and discounted using a
      risk-free rate of 3.0% (2016 and 2015  3.0%).

| | Balance at January 1, 2015    | $ | 390,902 |  
| | ----------------------------- | - | ------- | -
| | Accretion expense             |   | 10,494  |  
| | Foreign exchange translation  |   | (41,113 | )
| | Balance at December 31, 2015  | $ | 360,283 |  
| | Accretion expense             |   | 10,545  |  
| | Foreign exchange translation  |   | (4,311  | )
| | Balance at December 31, 2016  | $ | 366,517 |  
| | Accretion expense             |   | 11,698  |  
| | Foreign exchange translations |   | 24,185  |  
| | Balance at December 31, 2017  | $ | 402,400 |  

F-22

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|12. | Share capital:
|--- | --------------

| | a) | Authorized:                                                                
| | -- | ---------------------------------------------------------------------------
| |    |                                                                            
| |    | Unlimited number of common shares with no par
    value.                   
| |    |                                                                            
| |    | Unlimited number of preferred shares, of which none have
      been issued.
| |    |                                                                            
| | b) | Issued and outstanding:                                                    

| |                                        |  | Number of                                          |  |   |            | 
| | -------------------------------------- |  | -------------------------------------------------- |  | - | ---------- | 
| |                                        |  | shares                                             |  |   | Amount     | 
| |                                        |  |                                                    |  |   |            | 
| | Balance at January 2016 and
      2015 |  | 1, 2016 and
      December 31, 2017 and 64,056,876 |  | $ | 14,056,459 | 

| | c) | Stock option plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | Pursuant to resolutions of the Board of Directors of the
      Company dated January 9, 2013, the Company established a stock option plan
      for its directors, officers, consultants and employees under which the
      Company may grant options to acquire a maximum number of common shares
      equal to 10% of the total issued and outstanding shares of the Company. At
      December 31, 2017 and 2016, no options have been issued under this
      plan.                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | d) | Warrants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | On January 19, 2013, the Company granted 5.0 million
      warrants to directors, officers and consultants. These performance
      warrants have an exercise price of $0.25 per warrant, but are only
      exercisable if the share price of the Company exceeds $1.00 per share for
      ten consecutive trading days, with a minimum of 100,000 shares traded over
      the same period. The fair value of these warrants was estimated to be
      $254,938 using the Black-Scholes pricing model based on a volatility of
      98%, risk-free interest rate of 1.5%, expected life of 2 years and no
      dividend yield.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | On January 18, 2015, the Company extended the warrants
      for two years, expiring January 18, 2017. All other terms remained the
      same. The incremental fair value with respect to extending the warrant
      term was not significant.                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    | On January 18, 2017, all 5.0 million of the warrants
      expired out of the money and the estimated fair value of $254,938 was
      transferred to contributed surplus.                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|13. | Finance expense:
|--- | ----------------

| |                                         |   | 2017     |   |   | 2016    |   |   | 2015    |  
| | --------------------------------------- | - | -------- | - | - | ------- | - | - | ------- | -
| | Interest income on cash                 | $ | (2,604   | ) | $ | (3,079  | ) | $ | (3,872  | )
| | Interest expense                        |   | 346,3070 |   |   | 319,935 |   |   | 295,622 |  
| | Accretion on decommissioning liability. |   | 11,698   |   |   | 10,545  |   |   | 10,494  |  
| | Net finance expense                     | $ | 355,401  |   | $ | 327,401 |   | $ | 302,244 |  

F-23

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|14. | Income taxes:                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                             
|    | The provision for income taxes differs from the amount
      that would have been expected by applying the combined federal and
      provincial tax rates to the loss for the year. This difference results
      from the following items:

| |                                                  |   | 2017       |   |   | 2016     |   |   | 2015     |  
| | ------------------------------------------------ | - | ---------- | - | - | -------- | - | - | -------- | -
| | Loss before tax                                  | $ | (9,923,195 | ) | $ | (539,569 | ) | $ | (462,647 | )
| | Combined tax rate                                |   | 27.0%      |   |   | 27.0%    |   |   | 25.0%    |  
| | Expected income tax reduction                    | $ | (2,679,263 | ) | $ | (145,684 | ) | $ | (115,662 | )
| | Increase (decrease) resulting from:              |   |            |   |   |          |   |   |          |  
| | Effect of
      foreign tax rates                |   | (10,788    | ) |   | (9,496   | ) |   | (13,141  | )
| | Change in unrecognized
      deferred tax assets |   | 2,688,768  |   |   | 155,249  |   |   | 127,787  |  
| | Non-deductible and other                         |   | 3,425      |   |   | 3,300    |   |   | 6,062    |  
| | Income tax expense                               |   | 2,142      |   |   | 3,369    |   |   | 5,046    |  

The components of the recognized
deferred income tax asset (liability) are as follows:

| | As at December 31                                                                |   | 2017     |   |   | 2016     |   |   | 2015     |  
| | -------------------------------------------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
| |                                                                                  |   |          |   |   |          |   |   |          |  
| | Property, plant and equipment
      / exploration and evaluation assets - Canada | $ | (188,047 | ) | $ | (188,047 | ) | $ | (202,238 | )
| | Non-capital losses  Canada                                                      |   | 188,047  |   |   | 188,047  |   |   | 202,238  |  
| | Property, plant and equipment
      / exploration and evaluation assets  Canada |   | -        |   |   | (142,803 | ) |   | (142,803 | )
| | Decommissioning obligations  Australia                                          |   | -        |   |   | 109,955  |   |   | 142,803  |  
| | Non-capital losses  Australia                                                   |   | -        |   |   | 32,848   |   |   | -        |  
| |                                                                                  |   |          |   |   |          |   |   |          |  
| | Deferred tax asset (liability)                                                   | $ | -        |   | $ | -        |   | $ | -        |  

Deferred tax assets have not been
recognized in respect of the following temporary differences:

| | As at December 31                        |   | 2017      |  |   | 2016      |  |   | 2015      | 
| | ---------------------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| | Canada:                                  |   |           |  |   |           |  |   |           | 
| | Share issue costs                        | $ | -         |  | $ | -         |  | $ | 58,010    | 
| | Non-capital losses (expire 2024 to 2034) |   | 4,854,066 |  |   | 4,759,377 |  |   | 4,486,366 | 
| |                                          |   |           |  |   |           |  |   |           | 
| |                                          | $ | 4,854,066 |  | $ | 4,759,377 |  | $ | 4,544,376 | 

| | As at December 31           |   | 2017      |  |   | 2016      |  |   | 2015      | 
| | --------------------------- | - | --------- |  | - | --------- |  | - | --------- | 
| | Australia:                  |   |           |  |   |           |  |   |           | 
| | Decommissioning obligations | $ | -         |  | $ | -         |  | $ | 28,683    | 
| | Non-capital losses          |   | 1,784,074 |  |   | 1,316,752 |  |   | 1,112,794 | 
| |                             |   |           |  |   |           |  |   |           | 
| |                             | $ | 1,784,074 |  | $ | 1,316,752 |  | $ | 1,141,477 | 

Deferred tax assets have not been
recognized in respect of these items because it is not probable that future tax
profit will be available against which the Company can utilize the benefits.

F-24

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|15. | Related party
transactions:
|--- | ---------------------------

| | a) | Shareholder loans:                                                                                                                                                                                                                                                                                                                                                                
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The Companys shareholder loans are described in note 8.
      The loans were negotiated between the Company and the shareholders on
      terms comparable to arms-length transactions of similar type. The fair
      value of the shareholder loans approximates their carrying value at
      December 31, 2017, 2016 and 2015.                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | Compensation of key management personnel:                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                   
| |    | The remuneration of directors and key executives is
      determined by the Board of Directors having regard to the performance of
      individuals and market trends. During 2017, 2016 and 2015, the Company did
      not incur any salaries and no key management or Director received any
      salary or consulting fees.                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                   
| |    | During 2013, key Company personnel received performance
      warrants. The fair value of these warrants was estimated using the
      Black-Scholes pricing model based on a volatility of 98%, risk-free
      interest rate of 1.5%, expected life of 2 years and no dividend yield. On
      January 18, 2017, all 5.0 million of the warrants expired out of the
      money.

|16. | Loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | Basic per share amounts are calculated using the weighted
      average number of shares outstanding of 64,056,876 for the year ended
      December 31, 2017 (2016  64,056,876, 2015  64,056,876). In computing
      diluted per share amounts, all of the Companys outstanding warrants were
      excluded from the calculation of the weighted average number of common
      shares outstanding as they were anti-dilutive.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|17. | Subsidiaries and jurisdictions:                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    | The consolidated financial statements of the Company for
      the years ended December 31, 2017, 2016 and 2015 comprise the Company and
      the following subsidiaries:                                                                                                                                                                                                                                                          

| |                               |  | Country of    |  |  |                            |  |  | % Equity | 
| | ----------------------------- |  | ------------- |  |  | -------------------------- |  |  | -------- | 
| |                               |  | Incorporation |  |  | Assets Held                |  |  | Interest | 
| | Chelsea Oil Australia Pty.    |  | Australia     |  |  | PL 18, PL 40, PL
      280 |  |  | 100%     | 
| | Cooper-Eromanga Oil Inc.      |  | US            |  |  | ATP 582                    |  |  | 100%     | 
| | Cooper Basin Oil and Gas Inc. |  | US            |  |  | -                          |  |  | 20%      | 

F-25

---

|Chelsea Oil and Gas Ltd.                                               
|-----------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                         
|For the years
      ended December 31, 2017, 2016 and 2015 (US Dollars)

|18. | Commitments:
|--- | ------------

| |               |  |                           |  |   | Remaining       |  |  | Remaining       |  |  |                | 
| | ------------- |  | ------------------------- |  | - | --------------- |  |  | --------------- |  |  | -------------- | 
| |               |  | Current                   |  |   | Work Commitment |  |  | Work Commitment |  |  | License        | 
| | License       |  | Phase                     |  |   | ($ million)     |  |  | (A$ million)    |  |  | Term           | 
| | PL 18         |  | Later
      Development   |  | $ | 3.9             |  |  | AUD 5.0         |  |  | August 2024    | 
| | PL 40         |  | Later Development         |  | $ | 1.6             |  |  | AUD 2.0         |  |  | September 2029 | 
| | PL 280        |  | Initial
      Development |  | $ | 0.8             |  |  | AUD 1.0         |  |  | August 2031    | 
| | ATP
      582 |  | Second Term               |  | $ | 8.6             |  |  | AUD 11.0        |  |  | August 2020    | 
| |               |  |                           |  | $ | 14.8            |  |  | AUD 19.0        |  |  |                | 

|19. | Expense reimbursements:                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                         
|    | During the year, the Company received $79,228 (2016 -
      $87,652, 2015 - $nil) reimbursements from the Sponsor. These
      reimbursements relate to travel and general and administrative expenses
      incurred during the year. The Sponsor has agreed to fund the Companys
      funding and restructuring efforts. There is no obligation to repay these
      reimbursements.

F-26

---