Tuktu Resources Ltd. (formerly Jasper Mining Corp.)

Unaudited Interim Condensed Financial Statements

As at June 30, 2023 and for the three and six months ended

June 30, 2023 and 2022

Management Report

To the Shareholders of Tuktu Resources Ltd.

The unaudited interim condensed financial statements of Tuktu Resources Ltd. were prepared by management in accordance with appropriately selected International Financial Reporting Standards and have been approved by the Board of Directors. Management has used estimates and careful judgement, particularly in those circumstances where transactions affecting current periods are dependant on information not known until a future period.

Management is responsible for the integrity of the financial and operational information contained in these unaudited interim condensed financial statements. The Company has designed and maintains internal controls to provide reasonable assurance that assets are properly safeguarded and that the financial records are well maintained and provide relevant, timely and reliable information to management. The unaudited interim condensed financial statements have been prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized in the notes to the unaudited interim condensed financial statements.

Tuktu Resources Ltd.

Signed: (signed) “Tim de Freitas” President and Chief Executive Officer

Signed: (signed) “Mark Smith” Chief Financial Officer

Calgary, Canada August 23, 2023

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Tuktu Resources Ltd.

(formerly Jasper Mining Corp.)

Interim Condensed Statements of Financial Position

Nature of operations and going concern (note 1)

See accompanying notes to the interim condensed financial statements.

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Tuktu Resources Ltd.

(formerly Jasper Mining Corp.)

Interim Condensed Statements of Income (Loss) and Comprehensive Income (Loss) (unaudited)

See accompanying notes to the interim condensed financial statements.

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Tuktu Resources Ltd.

(formerly Jasper Mining Corp.) Interim Condensed Statements of Cash Flows

(unaudited)

See accompanying notes to the interim condensed financial statements.

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Notes to the Interim Condensed Financial Statements As at June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 (unaudited)

Tuktu Resources Ltd.

1. Nature of operations and going concern

Tuktu Resources Ltd. (formerly Jasper Mining Corporation) (the “Company”) is incorporated under the laws of the Province of Alberta and is listed on the TSX Venture Exchange under the symbol “TUK”. The Company was engaged in the business of mineral exploration in Canada until the July 15, 2022, recapitalization and change of management where the company adjusted its business strategy to pursue oil and natural gas producing assets. The Company’s registered and head office is located at 501, 888 - 4^th Avenue SW, Calgary, Alberta, Canada, T2P 0V2.

Going concern:

These unaudited interim condensed financial statements have been prepared on a going concern basis, which assumes the realization of assets and discharge of liabilities in the normal course of business as they become due. At June 30, 2023, the Company had accumulated losses of $19.1 million since inception (December 31, 2022 - $19.8 million). For the six months ended June 30, 2023, the Company reported net income of $692 thousand (June 30, 2022 - $218 thousand net loss) and cash used in operating activities of $721 thousand (June 30, 2022 - $65 thousand). The Company’s working capital balance has decreased from $3.1 million as at December 31, 2022 to $405 thousand as at June 30, 2023.

The Company’s ability to continue as a going concern is dependent upon its existing working capital being sufficient to sustain operating activities while the Company attempts to generate positive cash flows from operations, secure funding from debt or equity financings, dispose of the mining assets or make other arrangements which may not be available.

These conditions indicate a material uncertainty that may cast significant doubt as to the Company’s ability to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern. These financial statements do not reflect the adjustments to the carrying amounts of assets and liabilities, reported amounts of expenses, and statement of financial position classifications used that would be necessary were the going concern assumption deemed to be inappropriate. Such adjustments could be material.

2. Basis of presentation

• a) Statement of compliance:

These unaudited interim condensed financial statements have been prepared by management in accordance with International Accounting Standard 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”) under accounting principles consistent with International Financial Reporting Standards (“IFRS”) as issued by the IASB.

These unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2022. The Company has applied the same accounting policies outlined by the Company in its most recent annual financial statements. These unaudited interim condensed financial statements do not include all the information required for full annual financial statements.

These unaudited interim condensed financial statements were authorized for issue by the Board of Directors on August 23, 2023.

• b) Functional and presentation currency

These unaudited interim condensed financial statements are presented in Canadian dollars, which is the Company’s functional currency.

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c) Basis of measurement:

These unaudited interim condensed financial statements have been prepared on the historical cost basis, except for certain financial and non-financial assets and liabilities which have been measured at fair value.

• d) Use of estimates and judgments:

The preparation of the unaudited interim condensed financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingencies, if any, as at the date of the unaudited interim condensed financial statements and the reported amounts of revenue and expenses during the period. Actual results may differ from these estimates, judgements, and assumptions.

3. Significant accounting policies

Except as described below, these Interim Condensed Financial Statements as at June 30, 2023 have been prepared following the same accounting policies as the financial statements as at December 31, 2022.

a) Business Combinations

Business combinations are accounted for using the acquisition method. The identifiable assets acquired and liabilities assumed in a business combination are measured at their fair values at the acquisition date. The cost of an acquisition is measured as the fair value of the assets transferred, equity instruments issued, and liabilities incurred or assumed at the acquisition date. The excess of the acquisition cost over the fair value of the identifiable net assets acquired is recognized as goodwill. If the cost of the acquisition is less than the fair value of the net identifiable assets acquired, a gain on business combination is recognized immediately in net income or loss. Transaction costs associated with a business combination are expensed as incurred. If an acquisition does not meet the definition of a business, the acquisition is accounted for in accordance with other relevant standards.

There is an option to apply a concentration test that permits a simplified assessment of whether an acquired set of activities and assets is in fact a business. The optional concentration test is met if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. A company may make such an election separately for each transaction or other event. If the concentration test is met, the set of activities and assets is determined not to be a business and no further assessment is needed.

b) Property, plant and equipment

(i) Development and production costs:

Items of property, plant and equipment, which include oil and gas development and production assets, are measured at cost less accumulated depletion and depreciation and accumulated impairment losses and reversals. The cost of development and production assets includes; transfers from exploration and evaluation assets, which generally include the cost to drill the well and the cost of the associated land upon determination of technical feasibility and commercial viability; the cost to complete and tie-in the wells; facility costs; the cost of recognizing provisions for future restoration and decommissioning; geological and geophysical costs; and directly attributable overheads.

Development and production assts are grouped into CGUs for impairment testing. When significant parts of an item of property, plant and equipment, including oil and natural gas interests, have different useful lives, they are accounted for as separate items (major components). If there is an indication that a previously recognized impairment charge may no longer exist or may have decreased, the recoverable amount of the relevant CGU is calculated and compared against the carrying amount. An impairment charge is reversed to the extent that the asset’s recoverable amount does not exceed the carrying amount that would have been determined, net of depletion, depreciation and amortization, if no impairment charge had been recognized. A reversal of an impairment charge is recognized in the statement of income (loss) and comprehensive income (loss) in depletion, depreciation, amortization, and impairment.

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Gains and losses on disposal of property, plant and equipment, property swaps and farm-outs, are determined by comparing the proceeds from disposal or fair value of the asset received or given up with the carrying amount of property, plant and equipment and are recognized in the statement of income (loss) and comprehensive income (loss).

(ii) 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 assets to which they relate. All other expenditures are recognized in the statement of income (loss) and comprehensive income (loss) as incurred. Such capitalized oil and natural gas interests generally represent costs incurred in developing proved and/or probable petroleum and natural gas reserves and bringing in or enhancing production from such proved and/or probable petroleum and natural gas 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-to-day servicing of property, plant and equipment are recognized on the statement of income (loss) and comprehensive income (loss) as operating costs when incurred.

(iii) Depletion and depreciation

The Company depletes its net carrying value of development and production assets included within property, plant and equipment at the CGU level using the unit of production method by reference to the ratio of production in the period to the related proved and probable petroleum and natural gas reserves before royalties, taking into account expenditures incurred to date together with estimated future development costs necessary to bring those reserves into production and excludes salvage value.

Relative volumes of proved and probable petroleum and natural gas reserves and production are converted at the energy equivalent conversion ratio of six thousand cubic feet of natural gas to one barrel of oil. Future development costs are estimated taking into account the level of development required to produce the proved and probable petroleum and natural gas reserves.

Proved and probable petroleum and natural gas reserves are estimated using independent third-party reserve evaluators reports and represent the estimated quantities of crude oil, natural gas and natural gas liquids that geological, geophysical and engineering data demonstrate with a specified degree of certainty to be recoverable in future years from known reservoirs and that are considered commercially producible.

The Company has deemed the estimates useful lives for gathering systems and processing facilities to be consistent with the reserve lives of the CGUs for which they serve. As a result, the Company includes the cost of these assets within their associated CGUs for the purpose of depletion using the unit-of-production method.

For other assets, depreciation is recognized in the statement of income (loss) and comprehensive income (loss) on a declining balance basis over the estimated useful lives of each part of an item of property, plant and equipment and leased assets are depreciated over the lease term. Land is not depreciated.

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

c) Revenue

Revenue from the sale of crude oil, natural gas and natural gas liquids is recorded when control of the product is transferred to the buyer based on the consideration specified in the contracts with customers. This usually occurs when the product is physically transferred at the delivery point agreed upon in the contract and legal title to the product passes to the customer.

The Company evaluates its arrangements with third parties and partners to determine if the Company acts as the principal or as the agent. In making this determination, the Company considers if it obtains control of the product delivered or services provided, which is indicated by the Company having the primary responsibility for the delivery of the product or rendering of the service, having the ability to establish prices or having inventory risk. If the Company acts in the capacity of an agent rather than as a principal in a

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transaction, then the revenue is recognized on a net-basis, only reflecting the fee, if any, realized by the Company from the transaction.

Tariffs, tolls and other fees charged to other entities for use of pipelines and facilities owned by the Company are evaluated by management to determine if these originate from contracts with customers or from incidental or collaborative arrangements. Fees charges to other entities that are from contracts with customers are recognized in revenue when the related services are provided.

Royalty income is recognized as it accrues in accordance with the terms of overriding royalty agreements.

4. Mineral property security deposits

The Company is required to maintain safekeeping deposits with the Government of British Columbia as a condition of certain mineral claims. These deposits represent collateral for possible reclamation activities necessary on mineral properties in connection with the permits required for exploration activities by the Company. The deposits are held in guaranteed investment certificates with annual maturity dates and interest rates of 2.5% (December 31, 2022 – 1.2%) or in trust with the government ministry. As at June 30, 2023, the Company had $32,288 (December 31, 2022 - $32,227) on deposit.

5. Exploration and evaluation assets

Exploration and evaluation assets consist of the Company’s undeveloped land. The Company concluded that there were no indicators of impairment on its exploration and evaluation assets at June 30, 2023.

6. Acquisitions

On March 17, 2023, the Company closed an acquisition of southern Alberta light oil assets. As consideration for the assets, the Company issued 10,000,000 units (see note 10) and paid $100,000 cash, before customary adjustments. The Company incurred transaction costs of $28,566 on the acquisition which were capitalized to property, plant and equipment.

The transaction was accounted for as an asset acquisition. The purchase price was allocated as follows:

On April 14, 2023, the Company closed an acquisition of southern Alberta natural gas assets. As consideration for the assets, the Company paid $2,264,801 cash, before customary adjustments. The Company incurred transaction costs of $20,643 on the acquisition which were capitalized to property, plant and equipment.

The Company assessed the transaction using the concentration test and accounted for the acquisition as an asset acquisition. The purchase price was allocated as follows:

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7. Property, plant and equipment

On June 28, 2023 the Company disposed of land in Cranbrook, BC for net proceeds of $361,925. There was a $236,227 gain recognized on the disposition.

Future development costs of $9.7 million were included in the calculation of depletion. At June 30, 2023, there were no indicators of impairment for the oil and gas properties.

8. Warrant liability

On July 15, 2022, as part of the Recapitalization Transaction (note 10), the Company issued 51,941,773 Units comprised of one common share and one common share purchase warrant at $0.09 per unit. Each warrant entitles holders to acquire one common share at an exercise price of $0.11 prior to the date that is four years from the date of issuance of the warrants. The warrants will vest and become exercisable as to one-third upon the 20-day volume weighted average trading price of the common shares equaling or exceeding $0.13, $0.155 and $0.18, respectively. The warrants issued were classified as a financial liability as a result of a cashless exercise provision. In no event will the Company be required to settle the warrants through a cash payment.

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The fair value of the warrants on June 30, 2023 and on December 31, 2022 was determined using the BlackScholes pricing model with the following inputs:

(1) Expected volatility is based on a historical peer group volatility

The Company recorded a $1.4 million remeasurement gain on the warrant liability for the six months ended June 30, 2023.

9. Decommissioning obligations

The Company’s decommissioning obligations result from net ownership interests in petroleum and natural gas assets. The Company estimated the total inflated and undiscounted amount of cash flows required to settle its decommissioning obligations is approximately $5,052,118. These payments are expected to be made over the next 25 years. A risk-free rate of 3.09% and an inflation rate of 1.70% was used to calculate the decommissioning obligations.

A reconciliation of the decommissioning obligations is provided below:

10. Share capital

Common shares

• a) Authorized - unlimited common shares without nominal or par value.

• b) Issued and outstanding:

On March 17, 2023 the Company closed an acquisition of assets. The Company issued 10,000,000 units comprised of one common share and one common share purchase warrant. The warrants are exercisable at $0.30 per common share for a period of three years. The units were recognized at an ascribed value of $317,200 to the warrants and $882,800 to the common shares.

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Warrants

The warrants issued in connection with the acquisition of assets were ascribed a value of $317,200. The value was estimated using the Black-Scholes pricing model with the following assumptions; share price $0.09; risk-free interest rate of 3.15%; expected life of three years; and expected volatility of 95%.

2022 Recapitalization transaction

On July 15, 2022, the Company completed a recapitalization transaction which included the following:

The conversion of $240,000 debt of the Company into 2,666,666 common shares at a deemed price of $0.09 per common share.

A Non-Brokered Private Placement of 31,941,773 units of the Company at a price of $0.09 per unit for aggregate gross proceeds of $2.87 million. Each unit is comprised of one common share and one common share purchase warrant. Each warrant entitles holders to acquire one common share at an exercise price of $0.11 prior to the date that is four years from the date of the issuance of the warrants. The warrants will vest and become exercisable as to one-third upon the 20-day volume weighted average trading price of the common shares equaling or exceeding $0.13, $0.155 and $0.18, respectively.

A Brokered Private Placement of 20,000,000 units of the Company at a price of $0.09 per unit for aggregate gross proceeds of $1.8 million. Each unit is comprised of one common share and one common share purchase warrant. Each warrant entitles holders to acquire one common share at an exercise price of $0.11 prior to the date that is four years from the date of the issuance of the warrants. The warrants will vest and become exercisable as to one-third upon the 20-day volume weighted average trading price of the common shares equaling or exceeding $0.13, $0.155 and $0.18, respectively. The Company paid the agent a commission equal to 6.0% of the gross proceeds received by the Company. The commission was paid through the issuance of 358,479 units of the Company, included in the total 20,000,000 brokered units, at a deemed price of $0.09 per unit and $75,737 in cash.

The warrants were recognized at a fair value $2,746,799 with the residual $1,927,961 allocated to the common shares. See note 8.

Concurrently with the closing of the non-brokered and brokered private placement, the appointment of a new management team and reconstitution of the board of directors was completed.

Pursuant to the Recapitalization Transaction, the Company incurred $335,682 of transaction costs and $182,526 of share issue costs.

11. Share-based compensation

The following table reflects the Company’s stock options for which shares have been reserved:

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Summary information with respect to options outstanding at June 30, 2023 is provided below:

The Company calculated and recorded stock-based compensation expense for the six months ended June 30, 2023, of $98,631 (June 30, 2022 - $66,689).

12. Per share amounts

Basic and diluted net income (loss) per share is calculated as follows:

Basic per share amounts are calculated using the weighted average number of common shares outstanding. The Company uses the treasury stock method to determine the impact of dilutive securities. The reconciling items between the basic and diluted average common shares outstanding are stock options and warrants. Stock options and warrants that were out of the money were excluded from the diluted average common shares outstanding calculation. In periods where the Company recognizes a net loss, the effect of stock options and warrants are removed as they are anti-dilutive.

13. Revenue

The Company sells its production pursuant to variable-price contracts. The transaction price is based on the commodity price, adjusted for quality, location or other factors. Under the contracts the Company is required to deliver a variable volume of crude oil, condensate, natural gas or natural gas liquids to the customer.

The amount of revenue recognized is based on the agreed transaction price, whereby any variability in revenue relates specifically to the Company’s efforts to transfer production, and therefore the resulting revenue is allocated to the production delivered in the period during which the variability occurs. As a result, none of the variable revenue is considered constrained.

Crude oil and natural gas are sold under contracts of varying terms. Revenues are typically collected on the 25^th day of the month following production.

The following table summarizes the Company’s petroleum and natural gas sales:

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Included in accounts receivable as at June 30, 2023, is $309,799 of accrued petroleum and natural gas sales related to April and June 2023 production.

14. General and administrative expenses

15. Finance income and expense

16. Change in working capital

17. Related party transactions

Except as disclosed elsewhere in these financial statements, the Company had the following related party transactions in the normal course of operations and measured at the exchange amount:

Amounts due to related parties consist of amounts due to shareholders, officers and directors of the Company and companies controlled or significantly influenced by shareholders and officers of the Company. The amounts are non-interest bearing, unsecured and have been settled.

During the six months ended June 30, 2023, there were no related party transactions or balances owing to related parties.

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During the six months ended June 30, 2022, $13,500 was charged for office rent and administrative services and $62,038 was advanced to the Company by entities owned by a director of the Company.

18. Capital management

The Company’s objective when managing capital is to maintain a flexible capital structure and sufficient liquidity to meet its financial obligations and to execute its business plans. The Company considers capital structure to include shareholder’s equity and working capital.

The Company monitors its current and forecasted capital structure in response to changes in economic conditions and the risk characteristics of its mining claims and future oil and gas development. Value-creating activities may be financed with a combination of working capital and other sources of capital.

19. Financial instruments and risk management

The Company’s financial instruments include cash and cash equivalents, accounts receivable, mineral property security deposits and accounts payable and accrued liabilities.

Fair value measurement

IFRS establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lower priority to unobservable inputs. The three levels of the fair value hierarchy are as follows:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

Level 3 – Valuations in this level are those inputs for the asset or liability that are not based on observable market data.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, mineral property security deposits and accounts payable and accrued liabilities. The carrying values of these financial instruments approximate their fair values due to their relatively short periods to maturity.

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;

a) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from joint venture partners and oil and natural gas marketers.

Receivables from oil and natural gas marketers is normally collected on the 25^th day of the month following sales. The Company’s policy to mitigate credit risk associated with these balances is to establish marketing relationships with large, well-established purchasers. The Company has not experienced any collection issues with its oil and gas marketing receivables.

The Company’s total carrying amount of cash and cash equivalents and accounts receivable at June 30, 2023 was $976,935 (December 31, 2022 - $3,504,813), representing the Company’s maximum credit exposure. The total amount of accounts receivable 90 days past due is nominal at June 30, 2023 (December 31, 2022 – nominal).

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b) Liquidity risk

Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation. The Company prepares annual expenditure budget, which are regularly monitored and updated as considered necessary. See going concern Note 1.

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 income (loss) or value of financial instruments. The Company does not have and risk management contracts in place to minimize market risks.

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