Borders & Sth. Regulatory News (BOR)

8 April 2013

Borders & Southern Petroleum Plc

Preliminary Unaudited Results for the 12 months ended

31 December 2012

Borders & Southern Petroleum Plc ("Borders & Southern" or "the Company") (AIM:BOR) announces preliminary unaudited results for the year to 31 December 2012.

Highlights

·; Safely executed a two well drilling programme in the Falkland Islands

·; Reported a gas condensate discovery with the Company's first exploration well - current estimated most likely recoverable resource: 200 million barrels

·; Completed post-well sub-surface, engineering and commercial evaluations

·; Reduced risk profile of the prospect inventory

·; Entered second exploration phase of the licences

·; Post year-end activities - completed 3D seismic acquisition and commenced farm-out process

·; Cash balance as at 31 December 2012: $56 million

Harry Dobson, Borders & Southern's Non-Executive Chairman, commented:

"Last year Borders & Southern enjoyed its first taste of exploration success. In April 2012 the Company announced a gas condensate discovery with its first exploration well. Subsequent post-well technical studies have endorsed our initial opinion that Darwin has the potential to develop into a significant field. Furthermore, the discovery well (61/17-1) has opened up a new hydrocarbon basin, proved the Early Cretaceous play fairway and significantly reduced the risk profile of the Company's prospect inventory.

Building on this success, the Company has defined an ambitious work programme for the next two years. This includes further technical evaluation, 3D seismic acquisition and processing, reprocessing of existing 3D seismic, securing a partner and a rig contract, well planning and finally the drilling of both appraisal and exploration wells. At the conclusion of this programme, the Company hopes to have established a core area comprising an appraised discovery that can be taken forward for project sanction and prospects that could add further significant value."

For further information please visit www.bordersandsouthern.com or contact:

Notes:

Borders & Southern Petroleum plc is an oil & gas exploration company listed on the London Stock Exchange AIM (BOR). The Company operates and has a 100% interest in three Production Licences in the South Falkland Basin covering an area of nearly 10,000 square kilometres. The Company has acquired 2,862 km of 2D seismic, 1,492 square kilometres of 3D seismic and drilled two exploration wells, making a gas condensate discovery with its first well.

This statement has been reviewed, verified and approved by Dr Howard Obee, (a petroleum geologist with 25 years relevant experience, Fellow of the Geological Society and member of the American Association of Petroleum Geologists and the Petroleum Exploration Society of Great Britain), in accordance with the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies.

Chairman's Statement

I believe that 2012 will be seen as a breakthrough year for the Company. With a successful drilling campaign behind us, we now have an important discovery (Darwin) to underpin the Company's future.

Furthermore, the discovery has profound implications on the quality of nearby prospects. Borders & Southern is starting to realise its ambition to build a successful exploration company, delivering growth and value through discovery and appraisal. We have increasing confidence in further discoveries and believe our acreage position could develop into a core area.

The accomplishments of last year were due to the hard work of a small, dedicated and professional team that made excellent commercial and technical judgments. This team is supported by a number of contractors with whom we have developed good working relationships over a number of years. Without their help, our success to date would not have been possible and our thanks go to all those involved.

With a drilling programme involving a large number of personnel and operating in an environmentally sensitive area, the Board maintained a strong focus on the highest standards of health, safety and environmental management during the year. I am pleased to report that the operation was conducted safely and without major incident and it is a credit to the drilling team that they performed so well in such a remote location where the logistical challenges were significant.

The technical evaluation of the Darwin gas condensate discovery is progressing well. Our initial estimate of the recoverable liquids from the discovery was in the range of 130 to 250 million barrels. Comprehensive post-well studies, a re-evaluation of the seismic data and the development of new reservoir models suggest that this might be conservative. As we have already reported, a screening feasibility study and independent project economics both indicate that if our current resource estimates alone are substantiated through appraisal drilling, a development of the discovery is both technically and commercially viable using existing technology. Demonstrating further resource additions will clearly enhance any development.

The next couple of years will be an exciting period for the Company. We have defined a comprehensive work plan and we are completely focused on building, and demonstrating, the value of the Company's assets.

Harry Dobson,

Chairman

5 April 2013

Chief Executive's Statement

The Company acquired its acreage to the south of the Falkland Islands in 2004 with the specific objective of evaluating an untested fold belt. Recognising that there was a high probability that a regional Late Jurassic to Early Cretaceous source rock would be present and working in the area, we were looking for robust simple structures, characteristic of fold belts. Acquisition of 2D seismic confirmed the presence of large anticlines and tilted fault blocks. Encouraged by the confirmation of closed structures, our initial attention focused on the folds due to their size and simplicity. However, our understanding of sub-surface risk improved significantly following the acquisition of 3D seismic, which revealed particularly interesting geophysical attributes associated with the tilted fault blocks.

The drilling programme was therefore designed to test both structural play types, targeting different age reservoirs: Early Cretaceous shallow marine sand reservoirs in tilted fault blocks and Tertiary / Late Cretaceous deep-water turbidite reservoirs in folds. Whilst the drilling campaign proved the fault blocks as a valid play, it left questions unanswered about the folds. Our second well (61/25-1), drilled on the Stebbing prospect, encountered very strong hydrocarbon shows in poor quality Tertiary reservoir, but failed to reach the deeper Late Cretaceous targets due to high pressures. Therefore part of the regional geology remains unevaluated and the folds continue to be high potential targets within our exploration portfolio.

However, our short-term focus is on the Early Cretaceous high quality reservoir, both appraising the Darwin discovery and exploring nearby prospects. This is partly due to its ability to be clearly imaged on 3D seismic data. Our understanding of this reservoir interval is improving all the time. The Darwin exploration well was sited on the easternmost of two adjacent tilted fault blocks as it was anticipated that it would encounter the thickest, high quality reservoir. The well came in very close to prognosis, and through integrating the well data with the seismic data we are now able to extract more information from our seismic volume. This has led to alternative reservoir models and may indicate that the reservoir unit is actually thicker on Darwin West.

A new 3D survey commenced in late February 2013. The key objective is to reduce the technical risks on those prospects currently only mapped on 2D data. Additionally, the survey will provide new information on regional reservoir development and potentially identify new prospects. An initial processed product from the new seismic will be received approximately three months after acquisition has been completed. At that stage, we would hope to get first insights into the geophysical attributes of key prospects. The final depth processed data will not be received for approximately nine months. Well planning can proceed using the fast track data, but ultimate well locations will be selected using the final product.

The 2012 drilling campaign not only improved our understanding of the sub-surface, it also provided valuable insights into the operating environment. We learnt that we could safely drill deep-water wells with little impact from adverse weather conditions. Securing a harsh environment dynamically positioned semi-submersible meant that we lost very little time due to weather. We also learnt that we could operate year round. The biggest challenge came from logistics, but with careful planning and enough contingency supplies we were able to minimise the impact of the long supply route between Europe and the Falkland Islands.

One important licence milestone occurred in November of last year, when we entered the second exploration term. By doing so, we committed to drill one exploration well and had to relinquish 50% of our acreage. Defining the area of relinquishment was not difficult and the impact on our exploration portfolio was minimal. Part of the area relinquished was structurally very complex and the other part is in very deep water. Additionally, our palaeogeographic models predicted that the area would have limited reservoir development. Following relinquishment, we still retain, on a 100% ownership basis, nearly 10,000 square kilometres and hold a very extensive prospect inventory.

As we have already announced, in order to help fund the next appraisal and exploration programme, we intend to bring partners into the licences. This process is underway and our aim is to conclude it as soon as possible. At the same time, we are actively monitoring the rig market, with a view to mobilising a rig in late 2014 or early 2015.

In summary, the entire team is extremely optimistic about our discovery, the quality of the surrounding prospects and the potential growth options for the Company. Our immediate priority is to demonstrate a clear path to the next drilling campaign.

Financial Review

The Company reported a loss for the year of $1.3 million compared to $1.7 million for 2011. The reduction in losses was due to foreign exchange gains partially offset by higher administrative expenses due to higher staff related costs in 2012.

We commenced the drilling campaign in 2012 with the view that we had sufficient funds, with contingency, to drill both wells. The rig equipment problems during the drilling of the Darwin well resulted in significant increases to the budgeted well cost and we considered it prudent to raise additional capital of $74 million (before expenses) in late April to ensure that we continued to have sufficient funds, with contingency, to drill Stebbing. This prudent approach to capital management has proven to be correct. After spending around $193 million in 2012, the Company ended the year with around $56 million in cash deposits. This is sufficient to fund the small amounts still owing from the drilling campaign, the existing 3D seismic acquisition and ongoing overhead costs for the foreseeable future. Due to the increased levels of expenditure during 2012 and 2013, considerable effort is expended on cost-tracking and oversight to ensure that capital is allocated efficiently.

The annual report and notice of the Annual General Meeting will be sent out to shareholders during May.

Howard Obee

Chief Executive

5 April 2013

Unaudited consolidated statement of comprehensive income

for the year ended 31 December 2012

Unaudited consolidated statement of financial position

as at 31 December 2012

Unaudited Consolidated statement of changes in

Equity for the year ended 31 December 2012

The following describes the nature and purpose of each reserve within owners' equity:

.

Unaudited statement of cash flows

for the year ended 31 December 2012

Notes

1. Basis of preparation

The financial information set out above does not constitute the company's statutory accounts for 2011 or 2012. Statutory accounts for the year 31 December 2011 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2011 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The results for 2012 are unaudited. Statutory accounts for the year ended 31 December 2012 will be finalised based on the information presented in this announcement. The independent Auditors' Report will be based on those statutory accounts once they are complete.

Statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2012, prepared under IFRS as adopted by the EU, will be delivered to the Registrar in due course.

2. Going concern

The Directors believe that the company has sufficient funds, with contingency, to meet its current commitments with excess funds expected to be sufficient to fund ongoing operations for the foreseeable future. Therefore, this financial information has been prepared on a going concern basis.

3. Basic and dilutive loss per share

The calculation of the basic and dilutive loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The loss for the financial year for the group was $1,280.504 (2011 - loss $1,740,901) and the weighted average number of shares in issue for the year was 463,145,812 (2011 - 428,578,404). During the year the potential ordinary shares are anti-dilutive and therefore diluted loss per share has not been calculated. At the statement of financial position date, there were 5,350,000 (2011: 5,350,000) potentially dilutive ordinary shares being the share options.

4. Capital Commitments

On 1 October 2012 the Company entered into an agreement with PGS Geophysical AS for the acquisition of 3D seismic. This seismic will be acquired during 2013 and the estimated cost is $24 million.

5. Cash and cash equivalents

The company holds its deposits with banks. At the reporting date, the company had a cash deposit held as security for a letter of credit issued as part of its obligations under the rig contract which has been released post balance date. The company has also placed funds into an escrow account under the terms of a project management contract.

6. Post Reporting Date Events

On 26 February 2013, the Company commenced the acquisition of 3D seismic within the licences.

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