Circle Oil Plc Regulatory News (COP)

7 June 2012

Circle Oil Plc

(The "Company") and its Subsidiaries ("Circle" or the "Group")

Preliminary results for the year ended 31 December 2011

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce its results for the year ended 31 December 2011.

Financial Highlights

Highlights

·; Record financial results due to increased production and higher oil and gas prices

·; 100% success in six well Egyptian drilling campaign comprising three producing and three water injection wells

·; Water injection programme underway in Egypt which is aimed at improving recoverability - current daily production rate has reached c. 10,000 bopd (gross)

·; Highly successful drilling campaign in Morocco in 2010-2011 with five wells drilled and four successfully tested for gas, with one well still to be tested

·; Bayphase Reserve Report shows 30% increase in gross initial recoverable reserves over 2010 ultimate recoverable resources number

·; Circle continues to develop its strategy of bringing its assets into production leading to increased revenue

·; New gas pipeline infrastructure installation completed in Morocco with increased production levels and revenue in 2012

·; Circle receiving weekly payments for past six months from EGPC in Egypt and US$30 million convertible loan extended for a further three years to 2015 

Prof Chris Green, CEO, said:

"2011 was another very successful year for Circle as we have continued to progress. Significantly our continued drilling success in both Egypt and Morocco has resulted in increased daily production and this is reflected in our profitability for the year."

For further information contact: 

Circle Oil Plc (+44 20 7638 9571)

Professor Chris Green, CEO

Brendan McMorrow, CFO

Evolution Securities (+44 20 7071 4300)

Chris Sim

Neil Elliot

Fox-Davies Capital (+44 20 3463 5010)

Daniel Fox-Davies

Richard Hail

Citigate Dewe Rogerson (+44 20 7638 9571)

Martin Jackson

Kate Lehane

Murray Consultants (+353 1 498 0300)

Joe Murray

Joe Heron

 Chairman's Statement

2011 was a year which witnessed changes and challenges for all those operating in and concerned with North Africa and the Middle East. Circle is proud to have stood steadfast throughout this period of change, whilst maintaining and growing its position as a respected exploration, development and production company in this region's oil and gas industry.

The Company has underpinned the successes of previous years with more significant and noteworthy milestones in 2011, including the construction of a new gas pipeline in Morocco, which was commissioned in February 2012, to increase our gas sales and complement our continued drilling success on our Sebou block. Our Egyptian oil fields have maintained high levels of production and together with targeted appraisal drilling and successful reserve management, including water injection, have resulted in a significant increase in reserves. The combination of Circle's Moroccan and Egyptian assets constitute an excellent income base for the Company. The 2012 Competent Person's Report (Bayphase CPR, conducted in early 2012) has credited Circle with a 30% increase in the Company's 2P reserve base for Morocco and Egypt over the 2011 report. This outcome reflects the success of our development strategy together with the dedication and commitment of the Circle team. All of which bodes well for further increasing the future value of the Company for our shareholders.

The successful drilling campaigns of 2011 have, once again, underscored the Company's valuable acreage position. It is our intention to continue this level of drilling success and to further increase production during 2012, as well as to expand our portfolio of assets with new ventures, exploiting to the full the significant value of our management team's many areas of knowledge and expertise. This remains at the core of the Company's successful strategy in terms of diligently selecting acreage which has led to continued considerable successes with the drill-bit, following on from successes of previous years.

In 2011, the Company participated in the drilling and testing of three successful gas discoveries in Morocco, together with three successful oil wells and three water injection wells in Egypt. A 3D seismic survey was acquired over both our blocks in Morocco and the existing 3D seismic over our Egyptian block was reprocessed, in order that we may fine-tune our drilling programmes for these areas and continue with our rate of success. 

The team at Circle deserves recognition and our unwavering appreciation for the vital role that their hard work, resolute commitment and ideas have contributed to the success and growing profitability of the Company. For example, while the drilling success is just one very visible aspect, the sound understanding of production, development and remedial action methodology to achieve and improve productivity also warrant special mention. The new 55 km gas pipeline from Sebou to Kenitra in Morocco was successfully installed in 2011 on budget and successfully commissioned in early 2012, again a testament to the diligence, technical and commercial efficiency of the Circle team. The 30% increase in reserves is another aspect of Circle's performance this year that reflects on the strength in depth of the Company's staff, associates and partners.

Operations

Egypt

Great progress has been made on our NW Gemsa block with the drilling of additional producers and three water injectors to support the level of productivity and increase reserves. Pressure increase in the producers has already been recorded and the effect of the injection on recoverability has played an important part in the increase in reserves for the NW Gemsa oil fields.

The process of replacing the original rental facilities with permanent wholly owned facilities is well underway. As part of the new facilities an 8 inch oil pipeline has been constructed, removing the need for the Company to truck its oil, and the 16 km 12 inch gas pipeline to the Suco terminal at Zeit Bay will be tied in by late 2012. These new facilities will mean more efficient production and the capture of the income stream from the gas and the associated liquids, which will result in increased revenue and profitability.

The 2012 NW Gemsa 2P reserves compiled by Bayphase have increased by 34% to 48 MMboe over the 2011 figure of 35.9 MMboe compiled by RPS. This is due largely to the establishment of a deeper oil-water contact (more oil originally in place) and improved recovery efficiency. Gross oil production from the commencement of operations in early 2009 through end of December 2011 was 6.95 MMbo. Current production (as at early May 2012) has reached c. 10,000 bopd (gross).

The appointment of an experienced and well respected country manager and establishment of a fully staffed Egyptian country office is regarded as a significant demonstration of our commitment and belief in the future upside for Egypt as it develops over the next period.

While the management of Egyptian receivables has been a particular area of concern and focus, we are pleased to note that we have been receiving weekly payments for the past six months from EGPC in Egypt.

Morocco

In 2011, the Company participated in the drilling and testing of three successful gas discoveries in Morocco. Two wells (ADD-1 and KSR-11) were drilled and tested successfully in 2011, to complete the 2010-2011 drilling campaign. In addition, DRJ-6, a well drilled during the 2009 drilling campaign, was also tested successfully. All three wells have been completed as producers. A 3D seismic survey of 17 sq km was acquired to tie the Sebou and Gaddari surveys and an additional 135 sq km of 3D was acquired over the Lalla Mimouna Nord block, which will form the basis for the next drilling campaign currently scheduled for later in 2012.

Gross gas production during 2011 averaged between 2 and 2.5 MMscf/d. This rate will rise significantly as more wells are tied in during 2012, to between 7 and 8 MMscf/d. The flow rate in March 2012 was between 4 and 4.5 MMscf/d, following the signing of a contract to supply a large ceramics factory in Kenitra. The supply rate to this factory shall increase further and more contracts are expected to be signed shortly with an associated rise in production to 7 MMscf/d gross over the coming months. The pipeline has a total capacity of 23MMscf/d and there is significant scope to utilise this capacity as additional discoveries and offtake agreements are brought on-line.

The Bayphase CPR for our Sebou discoveries resulted in a 2P reserves case of 30 bcf, very close to the 2011 figure compiled by RPS, the authors of the 2011 CPR. Gross gas production from commencement of production in late 2008 through end of December 2011 was 1.93 bcf.

Tunisia

Activity in Tunisia, to date, has concentrated on evaluations of our three blocks of Grombalia, Ras Marmour and Mahdia. We have defined a drilling location on Ras Marmour to be drilled later in 2012. Ahead of this we have recently acquired new 2D seismic to refine some potential drilling targets in the Grombalia permit and plan to drill an exploration well in mid 2012. Technical studies continue on the Mahdia permit to firm up the best location for future drilling. Events in 2011 have resulted in some operational delays, but we believe these delays are now nearing an end and we can press forward with our operational plans and are confident of drilling two wells in 2012.

Oman

The 3D seismic survey over southern onshore Block 49 was evaluated in 2010 and it was concluded that additional 2D coverage to the north-east of the 3D survey would be acquired to better define a drillable prospect. It is anticipated that the acquisition of this additional 2D seismic will begin by mid 2012.

Interpretation of the 2D seismic survey over offshore Block 52 was completed in 2011, with the identification of an undrilled and complex structured sedimentary basin, outboard of Sawqirah Bay. This prospectivity has been documented and the farm-out process is ongoing to attract partners to drill an exploration well, which includes three good leads in shallower water which Circle could yet opt to drill on a sole risk basis.

Corporate

The financial review and results as set out later in this announcement shows a very positive outturn for 2011 with significant increases in both oil and gas revenues (US$58.0 million), net profit (US$25.6 million) and a strengthening of the Group balance sheet.

As recently announced we are pleased to report that we have reached agreement with a subsidiary of KGL Investment Company, to extend the US$30 million convertible loan which was due to mature on 19 July 2012, for a further three years to 19 July 2015. This is very beneficial for Circle and also continues our strong relationship with KGL.

Outlook

In 2012-2013, Circle intends to continue with development work in Egypt, to maximise production and increase recovery efficiency. In Morocco, we plan to undertake exploration drilling campaigns on the Lalla Mimouna Nord and Sebou blocks, as well as tie in more discoveries to allow for an increase in the gas deliveries through our new pipeline. Additional exploration drilling is planned with two wells in Tunisia, one each on the Grombalia and Ras Marmour Blocks. In Oman we will be acquiring additional 2D seismic over Block 49 and will continue in our effort to get a partner to join in the drilling of a well on Block 52.

The Company continues to attentively seek out and pursue both production and exploration assets which will serve to complement and underpin our strong MENA regional portfolio. Our focus primarily remains within the MENA and Sub Saharan Africa regions.

In what has been, within our region of operations, a time of change we have remained on track and continue to register success. We are confident of maintaining this progress and momentum over the coming year and sincerely thank our teams in all countries for their professionalism and valued contributions to the continuing evolution of the Company.

I am delighted once again, to thank you our shareholders, for your support and to sincerely thank all our staff, associates and partners for their continued good work and commitment during the past year.

Thomas Anderson

Chairman

Financial Review

Results for the year

Circle has achieved excellent financial results for 2011 as a result of production of oil in Egypt and gas in Morocco together with increased commodity prices.

Group turnover for 2011 from oil and gas sales increased to US$58.0 million from US$44.4 million in 2010, an increase of 31%. This positive outcome was due primarily to an increase in oil and gas prices. The average oil price achieved for 2011 was US$105.46 per BO versus US$75.74 per BO in 2010 while the average gas price achieved was US$8.81 per Mscf as against US$7.43 per Mscf in 2010. Circle's share of volume of oil sold from the NW Gemsa permit in Egypt was 1.09 million barrels (2010: 1.18 million barrels) while volume of gas sold from the Sebou permit in Morocco was 576 MMscf, a 43% increase from 403 MMscf sold in 2010.

Gross profit achieved for the year was US$23.4 million as against US$16.9 million for 2010, an increase of over 38% year on year.

Total operating costs amounted to US$3.4 million, a reduction of US$0.9 million on the previous year.

The Group recorded an operating profit for 2011 of US$20.0 million (2010: US$12.6 million).

After a gain on financing activites amounting to US$5.7 million (2010: US$2.2 million loss) the Group recorded a net profit of US$25.6 million for 2011 (2010: US$10.4 million) an increase of 147% over the previous year.

EBITDA for the Group amounted to US$26.5 million (2010: US$18.2 million) an increase of 46% for the year.

Cash flow

Net cash inflow from operating activities for 2011 amounted to US$11.6 million (2010: US$9.0 million). Cashflow from operating activities was affected by a US$18.4 million increase in trade receivables during the year from EGPC in Egypt. The Company has actively sought to manage this situation and the position has subsequently stabilised. The Company has been receiving weekly payments from EGPC for the last six months.

Net cash used in investing activities relating to oil and gas assets amounted to US$43.9 million (2010: US$48.9 million) and comprised mainly of US$6.4 million invested in exploration and evaluation assets in Morocco and Oman while US$37.7 million was invested in production and development assets in Morocco and Egypt.

Net cash used from financing activities totalled US$1.8 million (2010: US$64.8 million generated) and comprised interest paid on the convertible loan.

Group cash balances at year-end amounted to US$14.4 million (2010: US$47.1 million) of which US$1.3 million was in restricted accounts leaving US$13.1 million available for use.

Statement of financial position

As a result of the significant profit recorded in 2011 the Groups financial position has strengthened.

Total assets for the Group at 31 December 2011 amounted to US$234.1 million (2010: US$203.9 million) and comprised mainly oil and gas assets of US$179.4 million, cash at bank of US$14.4 million and US$40.2 million of trade and other receivables.

Net assets amounted to US$184.5 million at year end (2010: US$158.9 million) an increase of US$25.6 million over the previous year.

Working capital, after adjustment for the US$30 million convertible loan which has now been agreed to be extended from maturity on 19 July 2012 for a further three years to 19 July 2015, amounted to US$37.6 million (2010: US$59.1 million).

Financial gearing at year end was at a low 8% level.

Brendan McMorrow

Chief Financial Officer

Circle Oil PLC

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

Circle Oil PLC

CONSOLIDATED statement of financial position AT 31 DECEMBER 2011

Circle Oil PLC

CONSOLIDATED cash flow statement

FOR THE YEAR ENDED 31 DECEMBER 2011

Circle Oil PLC

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

NOTES TO THE FINANCIAL STATEMENTS

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Financial Reporting Interpretations Committee (IFRIC). They have also been prepared in accordance with the Companies Acts, 1963 to 2009 and are compliant with the rules of the Alternative Investment Market (AIM) of the London Stock Exchange.

The financial statements have been prepared on the historical cost basis.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to the end of the financial year. Subsidiaries are consolidated in the Group financial statements from the dates on which control over financial and operating policies and decisions is obtained. All intercompany transactions, balances, income and expenses have been eliminated in full on consolidation.

Basic and diluted earnings per share

The calculation of the basic earnings/per share attributable to the ordinary equity holders of the parent is based on the following data:

Diluted earnings per share was calculated using the weighted average number of ordinary shares assuming the conversion of its potential dilutive equity derivatives outstanding. All of the Group's potential ordinary shares were dilutive for the year ended 31 December 2011, which resulted in a decrease in earnings per share. The Group had total potential ordinary shares outstanding of 104,216,937 at 31 December 2011 (2010: 104,714,949).

 In accordance with the guidelines of the AIM Market of the London Stock Exchange, Professor Chris Green, Chief Executive Officer of Circle Oil plc, and Dr Stuart Harker both explorationists with over thirty years oil & gas industry experience, are the qualified persons, as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement.

Glossary of terms

bcf Billion cubic feet

bo Barrels of oil

bopd Barrels of oil per day

CPR Competent Persons Report

EBITDA Earnings before interest, taxation, depreciation and amortisation

EGPC Egyptian General Petroleum Company

km Kilometres

MENA Middle-East North Africa

MMbo Millions of barrels of oil

MMboe Millions of barrels of oil equivalent

Mscf Thousand standard cubic feet of gas

MMscf Million standard cubic feet of gas

MMscf/d Million standard cubic feet of gas per day

2P Probability of success of 50%

Sq km Square kilometres

2D Two dimensional

3D Three dimensional

Notes to Editors

Circle Oil Plc (AIM: COP) is an international oil & gas exploration, development and production Company with an expanding portfolio of assets in Morocco, Tunisia, Oman and Egypt with a combination of low-risk near-term production and significant exploration upside potential. The Company listed on AIM in October 2004.

Internationally, the Company has continued to expand its portfolio over the past 2 years and now has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Mahdia Permit offshore Tunisia; the Grombalia Permit in northern Tunisia and the Zeit Bay area of Egypt. Circle also has the largest licence holding of any company in Oman. In addition to its prospective Block 52 offshore, Circle also has an ongoing exploration program in Block 49 onshore.

Circle's strategy is to locate and secure additional licenses in prospective hydrocarbon provinces and through targeted investment programmes, monetise the value in those assets for the benefit of shareholders. This could be achieved through farm-outs to selected partners who would then invest in and continue the development of the asset into production, or Circle may itself opt to use its own expertise to appraise reserves and bring assets into production, generating sustained cash flow for further investment.

Further information on Circle is available on its website at www.circleoil.net.