Circle Oil Plc Regulatory News (COP)

29 September 2015

CIRCLE OIL PLC

("Circle or the "Company" or "Group")

2015 INTERIM RESULTS

Circle Oil Plc (AIM: COP), the international oil and gas exploration, development and production company, is pleased to announce its results for the six month period ended 30 June 2015.

Financial Highlights

· Circle returns to profit for H1 2015 with operating profit of US$5.5 million

· Revenues for the 6 months to 30 June of US$22.3 million (H1 2014 US$47.8 million)

· Aggressive cost management strategy helps negate the impact of lower oil prices and reduced Egypt production

· Successful renegotiation of supply contracts in Morocco resulting in a drop in operating costs from US$0.8 million in H1 2014 to US$0.5 million in H1 2015

· Gross profit as a percentage of revenue increased to 43.4% in the six months ended 30 June 2015 from 34.3% in H1 2014, reflecting management's successful focus on reducing operating costs particularly in Morocco

· Trade and Other Receivables of US$25.3 million at 30 June 2015, a reduction from US$48.1 million at 30 June 2014, reflecting the lower oil price environment and the substantial payments received from EGPC

· Cash and cash equivalents at 30 June 2015 were US$17.1 million

· Repaid US$6.0 million of the US$30.0 million Convertible Loan and extended term of the loan from July 2015 to July 2017. A further US$4.0 million was repaid in July 2015

· The Group drew down a further US$12.5 million on the Reserve Based Lending facility (RBL)

· Post period end the Group has reached agreement in principle to extend the RBL facility with IFC by one year to June 2019

· As at 30 June 2015, net debt was US$64.4 million

Operational Highlights

· New executive management team in place

· Board strengthened with the appointment of experienced non-executive directors

· Improved operational efficiency in Morocco evidenced by shorter drilling times and well costs reduced by over US$1.0 million per well

· Gas production in Morocco benefiting from fixed price (i.e. independent of oil price) gas contracts at US$8.66/Mcf

· Ongoing successful appraisal / development drilling programme in Sebou Permit in Morocco with the hook-up of two newly completed wells including one new discovery

· Exploration of new permit - Lalla Mimouna in Morocco. Gas discovery in first exploration well in Lalla Mimouna Permit.

· Egypt unit production operating cash costs of US$4.34/bbl, rank amongst the lowest in the world

· Continued prudent field management through water injection programme, and implementation of workover programme in NW Gemsa field in Egypt

· Mahdia farm-out in Tunisia underway following grant of licence extension

· Decision to exit Oman to concentrate on numerous opportunities currently available in Egypt, Morocco and Tunisia

Stephen Jenkins, Chairman, commented:

"Both of Circle's producing assets continue to generate good cashflow and are profitable even in today's low oil price environment. However, management efforts remain strongly focused on delivering further cost and operational efficiency improvements, particularly with our operated Morocco assets. The low operating cost bases of these assets demonstrates their underlying strength. The Company has an established presence in three territories which have the benefit of low operating price regimes. The Company believes there will be further opportunities to capitalise on this operational platform especially in the current oil price environment.

However, as a consequence of the significant costs incurred during exploration drilling in Tunisia and Oman, the cash resources of the Company were materially impacted. The cost overruns of these wells were exacerbated by both wells being sole risk. The Group continues to build an overall internal control framework to ensure that the finance function is well placed to support both the Board's and management's decision making processes going forward. 

As part of right-sizing its balance sheet, the Group has reached an in principle agreement with IFC to extend the RBL by one year. The Company continues to review its overall capital structure so that it is better positioned to take advantage of the opportunities it believes will arise in this lower oil price environment."

For further information contact:

Circle Oil Plc (+44 20 7638 9571)

Mitch Flegg, Chief Executive Officer

Investec (+44 20 7597 4000)Chris SimGeorge Price

James Rudd

Citigate Dewe Rogerson (+44 20 7638 9571)Martin JacksonShabnam Bashir

Murray Consultants (+353 1 498 0300)Joe Heron (+353 87 6909735)

Pat Walsh

In accordance with the guidelines of the AIM Market of the London Stock Exchange the technical information contained in the announcement has been reviewed and approved by Mitch Flegg, Chief Executive Officer of Circle Oil Plc. Mitch Flegg, who has over 33 years of experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies,

Mitch Flegg holds a BSc in Physics from Birmingham University and is a member of the Society of Petroleum Engineers (SPE) and the Petroleum Exploration Society of Great Britain (PESGB).

Notes to Editors

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

Internationally, the Company has assets in the Rharb Basin, Morocco; the Ras Marmour Permit in southern Tunisia; the Beni Khalled permit in northern Tunisia, the Mahdia Permit offshore Tunisia and the NW Gemsa permit in Zeit Bay area of Egypt.

Circle Oil's strategy is to locate and secure additional licences 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 Oil may 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 Oil is available on its website atwww.circleoil.net.

CHIEF EXECUTIVE OFFICER'S STATEMENT

Over the course of the year there has been a strong focus on costs, operational efficiencies and ensuring that Circle is able to maximise the potential of its low cost assets. Against the current commodity price backdrop the Group's asset base has continued to generate profits and forms a strong platform for growth.

OPERATIONS

Morocco

Operationally, the Group has made a number of efficiency improvements in-country. Led by a newly appointed country manager the focus has been on business continuity, decreasing costs and improving overall operational and drilling efficiency. A number of local supply contracts have been re-negotiated and the supply chain restructured. As a result, Circle has benefited both from reduced operating costs and reduced rig down-time, resulting in a fall in well costs by over US$1.0 million per well.

The Group also continues to benefit from the use of its own pipeline which has additional capacity for new gas supply. As a result of the existing infrastructure the threshold for commerciality for any new discoveries is relatively low and the Group continues to look to add reserves both through its drilling programme and any other opportunities that might arise. The cumulative production from Circle's wells in the Sebou Permit through to the end of June 2015 was 8.59 Bcf.

Sebou average daily gas production was 6.2 MMcf/d during the first half of 2015 and negotiations are under way for further off-take to increase the supplies to and revenue from both existing customers and new industrial partners moving into the Kenitra region. Demand in-country remains buoyant and whilst Circle has been somewhat shielded from falling commodity prices due to attractive fiscal terms and fixed price gas contracts (average price realised during the period of US$8.66/Mcf). There is potential for a further improvement on current pricing levels as new contracts are negotiated.

Drilling operations in the onshore Sebou and Lalla Mimouna blocks have continued throughout the first half of 2015. In Sebou, the notable success was the SAH-W1 well which encountered gas shows at different levels within the target Guebbas sands. Circle will produce from the lowermost Guebbas zone where 3.6 metres of net pay was discovered and flowed at a sustained rate of 4.94 MMcf/d on a 24/64" choke during a test period of 5 hours. This well was tied-in to existing production facilities in July 2015. The KAB-1bis exploration well, also in the Sebou permit, was drilled in February 2015 and encountered very limited gas shows and as a result, was plugged and abandoned. The KSR-12 discovery well, drilled in the Sebou permit in late 2014, has also been connected for production and was successfully brought on line during May 2015. The well is producing at rates of up to 2 MMcf/d.

Results in Lalla Mimouna to date have been mixed, with the first well LAM-1 targeting Miocene gas-bearing sands similar to the Sebou Permit. LAM-1was tested and the primary target flowed gas at a stabilised rate of 1.9 MMcf/d on a 16/64" choke and the secondary target was perforated and flowed at a stabilised rate of 1.1 MMcf/d on a 16/64" choke. Post period, ANS-2 and NFA-1 wells were drilled and although both encountered gas shows at the targeted depth, the interpretation of wire line logs indicated that the reservoir quality encountered in the wells did not meet the Group's pre-drill estimates. Circle is continuing to review the data gathered and in partnership with ONHYM will prioritise the next prospects to drill.

Following the Lalla Mimouna wells the rig has now returned to the Sebou permit in the Rharb Basin, the location of the Group's existing production wells.

Egypt

The partners continue to carefully manage output at the Egyptian licence with costs of US$4.34/bbl, amongst the lowest globally. As a result, even in the current oil price environment, the field remains profitable and cash generative.

At the end of June 2015, fourteen wells in the Al Amir SE field (AASE) and five wells in the Geyad field were on production, with a combined average gross production rate of 9,648 boepd for the period. Water injection through four wells in AASE and one well in the Geyad field is providing continuing pressure support to maximise recovery efficiency and optimise production levels.

The export gas line to the SUCO facility at Zeit Bay is currently flowing at approximately 7 MMcf/d with a total delivered to the terminal of 8.8 Bcf at the end of June 2015. Valuable condensate and natural gas liquids are stripped out of the gas and sold to EGPC with gross average daily rates of about 65 bbls of condensate and 15 tonnes of LPG. The Group is in the final stages of documenting the commercial agreements, but has historically accrued for its share of the gas and condensate revenues from the field.

The AASE-21 well was shut in during April due to a high water cut. The AASE-18 well was recompleted and brought on line during May at an initial rate of 650 bopd (gross). This will help during the remainder of 2015 to partially compensate for the loss of AASE-21.

Given Circle's material ownership stake in the block, over the course of the year to date Circle has taken a much more active role with the operator. The process of good field management will be continued into 2016 through implementation of the dynamic reservoir model of the AASE field.

Circle continues to benefit from the historic capex spend on the fields and is working closely with the operator to prudently manage the field and arrest the decline in production through workover and drilling activity. During the second half of the year a programme to perform workovers on up to eight wells commenced. The results of this workover programme will be used to influence the design of the next planned drilling programme of two or three production wells.

Tunisia

During the first half of the year Circle continued to work with the Tunisian Consultative Committee on Hydrocarbons and post period end, the Group was pleased to announce the renewal of its Mahdia permit. The permit has been extended for three years until 19 January 2018. The extension carries with it a commitment of one exploration well, one appraisal well and a requirement to acquire 300km2 of 3D seismic. Circle currently has a 100% interest in the permit. Following the permit extension, a farm-out process has now commenced. The farm-out strategy will minimise Circle's financial commitment, reduce risk, and still allow the Group to benefit from the potential of the discovery. This approach is fully consistent with Circle's strategy to grow the Group in a sustainable manner and deliver value to shareholders in a low oil-price environment.

The offshore Mahdia permit covers an area of 3,024km2, and contains the El Mediouni structure which was tested by Circle's EMD-1 well in August 2014 and is a potentially large discovery. The well encountered a 133 metre column of light oil in the Ketatna (Oligo-Miocene) carbonates. While mud losses prevented log data acquisition, Circle estimates an un-risked prospective recoverable resource in excess of 70MMbo from the structure. The El Mediouni structure is located in a water depth of approximately 230 metres in benign Mediterranean conditions. The permit also contains a number of similar prospects which have been significantly derisked by the EMD-1 well..

At Ras Marmour and Beni Khalled, the Group continues to evaluate its commitments in the current commodity price environment. Circle awaits final confirmation of all approvals to drill the onshore Ras Marmour well which is targeting a productive sand in the Early Cretaceous Meloussi formation, which is the proven reservoir in the adjacent Robbana field. At Beni Khalled tenders are currently being reviewed in respect of the 3D seismic with a view to future appraisal of the existing discovery.

Oman

In Oman the onshore exploration well, Shisr-1, drilled in Q1 2015 in the south-west area of Block 49, was plugged and abandoned due to drilling difficulties. In light of this and coupled with insufficient interest in the farm-in on Block 52 and Circle's unwillingness to sole-risk shallow water wells, it is relinquishing both blocks and is no longer bidding for new acreage in the country as Circle is exiting Oman.

FINANCIAL REVIEW

Revenue for the 6 months to 30 June 2015 was US$22.3 million compared to US$47.8 million for the first half of 2014. The reduction primarily reflected the fall in oil prices and lower production volumes in Egypt. As noted above a workover campaign to improve production levels has commenced. There was also a small reduction in Morocco gas sales due to the cessation of one customer contract.

In the first half of 2015, management worked hard to implement a number of initiatives to reduce operating costs, particularly with our Moroccan operated assets. The benefit of these initiatives has resulted in an appreciable improvement in gross margin, which for the period was 43.4% of revenues for the period (US$9.7 million) compared to 34.4% of revenues in the first half of 2014 (US$16.4 million).

Profit before taxation was US$2.8 million compared to US$9.4 million in the first half of 2014.

Working capital, trade and other receivables fell to US$25.3 million on 30 June 2015 from US$48.1 million on 30 June 2014. This primarily reflects the lower oil price environment and substantial cash receipts from EGPC, with the receivable days now at levels not seen since before the Arab Spring.

Trade and other payables was reduced to US$17.4 million at 30 June 2015 from US$36.3 million at 30 June 2014 (and US$47.7 million at year-end), as the Group paid numerous substantial obligations relating to the EMD-1 well in the Mahdia permit and the final commitment well drilled in Oman (Block 49).

As agreed with the lender and approved by shareholders, US$6.0 million of the Convertible Loan was repaid in the first half of 2015 with a further repayment of US$4.0 million in July 2015, reducing the principle to US$20.0 million. As part of right-sizing its balance sheet, the Group has reached an in principle agreement with IFC to extend the RBL by one year. The Company continues to review its overall capital structure so that it is better positioned to take advantage of the opportunities it believes will arise in this lower oil price environment. During the period, the Group drew further on the RBL facility with the balance drawn down at 30 June 2015 increasing to US$57.5 million. Net debt was US$64.4 million as at 30 June 2015 compared to US$23.3 million at 30 June 2014. Net debt as at August 2015 was US$65.7 million.

Net cashflow from operations was US$17.8 million for the 6 months ended 30 June 2015 compared to US$25.1 million for the same period last year reflecting the reduced operating profit for the period which was in part mitigated by increased EGPC payments. Cash and cash equivalents at 30 June 2015 was US$17.1 million. This includes substantial cash balances in Morocco, a portion of which the Group is currently repatriating.

The Group continues to build an overall internal control framework to ensure that the finance function is well placed to support both the Board's and management's decision making processes going forward.

Like many E&P companies, the Group's overall financial position continues to be challenging. As stated in the 2014 Annual Report, in light of both the unanticipated capital expenditure overspend, primarily in the Mahdia Permit, and the lower oil price environment, the Group continues to manage its cash balances, review its operational commitments and evaluate its capital structure to ensure it is appropriate for the Group's operational objectives. This may still result in the Group exploring potential funding options, including but not limited to financing opportunities or farm-outs. These actions are directed at ensuring that the Group is able to remain profitable in a sustained lower oil price environment and better positioned to selectively pursue opportunities in its areas of focus.

Mitch Flegg

Chief Executive Officer

29 September 2015

Glossary

circle Oil PLC

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE SIX MONTHS ENDED 30 JUNE 2015 - UNAUDITED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2015 - UNAUDITED

Circle Oil PLC

CONDENSED CONSOLIDATED statement of financial position

AT 30 JUNE 2015 - UNAUDITED

Circle Oil PLC

CONDENSED CONSOLIDATED cash flow statement

FOR THE SIX MONTHS ENDED 30 JUNE 2015 - UNAUDITED

To ensure consistency with the current period, loan transaction costs paid in H1 2014 and share capital issued in 2014 were reclassified in the table above. This is for presentational purposes only and makes no change to the amounts of cash and cash equivalents reported.

Circle Oil PLC

consolidated STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2015 - UNAUDITED

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2015 

1. Basis of preparation

The condensed consolidated financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

The Directors recognise the continued volatility in the commodity price environment in recent months and its significant impact on the upstream sector in general and Circle in particular. The Directors recognise the Group requires the ongoing support of its key stakeholders, particularly its lenders, and careful management of its commitments in order to meet its obligations as they fall due. As the management team continues to right-size the business such that the Group will continue to be a going concern in a sustained low oil price environment, the Directors believe it continues to be appropriate to adopt the going concern basis in preparing the financial statements.

The accounting policies and methods of computation used in these interim financial statements are consistent with those used in the most recent annual audited financial statements and those envisaged for the year ended 31 December 2015 financial statements.

Adoption of new and revised Standards

No new standards or interpretations have been issued that would have a material financial impact on adoption on the condensed consolidated financial statements for the six months ended 30 June 2015.

2. Basic and diluted earnings per share

Basic earnings per share and diluted earnings per share at the end of the period were as follows:

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

Diluted earnings per share is calculated using the weighted average number of ordinary shares assuming the conversion of its potential dilutive ordinary shares outstanding which relate to the convertible loan and employee share options. All of the Group's potential ordinary shares were dilutive for the period ended 30 June 2015 which resulted in a decrease in earnings per share. The Group had total potential ordinary shares outstanding of 147,608,751 at 30 June 2015 (2014: 124,887,935).

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

3. Segmental reporting

Sales revenue in Africa of US$22.29 million (H1 2014: US$47.79 million) consists of US$14.22 million in oil sales and US$0.77 million in gas and associated liquid sales in Egypt together with US$7.3 million in gas sales in Morocco.  Corporate comprises mainly of corporate expenses, cash and other assets and liabilities not directly attributable to an operating segment.

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

3. Segmental reporting (continued)

Circle Oil PLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2015

3. Segmental reporting (continued)