DES.L Regulatory News (DES)

For immediate release 16 September 2013

Desire Petroleum plc

("Desire" or "the Company")

Interim Results

Desire Petroleum plc (AIM:DES), the exploration company focusing on the North Falkland Basin, today announces its interim results for the six months ended 30 June 2013.

Highlights:

· Data room opened in February 2013

· Farm-out process on-going with number of companies still engaged in the process

· Subject to rig availability, new exploration programme could start as early as Q4 2014

· Premier Oil and Rockhopper Exploration expect one exploration well to be drilled on licence PL004b (Desire: 40%)

· Unitisation of Sea Lion Oil Field not expected in Phase 1 development

· Loss for the period of $1.6 million (2012 H1: $1.9 million)

· Cash of $9.1 million at 30 June 2013

Stephen Phipps, Chairman of Desire Petroleum, commented:

"We are now entering an exciting period in the North Falkland Basin (NFB). The Board is pleased to note the statements from both Premier and Rockhopper that a new exploration programme for the NFB could, subject to rig availability, start as early as the final quarter of 2014.

Our current focus has been to attract investment into our NFB licences by conducting a farmout process. A data room was opened in February of this year and a number of companies have analysed the information with a smaller number still engaged in this process.

The possible recommencement of drilling activity will hopefully enable us to participate in a drilling campaign that should unlock more of the potential of our exciting prospect inventory."

Chairman's Statement

Dear Shareholder,

We are now entering an exciting period in the North Falkland Basin (NFB). Having experienced a period of relative inactivity, the Board is pleased to note the statements from both Premier Oil PLC ("Premier") and Rockhopper Exploration PLC ("Rockhopper") that a new exploration programme for the NFB could, subject to rig availability, start as early as the final quarter of 2014, with exact timings to be clarified. This would consist of at least three wells, one of which is expected to be drilled on a licence 40% held by Desire, namely at the Zebedee location on licence PL004b.

As previously announced, our current focus has been to attract investment into our NFB licences by conducting a farmout process. A data room was opened in February of this year and a number of companies have analysed the information with a smaller number still engaged in this process. Whilst there has been strong interest in our prospects, a combination of uncertainty over the timing and scope of the development of the Sea Lion Oil Field, plus the lack of a firm date for the mobilisation of a rig to the NFB, has delayed a conclusion to the farmout process.

The well at the Zebedee location should test our Ninky North prospect stack with gross best case unrisked prospective oil resources in multiple targets of 260 MMstb (Senergy Competent Persons Report 2012). In addition, this location should provide a southerly appraisal of the Casper South oil reservoir. With the likelihood of a rig becoming active again in the NFB we believe that this should also be the opportunity to drill the two most exciting of our other prospects as part of this drilling programme, namely the Isobel and Jayne prospect stacks which contain gross best case unrisked prospective oil resources of 281 MMstb and 405 MMstb respectively (Desire holds a 92.5% and 75% interest in these prospects respectively).

Our end June 2013 cash balance was $9.1 million, and, as previously stated, this is more than sufficient for ongoing administration and licence rental costs for the foreseeable future but not enough to fund drilling on our own account. It is still our intention to fund our share of the next drilling campaign by farming down our prospects and we believe that the increased likelihood of this campaign commencing in the fourth quarter of 2014 may be the necessary catalyst. 

Premier has indicated that the Sea Lion Oil Field development is likely to be a phased project, with final project sanction targeted for the end of 2014. The first phase would be in the northern part of the Field with a likely second phase in the south to include the extension into PL004b. Although unitisation of the Sea Lion Oil Field has not yet been undertaken, we believe our share of development costs is unlikely to be due until the second phase. We are seeking clarification of this from both the operator and the Falkland Islands Government.

The possible recommencement of drilling activity in the NFB towards the latter part of 2014 will hopefully enable us to participate in a drilling campaign that should unlock more of the potential of our exciting prospect inventory.

Yours sincerely,

Stephen L Phipps

Chairman

Financial Report

Income statement

The loss for the period decreased from $1,985,000 in the previous period to $1,643,000 in the current period. The reduced loss is mainly due to the previous period's taxation charge in respect of prior years.

The 2013 exploration and evaluation expense of $585,000 is slightly reduced from the corresponding period, and largely comprises farm out activity costs and man time.

Gross administrative expenses as disclosed in Note 2, have decreased from $1,424,000 to $1,156,000. However, a reduced allocation to exploration and evaluation costs leaves net administrative expenses a little higher at $918,000.

The exchange movement for the period showed a loss of $154,000 compared with a previous gain of $66,000, and arises primarily on the Company's Sterling cash balances. The period end exchange rate of $1.517/£ was lower than the 31 December 2012 rate of $1.626/£.

Balance Sheet

The Company incurred $0.6 million of exploration and evaluation expenditure ("E&E") in the period. The only E&E assets carried forward at the balance sheet date are those in respect of the farm in area PL004b, where the Company holds contingent hydrocarbon reserves. All other E&E costs have been expensed in the Income Statement, in accordance with the Company's successful efforts accounting policy.

Property, plant and equipment held for sale has reduced from $217,000 at the start of the period to $51,000. Disposals during the period realised $135,000. The balance of $51,000 carried forward represents the net scrap value of remaining inventory.

The Company's cash resources at the period end amounted to $9,114,000, from $10,480,000 at the start of the period. The reduction is due to costs incurred on administration and exploration and evaluation.

Financial outlook

Due to the Company's available cash resources at the period end, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

Eddie Wisniewski

Finance Director

Income Statement

Balance Sheet

* The Company's net inventory balance of $882,000 at 30 June 2012 was previously disclosed as Property, plant & equipment under non-current assets.

Statement of Changes in Equity

Cash Flow Statement

* The 2012 presentation has been restated to disclose $19,000 of pre-licence costs through net cash from operating activities instead of through purchase of tangible or intangible assets, as previously disclosed.

Material non-cash transactions

As restricted cash is excluded from cash and cash equivalents, then payments for oil expenditure costs from restricted cash are treated as non-cash transactions.

In addition to the purchase of tangible and intangible assets stated above, there were $Nil (30 June 2012 - $21,810,000) paid from restricted cash.

Reconciliation of Operating Loss to Net Cash from Operating Activities

* The presentation at 30 June 2012 has been restated to exclude $19,000 of pre-licence expenditure from exploration and evaluation expense, where it was previously disclosed.

Notes to the Interim Financial Statements for the six months ended 30 June 2013

1 Basis of preparation and accounting policies

The results for the six months to 30 June 2013 have been prepared in accordance with the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing this interim financial information. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 December 2012.

The financial statements have been prepared under the historical cost convention.

The interim financial statements have been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union.

These condensed interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2012 were approved by the board of directors on 25 March 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. These condensed interim financial statements have been reviewed, not audited.

2. Administrative expenses

3 Segmental information

The Company considers itself to have a single purpose, the exploration and exploitation of its licences in the North Falkland Basin, and therefore concludes that it has only one business segment and only one geographic segment.

4 Loss per share

The calculation of basic loss per share is based upon the loss for the period and the weighted-average number of shares of 342,282,198 (2012 - 342,285,172) in issue during the period.

There are 10,100,050 (2012 - 12,215,701) of share options and Share Appreciation Rights in issue that could potentially dilute the basic earnings per share in the future.

When the Company reports a loss for the period then, in accordance with International Accounting Standard 33, the share options are not considered dilutive.

5 Tax

Current tax comprises a provision for tax on the interest receivable less any allowable expenses, and any adjustment for over or under provision in prior periods.

There was no tax charge in the 6 months to 30 June 2013 (2012: $447,000).

6 Copies of report

Copies of this interim statement can be viewed on the Company's website and will be available to the public at the Registered Office, Mathon Court, Mathon, Malvern, Worcestershire WR13 5NZ.

Independent review report to Desire Petroleum Plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the six months ended 30 June 2013, which comprises the income statement, balance sheet, statement of changes in equity, cash flow statement, reconciliation of operating loss to net cash from operating activities and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

As disclosed in note 1, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with the basis of preparation set out in note 1.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1 and the AIM Rules for Companies.

PricewaterhouseCoopers LLPChartered Accountants

Uxbridge

16 September 2013

Note (a)

The maintenance and integrity of the Desire Petroleum Plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Note (b)

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.