Empyrean Regulatory News (EME)

Empyrean Energy PLC

("Empyrean" or the "Company"; Ticker: (EME))

Final Results

For the period 1 April 2012 to 31 March 2013

Empyrean Energy Plc (Ticker: EME), the AIM-listed condensate, oil and gas exploration and production company focused on the Eagle Ford Shale, Texas, USA, is pleased to announce its results for the year ended 31 March 2013.

Highlights

Financial

·; Revenues for the 12 months to 31 March 2013 increased by 119% to £5,893,000 (2012: £2,694,000)

·; Net profit after tax for the 12 months to 31 March 2013 increased by 198% to £2,014,000 (2012: £675,000)

·; Substantial drawdown on US$50 million Macquarie Bank loan to fund Sugarloaf AMI development (US$10.52 million drawn at 31 March 2013)

·; Fully funded for current proposed drill schedule through 2013

Operational

·; Increase in the total number of gross wells in production by 236% from 25 to 84 (including 81 at Sugarloaf AMI)

·; Proven reserves (1P) increased by 54% to 2.3MMboe

·; Proven plus probable reserves (2P) increased by 36% to 4.3MMboe

·; At least two Austin Chalk wells within the Sugarloaf AMI are being drilled that could add significant reserves if successful

·; Well down spacing program underway to optimise development spacing and aimed at improving recoveries and reserves

·; Operator at Sugarloaf AMI has earmarked Pearsall Shale and Wilcox as potential further productive horizons in addition to the currently producing Eagle Ford Shale and Austin Chalk

·; An increase in the working interest at the Eagle Oil Pool Development Project in California to 57.2% at no direct cost to Empyrean

Production

The following is a summary of wellhead production data received from the operator from wells at the Sugarloaf AMI from April 2012 through to March 2013. All figures that are stated as "Net to EME" are calculated at the working interest percentage in each well and multiplied by the approximate net revenue interest ("NRI") to give an amount attributable to Empyrean net of royalties but before any taxes.

Notes:

1. The March 2013 production data includes an adjustment over the figures previously reported on 19 April 2013 due to the receipt of additional well production data.

2. The wells have had the Average Daily Equivalent Oil Rate recalculated on a simple 6:1 basis.

3. Please note that reporting for production at the wellhead does not include Natural Gas Liquids (NGL's) as these are extracted and measured later. The numbers are approximate and are rounded and are subject to change as sales are completed and allocated to each well. The Company has been notified by the operator that there have been some issues with the allocation of gas production numbers for some wells since September 2012, when wells on single separators have been switched over to facilities that have both a high pressure and low pressure separator. The operator has assured the Company that these issues are being corrected and will not affect the ultimate allocation of volumes of hydrocarbons for product sold.

Going forward the Company intends to provide a Production and Operational update on a quarterly basis. The quarterly update will provide a summary of wellhead production data but will no longer provide individual well 30 and 60 day production figures.

A revised version of this announcement in which the information from the table above has been portrayed graphically is available on the Company's website and clearly shows a positive trend.

Empyrean CEO, Tom Kelly commented "We anticipated a stronger second half and have delivered a full year net profit that is above management's expectations. We have secured a substantial debt facility (up to US$50 million) with Macquarie Bank that ensures Empyrean is well funded for development drilling through 2013. This is a major achievement for the Company. Revenue growth has continued alongside production and will be supported by the ongoing drill program. The additions to the 2013 drill schedule at the Sugarloaf AMI are positive for our Company. Major initiatives to improve recoveries and add to our reserves are underway with well down-spacing results expected in the second half of 2013 along with testing results from at least two Austin Chalk wells. These initiatives are relatively short term with further medium term potential from future testing of the Pearsall Shale and Wilcox targets."

The information contained in this announcement was completed and reviewed by the Technical Director of Empyrean Energy Plc, Mr Frank Brophy BSc (Hons) who has over 40 years experience as a petroleum geologist.

For further information

Empyrean Energy Plc

Tom Kelly

+618 9480 0111

Shore Capital

Anita Ghanekar

Edward Mansfield

+44 (0) 207 408 4090

Jonathan Charles

Lionsgate Communications

E: jcharles@lionsgatecomms.com

M: +44 (0)7791 892509

www.lionsgatecomms.com

CHAIRMAN'S STATEMENT

I am pleased to report that Empyrean has achieved substantial growth in the number of wells producing, overall production, revenue, reserves and net profit over the last 12 months. An additional major achievement for the Company has been the securing of debt finance to fund development of our flagship project, the Sugarloaf AMI (Area of Mutual Interest).

At the end of March 2013, the Company had an interest in 84 (including 81 at Sugarloaf AMI) gross wells producing condensate, gas and Natural Gas Liquids ("NGL's"). This represents a rise in the number of wells in production of over 236% during the last 12 months.

Empyrean has achieved consistent production growth due to a very busy development drilling schedule implemented by Marathon Oil Corporation ("Marathon" NYSE: MRO), the operator at the Sugarloaf AMI Project. Reduced drilling times and an outstanding operational performance by Marathon have contributed to this excellent result.

The Company has recorded its second full year in profit, with a 198% lift over our 2012 year end result.

As reported with the interim results, Empyrean has secured a debt facility of up to US$50million, with the first US$15million available now, from Macquarie Bank Limited to support its continuing participation in the Sugarloaf AMI. This facility is now operational with amounts drawn down having been utilised to fund a large number of development wells - most of which are already producing. The strategic importance of securing this funding cannot be overstated. It has provided the Company with secured access to capital to allow full participation in the development of the Sugarloaf AMI. This security is particularly important in light of the volatility in the equity markets which have particularly impacted on the smaller oil and gas companies where the total amount raised via secondary issues in the oil and gas sector on AIM has reduced substantially year on year since 2010, with 2012 secondary equity raisings 50% down on 2011.

An updated assessment of the total reserves at the Sugarloaf AMI, by Netherland Sewell and Associates, resulted in a substantial 54% lift in proven (1P) reserves to 2.3 million barrels of oil equivalent ("MMboe") and an equally pleasing 36% lift in proven plus probable (2P) reserves to 4.3MMboe. Further potential exists to enhance reserves with the initiatives to test closer well spacing and access production from the Austin Chalk, Pearsall Shale and Wilcox. Marathon have recently announced that the results to date of the down spacing pilots have been in line with its expectations and they anticipate releasing more definitive results of the down spacing pilots and additional formation testing in the second half of this year.

While the operational focus has been on the rapid development of production at the Sugarloaf AMI, the Company continues to monitor additional exploration opportunities. The continuing activity adjacent to our Eagle Oil Pool Development project confirms the industry interest in the longer term potential of the San Joaquin Basin, California and should provide additional data for the formulation of future exploration plans. The renewal of operations at the Cartwright - 1H well in the Riverbend Project also offers the prospect of establishing economically viable production there.

Corporate governance

The Board of Directors has made small but significant changes to the way resolutions will be put to shareholders at the Annual General Meeting, the resolution to dis-apply pre-emption rights has been split with one resolution specifically covering management options. With the financial stability of the Company continuing to improve the Remuneration Committee will no longer need to rely as heavily on options to retain and incentivise management. In addition, it is the Remuneration Committee's intention to set higher exercise prices, in percentage terms, relative to the three month volume weighted average share price. This will be applied to any new options granted. Finally, the Directors agreed to waive their acceptance of any options granted between the 2012 and 2013 Annual General Meetings.

OPERATIONAL REVIEW

Your Board of Directors wishes to thank shareholders for their continued support, and looks forward to another exciting year ahead.

Empyrean continues to be actively involved in four oil and gas projects, all located onshore USA. The development of the Sugarloaf AMI, located onshore East Texas and operated by Marathon Oil Corporation ("Marathon" NYSE: MRO), still remains the principle focus of activity and revenue generation. This project involves the exploitation of the gas-condensate Sugarkane Field which has as its primary objective and focus of development to date the prolific Eagle Ford Shale. Empyrean has a 3% working interest in approximately 24,300 gross acres equating to approximately 729 net acres in the Sugarloaf AMI, previously referred to as Block B.

In the adjacent Block A, Empyrean maintains its 7.5% interest in 5 wells TCEI JV A-1, A-2, A-3, A-4 and A-5. Empyrean has not been involved in any further development drilling in this Block A during the last 12 months.

The third project, onshore Texas, is the Riverbend Project which involves mainly gas production from the Cartwright No 1 well drilled in 2010. A blockage in the production tubing has always acted as a severe impediment to the full production potential of the over-pressured Austin Chalk fractured reservoir. Since the appointment of a new operator, Empyrean with its 10% working interest has recently accepted to participate in a proposal to re-enter the well and test for hydrocarbons in an overlying reservoir, the Wilcox Formation, which is a proven producer in the region.

The fourth project located onshore California in the San Joaquin Basin is the Eagle Oil Pool Development Project. The primary target is the Gatchell Sand Member of the Eocene Lodo Formation. Referred to as the Gatchell sands, this clastic reservoir has proven oil and gas reserves contained in a structural- stratigraphic trap. Empyrean recently announced an increase in its working interest from 48.5% to 57.2126% for no extra direct cost. Further operational plans for 2013 have yet to be finalised.

Sugarloaf AMI (Block B) (3% WI)

The Eagle Ford Shale "play" is now unquestionably the most sought after in the onshore USA today. It is certainly the most active. The horizontal drilling trend has grown from virtually nothing in late2007 to almost 1,200 producing leases by the end of February 2012. The Texas Railroad Commission reported at the end of February 2013 that it had issued 1,978 drilling permits in January; a 25% increase compared to the 1,581 permits issued the same month last year. Ten counties lie in the heart of the trend and Karnes County, in which the AMI is located, is ranked with De Witt County as the best based on EUR (estimated ultimate recovery) calculations per well.

Marathon is well-placed as being a reliable and experienced operator for this Sugarloaf AMI.

Historically, well results have clearly improved since the refinement of the horizontal drilling technique. It would appear also that best well performances for the Eagle Ford Shale have generally come from wells with horizontal legs in the 4,000 to 5,500 ft. range. In the Sugarloaf AMI, of the 81 wells at present producing, the horizontal distances range from 4000 to 6500 ft. wells have vertical depths of approximately 12,000ft. The time to drill the wells from spud to Total Depth ("TD") has varied between 10 and 45 days. There have been 40 wells drilled in less than 21 days. The number of wells estimated to develop the field in the AMI remains at approximately 280 wells on a spacing of 80 acres. This number will increase if a tighter density proves to be economic.

Fraccing and completion times have been more variable in duration, which depends on the number of fraccing stages and the overall efficiency of this highly complex operation. The usual number of separate fraccing stages has been in the vicinity of 15-18. The fraccing and completion expenditure has consequently accounted for between 60-70% of the total cost of each well.

Marathon, as operator, has embarked on a number of technical initiatives aimed at achieving the optimum productivity with maximum efficiency and minimum CAPEX and OPEX. These initiatives include fracc spacing in the laterals, number of fracc stages, spacing between wells, pad drilling (3-4 wells from the one pad), and micro seismic interpretation. Marathon continues to test diverse acreage with spacing pilots investigating 60 and 40 acre spacing and landing zone pilots. The 60 acre spacing infers 500ft between wells and 330ft for 40acre spacing. The first material results from the well down-spacing pilots are expected during the second half of 2013. Early indications show the wells drilled on tighter spacing are behaving as forecast. Early planning and reserves calculations on the Sugarloaf Project were based on 80 acre spacing. Well down-spacing has the potential to improve recoveries, reserves and ultimate value. At the Sugarloaf Project, further production history will be required before the optimum spacing regime for the next phase of development is finalised. The Austin Chalk wells currently being drilled will also be considered during this process. At this early stage of development, the calculation of reserves (EUR's) can only be estimated.

Depending on the amount of gas, Natural Gas Liquid's ("NGL's") and condensate, the early wells have been producing between 500 and 1,000 BOE (barrels of oil equivalent) per day over 30 and 60 day durations. Some recent wells (eg: Davila 1H) have produced over 1,000 BOE per day during the first 30 days of production. The life of a producing well is estimated to be in the vicinity of 15 to 20 years.

At the 2012 AGM, Empyrean reported that a total of 25 wells were producing in the Sugarloaf AMI at the end of March 2012, 11 of which had been drilled by Marathon. Those figures have since increased dramatically. 52 wells have been spudded since 1 April 2012 to the end of March 2013. 56 wells have been brought on production during the same 12 month period.

At the time of writing there were 81wells producing gas, condensate and NGL's from the Eagle Ford Shale in the Sugarloaf AMI.

The present drill schedule for calendar year 2013 anticipates 38 wells including at least two Austin Chalk wells. To date 15 wells have been spudded in the calendar year 2013. Although the Eagle Ford Shale is the primary objective in the Sugarloaf AMI, the overlying Austin Chalk is also being assessed with at least two wells being drilled. The fractured Austin Chalk has been exploited in Texas for over 50 years and produces both gas and oil in East Texas. Should it prove to be productive in the Sugarloaf AMI, the Company can expect potentially significant increases in its reserves and a significant increase in the total number of wells required to develop the field.

Marathon is also studying the potential of the Wilcox and Pearsall formations, both of which are known producers and both of which exist at obtainable depths in the region of the Sugarloaf AMI. These are both considered to be secondary objectives and have the potential to add substantial value to the Empyrean acreage.

Riverbend Project (10% WI)

The Riverbend project is located onshore Texas in Jasper County. The Cartwright-1 well was successfully drilled and encountered high pressure gas with condensate in the Austin Chalk. Due to an unidentified obstruction in the production tubing, rates of production from the Austin Chalk has been severely diminished and generally at sub-economic rates.

On the 19 March 2013 Empyrean announced the appointment of the new operator, Krescent Energy Partners II, LP ("KEP II"), which is also a partner in the Riverbend Project. KEP II plans to re-enter the Cartwright-1 well, set a plug above the downhole impediment, and perforate and test an interval between 9,584 - 9,590 ft. in the younger Wilcox Formation. This interval exhibited encouraging "shows" during the original drilling of Cartwright-1.

Eagle Oil Pool Development Project (57% WI)

The Eagle Oil Pool Development Project ("Eagle Oil Pool") is a proven, undeveloped accumulation and is estimated to contain between 7- 22 million barrels of oil and 12-23 billion c.ft of gas contained in the primary objective, the Eocene Gatchell sands. The accumulation is confined in a structural- stratigraphic trap and covers approximately 5,160 gross acres.

Empyrean announced on the 25 March 2013 that it had increased its working interest from 48.5% to 57.2%. This increase in working interest is due to the surrender of one of the partners, FAR Limited, of its entire interest in order to focus on exploring its African assets. The increase in interest to EME has been at no extra cost.

Several companies, including Zodiac Exploration, Occidental Petroleum Corporation and Hess Corporation, have been responsible for the renewed activity in the San Joaquin Basin and are focussing efforts on unconventional oil and gas "plays" in the region. The Monterey Shale and Kreyenhagen Shale formations are included among these unconventional "plays", previously thought to be too difficult to exploit. These formations are now necessarily included as secondary objectives in the Eagle Oil Pool area.

Currently other operators are drilling within the area and the results from adjacent wells will influence future operational plans and the possible re-classification of objectives. The next step in the appraisal process being discussed with the operator, Strata-X Energy (TSX .V: SXE) will most likely be a vertical well test, the results of which will influence the design and emplacement of horizontal drilling if required.

DIRECTORS' REPORT

The Directors are pleased to present their report on the affairs of the Company, together with the audited financial statements for the period 1 April 2012 to 31 March 2013.

Principal Activities and Business Review

The principal activities of the Company are energy resource exploration and project development in geopolitically stable environments. The developments during the period are detailed in the Chairman's Statement and Operational Review.

Principal Risks and Uncertainties

The Company's activities are carried out principally in North America. Risk assessment and evaluation is an essential part of the Company's planning and an important aspect of the Company's internal control system. The principal risks and uncertainties are considered to be the following:

Exploration, Development and Production Risks

Exploration and development activities may be delayed or adversely affected by factors outside the Company's control, in particular; climatic conditions; performance of joint venture partners or suppliers; availability, delays or failures in commissioning or installing plant and equipment; unknown geological conditions resulting in uneconomic or dry wells; remoteness of location; failure to achieve estimate capital costs, operating costs, reserves, recovery and production levels; actions of host governments or other regulatory authorities.

Commodity Risk

The demand for, and pricing of, oil and gas is dependent on global and local supply and demand, weather conditions, availability of alternative fuels, actions of governments or cartels and general economic and political developments.

Currency Risk

Although the reporting currency is Sterling (£GBP), the currency most commonly used in the pricing of petroleum commodities and for significant exploration and production costs is US dollar ($USD), thus creating currency exposure.

General and Economic Risk

As a consequence of activities in different parts of the world the Company may be subject to political, economic and other uncertainties both locally and internationally, including but not limited to inflation, interest rates, market sentiments, equity and financing market conditions.

Financing Risk

Future investment is dependent on having sufficient funds to enable the exploration or development of projects, whether through debt or equity funding.

Market Risk

Securing sufficient and profitable sales contracts to support operations is a key business risk.

Key Performance Indicators

The current business of the Company is fundamentally exploration, together with development and production with focus on the successful delivery of investment to enable the Company to progress to a larger operational business.

Financial Review

The profit for the year on ordinary activities of the Company after taxation amounted to £2,014,000 (2012: profit £675,000). The Company generated revenue of £5,893,000 (2012: £2,694,000) from oil and gas sales derived from its Sugarloaf and Riverbend Projects in Texas. This was offset by cost of sales of £2,286,000 (2012: £1,243,000) which includes amortisation of the oil and gas properties of £1,579,000 (2012: £1,057,000). The Company incurred administrative expenses of £1,415,000 (2012: £678,000), which is exclusive of exploration and oil and gas properties expenditure impairment write off totalling £67,000 (2012: £22,000). Net exploration costs for the year of £10,765,000 (2012: £2,111,000) have been capitalised. Continued production success at the Sugarloaf Project resulted in oil and gas properties of £139,000 (2012: £1,223,000) being re-classified from exploration expenditure.

Dividends

The Directors do not propose the payment of a dividend.

Directors and Directors' Interests

Patrick Cross - Non-Executive Chairman

Patrick Cross has international experience in corporate finance, organisation structures, marketing and joint venture operations. His previous positions include 25 years with BP specialising in marketing, strategic planning and business development across different cultures. He also worked for two years as President of Cable and Wireless Japan, and six years as Managing Director of BBC World Ltd. Patrick Cross has operated in South America, Asia, Europe and the United Kingdom establishing relationships at senior levels with major companies, Governments and the European Commission. He is non-executive chairman of Mercom Oil Sands Plc and was a non-executive director of Orca Interactive Limited until that company was successfully sold in 2008.

Thomas Kelly - Chief Executive Officer

Thomas Kelly has had more than 20 years corporate, finance and investment banking experience. During this period, Thomas Kelly has had involvement in and been responsible for the financing of numerous listed companies on the Australian Securities Exchange (ASX) and several mergers and acquisitions within the Australian corporate sector. He held a previous directorship of ASX listed Brazilian Metals Group, formerly Lefroy Resources Limited.

Frank Brophy - Technical Director

Frank Brophy has over 40 years' experience as a petroleum geologist in the exploration, development and production of many world class projects. Frank Brophy's roles have seen him involved with operations in many locations around the world including Australia, Asia, Europe, USA, North Africa and the Middle East. Recent experience includes four years as General Manager of the Hanoi operation in North Vietnam, for French based company Maurel et Prom. Frank Brophy's previous positions also include his former role as International Business Development Manager for Ampolex Limited, Chief Geologist of Elf Aquitaine Australia and Exploration Manager for five years with Peko Oil Limited.

John Laycock - Finance Director

John Laycock has over 30 years' experience in accounting, finance and risk management. His previous positions include 22 years with BP both in UK and international experience in France and Japan. John Laycock has a degree in Mechanical Engineering from Bristol University and is a Chartered Management Accountant. He is based in the UK and currently works for an electricity generating company.

The Directors who served during the year to 31 March 2013 had, at that time, the following beneficial interests in the securities of the Company:

Other than those items disclosed above, there have been no changes in Directors' interests since the year-end. For further details on options held by Directors, refer to Note 5 of the Financial Statements.

Directors' Remuneration

The Company's policy on remuneration of directors is to attract, retain and motivate the best people, recognising they are key to the ongoing success of the business.

Details of the Directors' emoluments and of payments made for professional services rendered are set out in Note 5 to the Financial Statements.

Employment Policies

The Company is committed to promoting policies which ensure that high calibre employees are attracted, retained and motivated, to ensure the ongoing success of the business. Employees and those who seek to work within the Company are treated equally regardless of sex, marital status, creed, colour, race or ethnic origin.

Insurance

The Company maintains liability insurance for the Directors and officers of the Company.

Substantial shareholdings

On 13 May 2013 the following were registered as being interested in 3% or more of the Company's ordinary share capital, inclusive of Directors holdings above 3%:

Share Capital

Information relating to shares issued during the period is given in Note 14 to the Financial Statements.

Charitable and Political Donations

During the period there were no charitable or political donations.

Treasury Policy

The Company finances its operations through equity investment, convertible notes and debt and holds its cash as a liquid resource to fund the Company's financial commitments. Decisions regarding the management of these assets are approved by the Board.

Payment of Suppliers

The Company's policy is to settle terms of payment with suppliers when agreeing terms of business, to ensure that suppliers are aware of the terms of payment and to abide by them. It is usual for suppliers to be paid within 28 days of receipt of invoice.

Going Concern

The Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing its financial statements. The net current liabilities of £1,820,000 (2012: £1,321,000 net current assets) is alleviated with the available Macquarie Bank Facility.

Auditors

The Auditors, Chapman Davis LLP, have indicated their willingness to continue in office and a resolution that they be reappointed will be proposed at the Annual General Meeting.

Control Procedures

The Board has approved financial budgets and cash forecasts. In addition, it has implemented procedures to ensure compliance with accounting standards and effective reporting.

Environment, Health and Safety

The Company is committed to conducting its operations in a responsible manner that protects the health and safety of employees, contractors and the public and minimises the impact on the environment. To accomplish this the Company is committed to ensuring compliance with all applicable legislation and standards; ensure an effective management team is in place and that all personnel and contractors are aware of their health, safety and environmental responsibilities; creation of a safe and healthy working environment; identify, evaluate and control the risks and impact associated with all company activities; monitor, evaluate and report health, safety and environmental performance; seek to achieve continuous improvement in health, safety and environmental performance.

The Directors are committed to maintaining high standards of corporate governance. The Directors have established procedures, so far as is practicable, given the Company's size, to comply with the UK Corporate Governance Code (UK Code") as modified by the recommendations of the Quoted Companies Alliance ("QCA Code"). The Company has adopted and operates a share dealing code for directors and senior employees on substantially the same terms as the Model Code appended to the Listing Rules of the UK Listing Authority.

The Board

The Board met 9 times throughout the year and each member was in attendance at each meeting except the CEO who was unable to attend one meeting. To enable the Board to perform its duties, each of the Directors has full access to all relevant information and to the services of the Company Secretary. If necessary the non-executive directors may take independent professional advice at the Company's expense. The Board currently includes two executive directors and two non-executive directors. The Board has delegated specific responsibilities to the committees described below.

Patrick Cross is a Non-Executive Director and Chairman of the Company and meets the Company's criteria for independence. His experience and knowledge of the Company makes his contribution to the Board such that it is appropriate for him to remain on the Board and in his position as Chairman. John Laycock is a Non-Executive Director of the Company and meets the Company's criteria for independence.

Performance Evaluation

The Chairman is responsible for the performance evaluation of the executive and non-executive directors. The Non-Executive Finance Director is responsible for the performance evaluation of the Chairman. The Board as a whole is responsible for the performance evaluation of the Committees and its own performance. These assessments occurred throughout the year.

The Audit Committee

The Audit Committee comprises Patrick Cross and John Laycock, and is chaired by John Laycock. During the year the Audit Committee met twice and each member was in attendance at each meeting. The committee reviews the Company's annual and interim financial statements before submission to the Board for approval. The committee also reviews regular reports from management and the external auditors on accounting and internal control matters. When appropriate, the committee monitors the progress of action taken in relation to such matters. The committee also recommends the appointment of, and reviews the fees of, the external auditors. The committee has considered the need for an internal audit function and has deemed the need unnecessary as the Company is not of a size to warrant such a function. The Audit Committee Charter can be found on the Company's website (www.empyreanenergy.com/corporate/governance).

The Remuneration Committee

The Remuneration Committee is made up of Patrick Cross and John Laycock, and is chaired by John Laycock. The Remuneration Committee met twice during the year ended 31 March 2013 and each member was in attendance at the meeting. It is responsible for reviewing the performance of the Executive Directors and for setting the scale and structure of their remuneration, paying due regard to the interests of shareholders as a whole and the performance of the Company. The Remuneration Committee Charter can be found on the Company's website (www.empyreanenergy.com/corporate/governance).

Nomination Committee

The role of a Nomination Committee is to help achieve a structured Board that adds value to the Company by ensuring an appropriate mix of skills are present in Directors on the Board at all times. As the whole Board only consists of 4 members, the Company does not have a nomination committee because it would not be a more efficient mechanism than the full Board for focusing the Company on specific issues. The full Board carries out the functions of the Nomination Committee. The Board did not meet formally as the Nomination Committee during the financial year however any relevant matters were discussed on an as-required basis from time to time during regular meetings of the Board.

Internal Control

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness annually. Such a system is designed to manage rather than eliminate risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Board has established a continuous process for identifying, evaluating and managing the Company's significant risks. This process involves the monitoring of all controls including financial, operational and compliance controls and risk management. It is based principally on reviewing reports from senior management and professional advisors to ensure any significant weaknesses are promptly remedied and to indicate a need for more extensive monitoring.

Relationship with Shareholders

The Board attaches a high importance to maintaining good relationships with shareholders and seeks to keep them fully updated on the Company's performance, strategy and management. In addition the Board welcomes as many shareholders as possible to attend its general meeting and encourages open discussion after formal proceedings.

Corporate Social Responsibility

Whilst the Company is cognisant of its corporate social responsibilities, the Company considers that it is not of the size to warrant a formal policy as the issues that are relevant to this policy are mostly the responsibility of the operators of the wells with which the Company has agreements.

Bribery Act

Whilst the Company is cognisant of its responsibilities under the Bribery Act, the Company considers that it is not of the size to warrant a formal policy as the Company ensures, through due diligence, that it does not deal with countries known to participate in bribery.

Company law in the United Kingdom requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Profit or Loss of the Company for that period. In preparing those financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business;

·; so far as each director is aware, there is no relevant audit information of which the Company's auditors are unaware, and the directors have taken all the steps that they ought to have taken as directors' in order to make themselves aware of any relevant audit information and to establish that the Company's auditor are aware of that information.

The Directors are responsible for keeping proper accounting records, for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible for ensuring that the annual report includes information required by the AIM Listing Rules and comply with the Companies Act 2006.

The maintenance and integrity of the Company's website is the responsibility of the Directors. 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.

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

In so far as each of the directors is aware:

·; there is no relevant audit information of which the Company's auditors are unaware; and

·; the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

We have audited the financial statements of Empyrean Energy Plc for the year ended 31 March 2013 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes 1 to 18. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the company's affairs as at 31 March 2013 and of the profit for the year then ended;

·; have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·; have been prepared in accordance with the requirements of the Companies Act 2006; and

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

·; the information given in the Director's Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

·; adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

·; the financial statements are not in agreement with the accounting records and returns; or

·; certain disclosures of directors' remuneration specified by law are not made; or

·; we have not received all the information and explanations we require for our audit.

Rowan J. Palmer (Senior statutory auditor)

For and on behalf of Chapman Davis LLP, Statutory Auditor

Chartered Accountants

Chapman Davis LLP

2 Chapel Court

London SE1 1HH

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 March 2012

All financial results presented are from continuing operations. The accompanying accounting policies and notes form an integral part of these financial statements.

STATEMENT OF FINANCIAL POSITION

As at 31 March 2013

STATEMENT OF CASH FLOWS

For the Year Ended 31 March 2013

STATEMENT OF CHANGES IN EQUITY

For the Year Ended 31 March 2013

The accompanying accounting policies and notes form an integral part of these financial statements.

STATEMENT OF ACCOUNTING POLICIES

For the Year Ended 31 March 2013

The Company's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The principal accounting policies are summarised below. They have all been applied consistently throughout the year. The financial report is presented in the functional currency, Sterling and all values are shown in thousands of pounds (£'000).

Basis of accounting

These financial statements have been prepared under the historical cost convention, modified for certain items carried at fair value, in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee ("IFRIC") and with the Companies Act 2006.

Going concern

The financial statements have been prepared on a going concern basis. The net current liabilities of £1,820,000 (2012: £1,321,000 net current assets) is alleviated with the available Macquarie Bank Facility.

Revenue recognition

Net revenues from crude oil and natural gas sales are recognised when the oil and gas has been lifted and title has passed to a third-party purchaser.

Finance revenue

Finance revenue is recognised as interest accrues.

Cash and cash equivalents

Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Trade and other receivables

Trade receivables, which generally have 30 day terms, are recognised and carried at original invoice amount less any allowance for any uncollectible amounts.

Deferred tax

Current tax assets and liabilities for the current and prior periods are measured as the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the end of financial year date. The Company has considered whether to create a deferred tax asset but has chosen the conservative approach to not recognise a deferred tax asset at this point in time but will review it on a bi-annual basis.

Foreign currencies

Transactions denominated in foreign currencies are translated into sterling at contracted rates or, where no contract exists, at average monthly rates. Monetary assets and liabilities denominated in foreign currencies which are held at the year-end are translated into sterling at year-end exchange rates. Exchange differences on monetary items are taken to the Statement of Comprehensive Income.

Trade and other payables

Trade payables and other payables are carried at cost and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Tangible fixed assets

Tangible fixed assets are included in the Statement of Financial Position at cost, less accumulated depreciation and any provision for impairment. Tangible fixed assets are depreciated on a straight line basis at rates sufficient to write off the cost, less estimated residual values, of individual assets over their estimated useful lives.

Office systems, equipment and furniture: 2.5 - 6 years

Intangible fixed assets

Exploration and development expenditure

Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure.

These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against the profit in the year in which the decision to abandon the area is made. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward the exploration and development costs in relation to that area of interest.

Oil and gas properties

Investments in unevaluated properties and development projects are not reclassified from exploration and development expenditure to oil and gas properties, until commercial production associated with the projects can be determined or until impairment occurs. The capitalised costs of intangible oil and gas assets are subject to amortisation when they are determined to have commercial production, at which point the capitalised costs plus the estimated future costs to develop the underlying commercial reserves are amortised using the unit-of-production method using total estimated reserves.

Judgements and estimates

The Group makes judgements and assumptions concerning the future that impact the application of policies and reported amounts. The resulting accounting estimates calculated using these judgements and assumptions will, by definition, seldom equal the related actual results but are based on historical experience and expectations of future events. The judgements and key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are discussed below.

Impairment of assets

Financial and non-financial assets are subject to impairment reviews based on whether current or future events and circumstances suggest that their recoverable amount may be less than their carrying value. Recoverable amount is based on a calculation of expected future cash flows which includes management assumptions and estimates of future performance.

Share-based payments

Certain Directors of the Company receive remuneration in the form of equity-settled share-based payment transactions, whereby services are rendered in exchange for rights over shares ("equity-settled transactions"). The cost of equity-settled transactions with Directors and the Company Secretary is measured by reference to the fair value at the date at which they are granted. The fair value is determined using the Black-Scholes pricing model. The cost of equity-settled transactions with parties other than Directors and the Company Secretary is measured at the fair value of the services received at the date of receipt, with a corresponding increase in equity.

Financial instruments

The Company's financial assets consist of current account or short-term deposits at variable interest rates, loans, other receivables. Any interest earned is accrued and classified as interest. Trade and other receivables are stated at cost. The Company's financial liabilities consist of trade and other payables and a convertible loan (of which no equity element has been included). All are non-derivative assets. The trade and other payables are stated at cost.

Adoption of standards and interpretations

As at the date of authorisation of these financial statements, there were Standards and Interpretations in issue but that are not yet effective and have not been applied in these financial statements, as listed below:

Standards, amendments and interpretations in issue but not effective

·; IFRS 7 "Disclosures - Offsetting Financial Assets and Financial Liabilities (amendment)"

·; IFRS 9 "Financial Instruments";

·; IFRS 10 "Consolidated Financial Statements";

·; IFRS 11 "Joint Arrangements";

·; IFRS 12 "Disclosure of Interests in Other Entities";

·; IFRS 13 "Fair Value Measurement";

·; IAS 1 "Presentation of Items of Other Comprehensive Income (amendment)";

·; IAS 19 "Employee Benefits (revised)"

·; IAS 28 "Investments in Associates (revised)";

·; IAS 32 "Offsetting Financial Assets and Financial Liabilities (amendment)".

(1) Services provided by Apnea Holdings Pty Ltd

(2) Services provided by F J Brophy Pty Ltd

No UK pension benefits are provided for any UK resident Director. An amount equal to 10% of salary is currently paid to Tom Kelly and Frank Brophy under the Australian superannuation regime. This amount will remain at 10% unless the Australian superannuation guarantee statutory percentage increases above 10%.

Directors' share options

The terms of the share option interests of Directors in office during the year ended 31 March 2013 were as follows:

As announced on 15 January 2013, each Director notified the Company that they voluntarily waived their future acceptance of options to subscribe for ordinary shares in the Company should the Remuneration Committee of the Company recommend any options to be granted to each of them from the date of the notice until the date of the next AGM.