Hague and London Oil Regulatory News (HNL)

WESSEX EXPLORATION PLC

(AIM: WSX)

Funding Update

Wessex Exploration PLC ("Wessex" or "the Company"), the oil and gas exploration company, announces that it intends to trigger a contractual right contained in the Northpet Investments Limited ("Northpet") Shareholders Agreement to conserve cash resources by electing not to fund up to £1.5m of future funding requests in respect of operations in Guyane.

Last year was challenging, as our enthusiasm following the 2011 Zaedyus oil discovery in Guyane, was tempered by three unsuccessful wells. The last well in the current drilling programme, GM-ES-5, a prospect located down-dip from the Zaedyus discovery, is expected to complete before the end of the calendar year.

Cash as at 30 June 2013 was £4.4m, of which the Company had projected that £3.3m was required for outstanding project commitments, being £3.1m on Guyane and £0.2m on other projects.

The combination of ongoing well costs in Guyane during the second half of 2013 and a recognition that the analysis of the results of drilling and the interpretation of a new portfolio of prospects in the Permit will not be complete until the second half of 2014, gives rise to a potential funding shortfall next year. This has led the Board to conclude that action needs to be taken now to ensure that the Group remains appropriately funded throughout the whole of 2014. It is critical that Wessex is able to benefit from the value creation that we expect to be generated from the identification of new leads and prospects in Guyane, particularly in the Central Area.

The Board has carefully considered various alternative methods of funding and concluded that the most certain and least dilutive option is to trigger a contractual right contained in the Northpet Shareholders Agreement. The intention is for Wessex to conserve cash resources over the next few months by giving notice of election not to fund up to £1.5m of future funding requests. This would result in a dilution of the Wessex shareholding in Northpet to around 44% (reduced from 50%), or an effective interest in Guyane of around 1.1% (reduced from 1.25%). This mechanism is the equivalent of funding Wessex at approximately 1.725p per share. Alongside this, the board has commenced a non-project cost reduction programme aimed at reducing overhead costs by a minimum of 25%.

Malcolm Butler, Chairman of Wessex said…

"While the results of our drilling campaign in Guyane over the past 12 months have been disappointing, we have only explored a small part of the prospectivity of this large permit. The Shell-operated group will spend the first half of 2014 integrating these results into a review of prospects in the remainder of the permit area, before gearing up for new drilling in 2015. It is essential that Wessex has the resources in place to capture the value of this work as we move through 2014."

For further information please contact:

Editor Notes

Northpet Investments Limited ("Northpet")

Northpet is the joint venture company that owns the 2.5% interest in the Guyane Maritime Permit and is currently 50% owned by each of Wessex and NP Offshore Holdings (UK) Limited ("NP"), a wholly-owned subsidiary of Northern Petroleum Plc ("Northern", AIM: NOP). The operation of Northpet is controlled by a Shareholders Agreement signed between Wessex and NP in July 2008. NP has the right to appoint Northpet's Chairman.

The contractual right allows Wessex to give notice to NP of its intention not to contribute to monthly funding requests made by Northpet in respect of costs of the Guyane Maritime operation and instead suffer pro-rata dilution in its shareholding in Northpet if NP pays Wessex's share of such requests.

NOP acts as administrator of the Joint Venture and receives the Operator's cash call usually within the first two weeks of each month which becomes payable 15 days from the date of the cash call statement. When it receives this cash call, Northpet issues a funding request to each of its shareholders for their pro rata share of the Operator's request and any Northpet administrative costs. Cash paid to Northpet in response to this request is treated as a subscription for Ordinary Shares of £1 in Northpet at a fixed price of £1,250 per share. As at 15 October 2013, there were 16,176 ordinary shares in issue, split equally between Wessex and NP.

All finance is provided to Northpet on a basis that is pro rata to the shareholdings. However, either shareholder may elect not to provide finance in respect of any funding request by so notifying the other shareholder within 14 days of receiving the request from Northpet. The other shareholder must then either make up any shortfall in the Northpet request by subscribing for more than its original pro rata entitlement of new shares or cause Northpet to fail to make the Operator's cash call, which would trigger default under the Joint Operating Agreement for the Guyane Maritime permit.

The carrying cost of the Company's investment in Northpet as at 30 June 2013 was £8.66m (2012: £3.73m).