Jersey Oil&gas Regulatory News (JOG)

26 SEPTEMBER 2012

TRAP OIL GROUP PLC

INTERIM RESULTS FOR THE PERIOD ENDED 30 JUNE 2012

Trap Oil Group plc ("Trapoil" or the "Company" and, together with its subsidiaries, the "Group") (AIM: TRAP) the independent oil and gas exploration and appraisal company focused on the UK Continental Shelf ("UKCS") region of the North Sea, is pleased to announce its results for the period ended 30 June 2012.

Commenting on the results, Mark Groves Gidney, Chief Executive Officer of Trapoil, said, "The Company continues to be very well placed: drilling has just started at the first of two high impact wells, either one of which could be transformational; we are in the process of completing the Athena acquisition which together with Lybster moves the Company into production; and results are shortly expected from the eight applications put forward in the 27th Licensing Round. These activities have all been progressed against the backdrop of one of the more challenging periods for North Sea E&P businesses. As importantly, the Company is in a financially healthy position with the capacity to fund its near term commercial objectives."

1st Half 2012

·; In March 2012 announced the proposed acquisition of a 15 per cent. interest in the Athena Oil Field:

1. Consent received from the Secretary of State for Energy and Climate Change for the proposed transfer of an initial 10 per cent. working interest in the Athena Oil Field from Dyas UK Limited

2. Awaiting final approvals from partners and BW Offshore

3. Production flow rate estimated to be c.11,000 bopd

·; First oil achieved from Athena Oil Field and Lybster well

·; Raised £4.3m (before expenses) via an institutional placing in June 2012

·; Loss before and after taxation reduced to £1.55m

Expected in 2nd Half 2012

·; Drilling of two high impact wells, Romeo and Scotney, either one of which could, if successful, be transformational

·; Further progress towards completing the proposed acquisition of a 33.33 per cent interest in Trent East, estimated to contain c.40-60bcf (gross) of resources and Trapoil to become operator

·; Results due from eight applications made in the 27th Licensing Round where extensive use was made of the Group's access to the unique CGGVeritas 3D seismic data

Mark Groves Gidney, continued, "Looking ahead, we will continue to stick to our business model of building an active drilling programme leveraged primarily by carried interests with leading international partners who are also targeting wells with near term cash potential and are keen to exchange higher upfront investment costs for access to our expertise in identifying high quality exploration opportunities in the UKCS."

Enquiries:

Notes to editors:

·; The Group was created in 2008 by a team of experienced industry executives with a broad range of oil and gas technical, operational and financial expertise and professional skills.

·; Trapoil has developed long term relationships with key oil industry partners and major suppliers and consultants including CGGVeritas Services (UK) Limited ("CGGVeritas") and Applied Drilling Technology International and Exploration Geosciences Limited.

·; The Company utilises a research-led, knowledge-based approach to identify and deliver promising exploration and appraisal opportunities, and to this end has secured extensive long term access to CGGVeritas' state of the art 3D seismic database over the majority of the Central North Sea area on negotiated terms. CGGVeritas is a leading pure-play geophysical services and equipment provider. Access to such 3D seismic data serves to strengthen the group's ability to create opportunities on both open and held acreage in the UKCS.

Chief Executive OFFICER's Report

Introduction

In a challenging global macro economic climate, Trapoil has established itself as a focused independent UK exploration and appraisal company offering investors participation in one of the more active drilling programmes on the UK Continental Shelf, with the majority of the well opportunities leveraged via carried interests. We have intentionally built a portfolio of drilling opportunities that balances lower risk/lower return prospects with commensurate near term cashflow potential, with higher risk opportunities, which, if successful, could generate significant upside and transform the Company. It is clearly impossible to predict with any certainty which of the wells will prove to be successful and commercially viable, but by pursuing a balanced and prudent portfolio management policy, we are confident that our existing assets and drill ready opportunities will ultimately provide our shareholders with a very attractive return on their investment.

Our progress to date has been achieved against a backdrop of a difficult year for UK North Sea drilling, due inter alia to fiscal changes announced by the UK Government and the continuing weak global economic and financing environment. Challenging equity markets in particular have made it all the more important to have a solid, low cost business model where the Company can fill a niche, working alongside its strong joint venture partners with proven track records. Trapoil remains committed to pursuing attractive investment opportunities in the increasingly mature UK North Sea region, where the size of prize for a given risk profile is decreasing over time, underpinned by strong oil and gas prices and growing spare capacity in existing pipelines and platform facilities. The tight drilling market however, caused by rigs being redeployed away from the North Sea area, has inevitably led to some delays to our anticipated drilling schedule, but we are now drilling the first of two high impact wells. We are also increasing our exposure to lower risk appraisal wells that we expect will be drilled and provide potential additional cash flow in the short to medium term.

We are close to completing our acquisition of an initial equity interest in the producing Athena Oil Field ("Athena"), as previously announced, which we believe will further build upon the solid foundation of the Company, with anticipated significant tax efficiencies. Combined with production from Lybster, we will therefore shortly have secured revenue streams to contribute to the funding for our 2013/2014 drilling programme.

Looking ahead to the remainder of 2012, we envisage several catalysts for further growth. In addition to the impending completion of the Athena acquisition and our continuing drilling programme, we look forward to the results of our applications in the Department of Energy and Climate Change's ("DECC's") 27th Licensing Round in which we have been active participants, securing the Trent East opportunity where we are seeking to become an operator, and we also look forward to additional attractive farm-in opportunities.

Financial results

Our financial results for the first half of 2012 show revenue of £0.77m (2011: £0.80m) and a loss after taxation of £1.55m (2011: £1.80m) reflecting principally exploration and administrative expenditure. As at 30 June 2012, cash reserves were £33.47m including £3m of restricted cash. These results are in line with our expectations and do not reflect the acquisition of our equity interest in Athena, which has yet to be completed. We remain well funded to deliver our near term operations.

Drilling schedule

Over the course of the last 15 months, we have established an exciting and well balanced portfolio of drilling opportunities, many of which are expected to come to fruition over the course of the next 18 months. Trapoil's business model, of predominantly holding carried interests in a range of exploration licences minimises the risks to the business. The carried interest model balances the lack of control Trapoil has over the timing and prioritisation of drilling opportunities with the removal of, or a significant reduction in, the downside impact of drilling or operational delays, funding exposure or shifts in the focus of its partners.

We drilled one well in H1 2012 - Orchid (Licence P.1556, Block 29/1c) - that resulted in the discovery of an approximate 200ft+ oil column within the primary Chalk reservoir. The well characteristics and differing partner materiality thresholds, made it unpalatable for the consortium, led by the operator Summit Petroleum Limited, to incur the cost of testing the well. Trapoil's preference was to test the well but as there was no consensus the well was, as always planned, plugged and abandoned. The partnership is currently evaluating its potential options going forward.

Drilling high impact wells in 2012

Our next wells are to be the Suncor Energy UK Limited ("Suncor") operated Romeo (Licence P.1666, Block 30/11c) and Scotney (Licence P.1658, Block 20/5b) prospects where we are fully carried by our partners. These wells will be drilled back to back, beginning in September 2012. Both of these wells are potentially high impact for Trapoil if our partners' projections are ultimately realised. The value accretion to Trapoil is significantly enhanced by the carry, where we will pay no costs until first production.

Later in 2012, we anticipate drilling the Magnolia (Licence P.1610, Block 13/23a) well, operated by Dana Petroleum (BVUK) Limited ("Dana"), where we are again fully carried.

Planned 2013 / 2014 drilling campaign

The drilling of the Magnolia well will be followed, using the same rig, by Norwegian Energy Company UK Limited's ("Noreco's") high impact Crazy Horse (Licence P.1650, Block 14/13) well, where we are partially carried. It is currently anticipated that the Crazy Horse well will spud in H2 2013 as we are subject to the rig's other third party commitments and the timing of its five year inspection, early next year. We are also involved, via a small working interest, in the pending decision to appraise the Dana Petroleum operated Surprise (Licence P.1267, Blocks 12/25a & 13/21b) discovery, however there are ongoing discussions regarding the likelihood of this well being drilled.

We also have a number of appraisal opportunities that have the potential to deliver near term organic cashflow. Over the course of the last year, together with our partner Noreco, we have completed a 3D seismic programme over the Bordeaux and Brulé (Licence P.1768, Blocks 14/14b, 18c & 19c) discoveries. This seismic has enhanced our understanding and view of the discoveries and we continue our technical work to increase our understanding of the numerous prospects prior to drilling. At this time, it looks like a bold step out around one of the discoveries could be drilled in 2013 or early 2014 in order to establish a commercially viable volume of oil. A development in this area will lead to several more wells as tie in options are plentiful.

In 2013 we also have two wells scheduled to be drilled with Caithness Oil Limited ("Caithness") as operator - the Knockinnon (Licence P.1270, Block 11/24) appraisal well followed by the potentially large Forse (Licence P.1286, Block 11/23) exploration prospect. These wells were originally due to be drilled in 2012 and 2011 respectively, but have been delayed to 2013 due to various force majeure events raised by Caithness. Trapoil are working on these issues with Caithness. DECC is fully cognisant of the delays and Caithness is currently in the process of finalising the necessary licence extensions. A further update will be provided once Trapoil has clarity on the revised timetable to be proposed by Caithness.

Further drilling opportunities

There is currently a possibility that two further wells will be drilled next year, but at this stage they are more likely opportunities for 2014. We are in discussions with a number of parties, with a view to seeking a commitment to drill Inverewe (Licence P.1864, Block 9/24d), formerly known as the Kew prospect but as this is a long lead High Temperature High Pressure ("HTHP") well it will take the best part of a year to plan, once an operator's commitment to drill has been gained. We understand that JX Nippon remains supportive of drilling an appraisal well, subject to the involvement of a new partner to replace Centrica. We have until the end of the year to secure an operator for this well. Finally Suncor has already committed to drill the Niobe (Licence P.1889 Blocks 12/26b & 27) prospect that has a similar time frame.

Portfolio enhancement and anticipated operatorship

As outlined at our AGM in May 2012, we are pursuing the acquisition of a 33.33 per cent. interest in Trent East (Licence P.685, Block 43/24a) that would lead to our first well as an operator and would ultimately involve a potential tie in to Perenco UK Limited's nearby Trent platform. We are close to agreeing the requisite sale and purchase agreement and supporting documentation, but the proposed acquisition will be conditional on obtaining DECC's permission to act as an operator; deal completion is therefore currently targeted for the end of this year with drilling of the appraisal well planned for in 2013. At Trent East we will be targeting 40 to 60bcf (gross) of gas where we will be drilling close to an early discovery well which tested at 50mmcfgpd.

We have been very active in DECC's 27th Licensing Round submitting eight applications in total, of which seven were made in conjunction with long standing partners, in order to potentially enhance our existing portfolio with promising new assets. Many of the applications stemmed from our team's analysis of state of the art 3D seismic data sourced from CGGVeritas Services (UK) Limited's database and, if successful, we will receive carried interests from our contracted partners. We also submitted a further application, close to Trent East, with a major utility as our partner. Awards for the 27th Licencing Round are currently anticipated in the latter part of 2012.

Approval of Trapoil as an operator is one of our stated goals and we currently expect to achieve this before the end of the year. The necessary staffing levels are close to being finalised in order to be able to operate the drilling of wells; all our HSE and Environmental policies are now in place and are currently being certified.

We also have a team constantly working on new ventures since many of the North Sea's best assets reside in acreage held by third parties. We are focused on continuing to source low cost opportunities and have a number of attractive targets under consideration at the current time.

Production

We expect to complete the acquisition of the first 10 per cent. equity tranche in Athena (Licence P.1293, Block 14/18b) from Dyas UK Limited in Q4 2012. At present, Athena is achieving a production rate of approximately 11,000 bopd gross. Looking ahead, the oil price appears to be fairly robust at around or slightly above the $100/bbl level that is the benchmark we applied when assessing our acquisition of an equity interest in Athena.

Our other source of production income is Lybster (Licence P.1270, Block 11/24-3v2), which is currently producing at a rate of approximately 450 bopd gross, being slightly ahead of our expectations. This equates to 90 bopd net to Trapoil, because although we hold a nominal 35 per cent. carried interest, our economic interest is effectively 20 per cent. since the terms of the Farm In Agreement allow our partner to recover all of the development and operating costs attributable to Trapoil's interest.

Share Price and Recent Fund Raising

It is clearly most disappointing that our share price does not currently reflect the significant intrinsic potential value within our exploration portfolio that has been carefully assembled both prior and subsequent to our IPO in March 2011. We are fortunate to have the support of major institutional shareholders and it was particularly pleasing to note the arrival of a number of new institutions and other investors at the time of our £4.3m (gross) placing completed in June 2012. In July 2012, we were also pleased to announce the appointment of FirstEnergy Capital LLP as a joint broker alongside our existing broker, Mirabaud Securities LLP. I am confident that our imminent drilling campaign, and some of the new ventures outlined above, will deliver significant value and hope that this will be reflected in a rerating of our shares.

I would like to thank all of our shareholders for their patience and loyalty and we remain focused, as a management team, on creating meaningful shareholder returns within a sensible time frame. I would also like to thank our dedicated staff for their unwavering support and acknowledge our appreciation of the valuable assistance and guidance provided by our non executive directors.

Mark Groves Gidney

Chief Executive Officer

26 September 2012

GROUP STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 JUNE 2012

GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

GROUP CONSOLIDATED STATEMENT OF CHANGES OF EQUITY FOR 6 MONTHS ENDED 30 JUNE 2012

GROUP CONSOLIDATED STATEMENT OF CASHFLOWS FOR 6 MONTHS ENDED 30 JUNE 2012

NOTES TO GROUP CONSOLIDATED FINANCIAL STATEMENTS FOR 6 MONTHS ENDED 30 JUNE 2012

1. GENERAL INFORMATION

Trap Oil Group plc ('the Company') and its subsidiaries (together, 'the Group') are involved in the exploration, development and production of oil and gas reserves from the UK Continental Shelf and during the period under review production of hydrocarbons commenced from the Lybster field.

The Company is a public limited company and is listed on AIM, a market operated by London Stock Exchange plc, and incorporated and domiciled in the United Kingdom. The address of its registered office is 10 The Triangle, ng2 Business Park, Nottingham, NG2 1AE.

2. BASIS OF PREPARATION

These consolidated interim financial statements have been prepared under the historic cost convention, using the accounting policies that will be applied in the Group's statutory financial information for the year ended 31 December 2012. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRS as adopted by the European Union.

The reports for the six months ended 30 June 2012 and 30 June 2011 are unaudited and do not constitute statutory accounts as defined by the Companies Act 2006. The financial statements for 31 December 2011 have been prepared and delivered to the Registrar of Companies. The auditors' report on those financial statements was unqualified, did not draw attention by way of emphasis of matter and did not contain a statement under section 498 of the Companies Act 2006.

3. Accounting Policies

These accounting policies adopted are consistent with those in the previous financial year.

Revenue recognition

Revenue is measured at the fair value of consideration received or receivable and represents amounts receivable for services supplied, stated net of discounts, returns and value added taxes. Revenue is derived from the principal activities of the Group. The Group is involved in the analysis of seismic data and information for the exploitation and development of oil and gas reserves in the UK Continental Shelf. Revenue is derived from strategic partners on the identification of opportunities for application for a licence to explore further and is recognised at the point the invoice is raised or the date a trigger event occurs if this is later.

The Group also receives revenue from the production of hydrocarbons from licences held by the Group that is recognised at the end of each month based upon the quantity and price of oil and gas delivered to the customer.

Exploration and evaluation costs

Such costs are initially capitalised as Intangible Assets and include payments to acquire the legal right to explore, together with the directly related costs of technical services and studies, seismic acquisition, exploratory drilling and testing.

Exploration costs are not amortised prior to the conclusion of appraisal activities.

Exploration costs included in Intangible Assets relating to each exploration licence and prospect are carried forward until the existence (or otherwise) of commercial reserves have been determined subject to certain limitations including review for indications of impairment. If commercial reserves are discovered the carrying value, after any impairment loss of the relevant assets, is then reclassified as a Tangible Asset under Production Interest & Fields Under Development. If, however, commercial reserves are not found, the capitalised costs are charged to the income statement. If there are indications of impairment prior to the conclusion of exploration activities, an impairment test is carried out.

Production interest and fields under development

Such assets are accumulated generally on a field by field basis and represent the cost of developing the commercial reserves discovered and bringing them into production, together with the exploration costs incurred in finding commercial reserves transferred from Intangible Assets.

The costs also include the acquisition and purchase of such assets, directly attributable overheads and the cost of recognising provisions for future restoration and decommissioning.

Amortisation, depletion and impairment of oil and gas assets

All expenditure carried within each field is amortised from the commencement of production on a unit of production basis, which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period, on a field by field basis. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future field development costs to access the related commercial reserves. Changes in the estimates of commercial reserves or future field development costs are dealt with prospectively.

Where there has been a change in economic conditions that indicate a possible impairment in an oil and gas asset, the recoverability of the net book value relating to that field is assessed by comparison with the estimated discounted future cash flows based on management's expectations of future oil and gas prices and future costs. Any impairment identified is charged to the income statement as additional depletion and amortisation. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to the income statement, net of any depreciation that would have been charged since the impairment.

Decommissioning and site restoration

Provision for decommissioning and site restoration is recognised in full when the related facilities are installed and the field commences production. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related Production Interest. The amount recognised is the estimated cost of decommissioning and site restoration, discounted to its net present value and is reassessed each year in accordance with existing conditions and requirements. Changes in the estimated timing of cost estimates are dealt with as an adjustment to the provision and a corresponding adjustment to the Production Interest. The unwinding of the discount on the decommissioning provision is included as a finance cost.

4. TAXATION

Trap Oil Group plc is a trading company but no liability to UK corporation tax arose on the ordinary activities for the period ended 30 June 2012 due to the losses incurred.

5. LOSS PER SHARE

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

Diluted loss per share is calculated using the weighted average number of shares adjusted to assume the conversion of all dilutive potential ordinary shares.

6. OTHER OPERATING INCOME

On 9 February 2012, the sale of the Group's 10 per cent. working interest in its Lacewing asset (P.1181, Block 23/22b) to ConocoPhillips (U.K.) Ltd was completed for cash consideration of £1 million realising a gain on disposal which is shown in the Consolidated Statement of Comprehensive Income as Other operating income.

7. INTANGIBLE ASSETS

8. TANGIBLE ASSETS

9. TRADE AND OTHER PAYABLES

Included in Non-Current Liabilities - Trade and other payables of the Group is £3,000,000 and capitalised interest of £321,260 which relates to the consideration for the data licence obtained from CGGVeritas Services (UK) Ltd which has been capitalised under Intangible Assets. The term of the licence is for 8 years and the final liability is due on expiry of the licence, August 2016. On each and every success fee that is acquired from using the data from the licence, £300,000 - £350,000 becomes due immediately as part of the consideration. Any balance remaining when the licence expires is due on that date and shall attract interest at LIBOR plus 1% per annum.

Trap Oil Ltd has a £2 million overdraft limit with National Westminster Bank plc which is secured by a debenture in the name of Trap Oil Ltd, a cross guarantee within the Group and on the shares of Trap Oil Ltd held by Predator Oil Ltd. The overdraft is currently undrawn. The overdraft limit currently expires on 31 May 2013.

10. PROVISIONS FOR LIABILITY AND CHARGES

This provision relates to the future decommissioning of producing fields.

11. ISSUE OF SHARE CAPITAL

During the period, Trap Oil Group plc issued 20,537,300 ordinary shares from which it raised £4,312,833 (gross) in additional capital. The net proceeds from the share issue were £4,084,712.

12. SHARE BASED PAYMENTS

The Group operates several share option schemes. Options are exercisable at prices set out in the table below. Options are forfeited if the employee leaves the Group through resignation or dismissal before the options vest. Equity-settled share based payments are measured at fair value at the date of grant. The fair value determined at the date of grant of equity-settled share based payments is expensed on a straight line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest.

The total expense included within the operating results in respect of equity-based share-based payments was £283,667. For the period ended 30 June 2011 the amount was £745,286 and for the period ended 31 December 2011 was £1,239,472. For the period ended 30 June 2011 and 31 December 2011 the amount included within the share premium account as part of the cost of raising capital was £534,838.

The Group share option schemes are for directors and employees and details of outstanding options are set out in the table below:

The weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was 28.22p per option. The significant inputs into the model were mid-market share price on the day of grant or 1p, the exercise price as shown above and an annual risk-free interest rate of 1.1%. The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices from the date of admission to AIM to the date of grant on an annualised basis.

CASH AND CASH EQUIVALENTS

The amounts disclosed on the consolidated statement of cash flows in respect of cash and cash equivalents are in respect of these consolidated statement of financial position amounts:

14. POST BALANCE SHEET EVENT

On 16 March 2012, Trap Oil Ltd, a wholly owned subsidiary of Trap Oil Group plc, entered into a conditional Sale and Purchase Agreement with Dyas UK Ltd to initially acquire a 10% working interest followed by a potential further 5% working interest in UK Seaward Production Licence P.1293 (Athena) for a total cash consideration of approximately £34.5 million with an effective date of 1 January 2012, subject inter alia to government (DECC) and joint venture partners' approvals.

As at 30 June 2012, the only part of the overall transaction that had taken place was the payment of £3 million into a solicitor's escrow account and this amount has been included in Current Assets, Cash and cash equivalents.