Petrel Resources Regulatory News (PET)

25th June 2015

Petrel Resources plc

("Petrel" or the "Company")

Preliminary Results for the Year Ended 31 December 2014

Petrel Resources announces its results for the year ended 31 December 2014.

ENDS

Enquiries:

Petrel Resources Plc

John Teeling, Chairman +353 (0) 1 833 2833

David Horgan, Director

Nominated Adviser and Broker

Northland Capital Partners Limited

Edward Hutton / Gerry Beaney +44 (0)20 7382 1100

John Howes/Mark Treharne (Broking)

Public Relations

Blytheweigh +44 (0)20 7138 3204

Tim Blythe +44 (0) 7816 924 626

Halimah Hussain +44 (0) 7725 978 141

Camilla Horsfall +44 (0) 7871 841 793

PSG Plus

Aoife Ross +353 (0) 1 661 4055

Alan Tyrrell +353 (0) 1 661 4055

www.petrelresources.com

Statement Accompanying the Preliminary Results

The lack of interest in junior explorers continues. Despite an active year for Petrel Resources, the share price continued to decline from 15p to 3p. Since the beginning of the current downturn in resource shares, in 2008, the price of Petrel has declined by over 90% - despite having carried interests and cash. While currently there appears to be some weak indications of interest returning principally more buying activity, and some media interest, the overall position remains dire. There is nothing new in vicious junior resource company share price cycles but the current version is deep and long. Few if any junior explorers have been able to raise money to continue meaningful exploration activities. Petrel is among the very few with cash and with a world class partner, Woodside Energy who continues work in the Irish Offshore Oil Exploration sector. To succeed in our sector, first you must survive. We have shown over decades our ability to survive. Then to succeed you need to be in a good sector, have good ground, good people and good technology. Petrel is active in three areas, Offshore Ireland, Iraq and Ghana.

The future market position of oil and gas is not in doubt. There are claims that renewables will damage the sector. It might in the very long term but for the next 30 to 50 years world economic growth will depend on a secure supply of energy. That will come from oil and gas. Billions of people will become middle class in the coming decades. That means they will want a Western World lifestyle - which is energy intensive. Consensus forecasts for energy demand show a strong upward trend. Of course there will be blips and setbacks along the way but the overall trend is clear.

Given that there is a market how best do you find oil and gas? It seems a blinding glimpse of the obvious that explorers need good ground. But it is not only the physical ground. There is also economics and politics associated with it. The Petrel strategy is to go where oil is likely to be. If this means taking greater political and technical risks so be it. We are on the ground in Iraq, probably the most prospective oil country in the world with production costing $2 a barrel but the political situation is close to impossible. We are Offshore Ireland, which is a frontier area geologically and technically, while politically stable. But there is the possibility of elephant discoveries. We are in Ghana, a frontier area when we first entered. Now with lower geological risk but unable to make political progress.

If you have ground in prospective areas you need people who have the skills, commitment and the nerve to plough on in the face of adversity. The board of Petrel and our technical backup have all of the above plus we have experience. Petrel was formed in the early 1980s to explore Offshore Ireland, the venture failed. It was reborn in the 1990s to explore in Africa and the Middle East. We have had a presence in Iraq since 1997. It has been a turbulent experience but we are still there. We know Ghana for over 20 years. Our experience in the past few years has disappointed. We believed the country to have transparent procedures and the rule of law. The rule of law operates but ratification procedures are obtuse.

Use of the most modern technology can reduce the level of risk in exploration. Petrel has strengths in this area. Over the years we have built a network of technology specialists which we contract in when needed and we have joint ventured with some of the world's best oil and gas companies thereby gaining access to their technology. In Iraq, we have a carry with one of the largest private groups in the country who in turn have a joint venture with a listed Canadian company, Oryx. Our Irish Offshore partner, Woodside Energy, is one of the world's foremost and successful gas explorers. Our local Irish technical experts are the go to people in the industry.

Despite all of the above exploration remains high risk. If we are successful in any one of our ventures the reward will more than compensate for the risks.

Activities

Petrel holds a 15% interest in 1,050 km of prospective acreage in the Porcupine Basin of the Irish Atlantic. The Irish Atlantic is virtually unexplored - only 31 wells have been drilled mainly in shallower water. Petrel with two exploration licences, 3/14 and 4/14, is focused on prospects in 600 to 800 metres of water. We have a joint venture with Woodside Energy, an Australian based hydrocarbon producer. In return for a substantially carried 15% interest in the early stages of exploration Woodside became the operator. Petrel had completed significant desk based work on the two blocks. Woodside is enhancing this work and intends to complete 3D seismic as soon as is practicable. This phase of the work has been delayed while the Irish government completes an offshore environmental assessment. Results are expected in Q3 2015 which means the seismic programme is likely to take place in 2016.

New technology, new discoveries in similar geology and high oil prices made prospecting in the Atlantic fashionable in recent years but a series of recent setbacks and a lower oil price have dampened enthusiasm. Exploration in Irish Atlantic waters is not for the faint hearted. Prospects look good but exploration costs are huge. A well on either of the two Petrel blocks is likely to cost upwards of $60 million - this is a new exploration province. Uncertainties introduced by possible tax changes, delays in issuing permits and the ongoing political problems with the Corrib gas field discourage explorers, as does the lower oil price. But the Irish Atlantic is one of the few remaining frontiers where big discoveries may be made.

Petrel and an associate company, Clontarf Energy had high expectations when they obtained an exploration concession (via Pan Andean Resources Ltd (30% Petrel, 60% Clontarf Energy, 10% local interests)) from the Ghana National Petroleum Company (GNPC) in 2010. The concession, which was always subject to cabinet and parliamentary approval covers 1,532 sq km in the Tano basin. Terms were very good reflecting the early stage of oil exploration in the country. Ratification of the agreement has dragged on for 5 years during which Ghana has become a significant oil producer - in an area south of Tano where our concession lies. For the past year the consortium of Petrel, Clontarf Energy and a local partner have been in litigation with the Ghanaian government and state agencies over an attempt to award ground from our licence in Tano to a third party. A court approved agreement was reached. This was acceptable to all parties concerned. The Ghanaian authorities have failed to implement the agreement. Ongoing talks have led to further settlement proposals which as yet are not acceptable to the consortium. What is happening in Ghana is regrettable. The country is a good place in which to work. The rule of law applies and title was thought to be good. Having very reluctantly commenced litigation Petrel and partners will see it through.

When Petrel first invested in Iraq in 1997 it was the Saddam era. Investing in Iraq was a clear example of choosing low geological risk over high political risk. We underestimated the political chaos of the last decade. Iraq has the potential to go to 10 million barrels a day of oil production. It is currently at 3.8m and growing despite the chaos. The Petrel interests are in the Wasit province where we have a carry which will be paid for in Petrel shares when certain milestones such as drilling are reached. Should the operator, Oryx, be unable to spud wells within the next 4 years then the agreement lapses. Iraq will be at the forefront of world oil development in the coming decades but it is difficult to attach a present value to the interests.

Future

Petrel has sufficient cash at present expenditure levels to continue for two or three years. This is not an option that the board accepts. We are actively working with our partner, our advisors and the Irish authorities on helping them complete the Irish Offshore Strategic Environmental Assessment. An early resolution will enable orderly planning for 2016. We have ongoing discussions with the authorities in Ghana. Neither side wants a court action but this may be inevitable. Current proposals from the authorities to the consortium have unacceptable risks. In Iraq we wait and observe.

We continue to evaluate possible opportunities in emerging frontier exploration areas. Investors in Petrel, as in most other junior explorers, have seen their shareholding literally decimated in value. We have cash, people and potentially very good ground. There are small signs of life in the stock exchange sector in which Petrel operates. If life blossoms then the potential return is significant.

John Teeling

Chairman

24th June 2015

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2014

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

Share premium

Share premium comprises of the excess of monies received in respect of the issue of share capital over the nominal value of shares issued.

Capital conversion reserve fund

The ordinary shares of the Company were renominalised from €0.0126774 each to €0.0125 each in 2001 and the amount by which the issued share capital of the Company was reduced was transferred to the capital conversion reserve fund.

Share based payment reserve

The share based payment reserve represents share options granted which are not yet exercised and issued as shares.

Translation Reserve

The translation reserve comprises of foreign exchange movement on translation from US Dollars (functional currency) to Euro (presentation currency).

Retained deficit

Retained deficit comprises accumulated losses in the current financial year and prior financial years.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014

NOTES:

1. ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for financial year ended 31 December 2013. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

2. LOSS PER SHARE

Basic loss per share

The earnings and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

Basic and diluted loss per share are the same as the effect of the outstanding share options is anti-dilutive.

3. FINANCIAL ASSET

Investment

On 14 August 2013 the Company announced that through its wholly owned subsidiary, Petrel Resources (TCI) Limited, it had acquired a 20 per cent shareholding in Amira Hydrocarbons Wasit B.V.("Amira") from Amira Petroleum N.V. Amira is a special purpose vehicle which holds a 25 per cent carried to production interest in an early stage oil opportunity in the large, underexplored and underdeveloped province of Wasit, Iraq.

Although the Company owns 20 per cent of Amira, it does not have significant influence over Amira. Petrel does not have any representation on the Board of Amira. It does not have the right to participate in any financial or operating policy decisions. As a result Amira does not meet the definition of an associate and is treated as an investment.

The consideration for the Acquisition comprised an up-front cash payment of US$500,000 and the issue of 18,947,368 shares in Petrel ("Initial Consideration Shares"), representing 19.82 per cent of the enlarged issued share capital of Petrel. The Initial Consideration Shares are locked-in until the spudding of the first conventional oil well in respect of Amira's interest in the Wasit province. If the Spudding Date has not occurred by 19 August 2018, Petrel may, amongst other things, elect to re-acquire the Initial Consideration Shares for a nominal amount.

Following completion of the Acquisition, a further 21,052,632 shares in Petrel may be issued in two tranches upon the occurrence of certain events ("Deferred Consideration Shares"). The first tranche of 10,526,316 Deferred Consideration Shares is to be issued upon the Spudding of the first conventional oil well. The second tranche of 10,526,316 Deferred Consideration Shares is to be issued upon notification of a discovery in respect of Amira's interest in the Wasit Province.

As part of the Acquisition, Arman Kayablian, COO of Amira Industries, joined the board of Petrel as a non-executive director with effect from 19 August 2013.

Under the terms of the Acquisition agreement, Petrel is also given a right of first refusal to participate or acquire an operated interest in any future exploration and production licences that Amira Industries secures in the Iraqi provinces of Muthanna, Karbala, Babil and Najaf, which are currently being pursued by Amira Industries. The terms of Petrel's participation in such licence are subject to agreement between the parties but are likely to be similar to Amira Industries' arrangement with Oryx Petroleum ("Oryx") in respect of the Wasit licences.

Fair value information for the investment in Amira has not been disclosed as its fair value cannot be reliably measured. As a result the investment is carried at cost. Fair value cannot be reliably measured as the investment is held in a private company. Amira's equity instruments do not have a quoted price in an active market.

The recoverability of the group's financial asset is dependent on the discovery and successful development of the economic reserves which is subject to a number of risks as outlined below:

· Licence obligations;

· Funding requirements;

· Political and legal risks, including title to licence, profit sharing and taxation;

· Geological and development risks;

· Exchange rate risk;

· Political risk; and

· Financial risk management.

4. INTANGIBLE ASSETS

4. INTANGIBLE ASSESTS (CONTINUED)

Exploration and evaluation assets at 31 December 2014 represent exploration and related expenditure in respect of projects in Ireland and Ghana. The directors are aware that by its nature there is an inherent uncertainty in relation to the recoverability of amounts capitalised on the exploration projects.

Due to the political and legal uncertainty in Iraq the directors have decided to impair in full the exploration and evaluation assets in Iraq to nil, resulting in an impairment charge of €2,470,320.

In addition the group incurred expenditure of €58,655 on various projects in Cameroon and Mozambique. The directors have decided to impair this cost, and accordingly an impairment charge of €58,655 was written off against the exploration and evaluation assets in Africa.

On 4 March 2014 the Company announced that it had finalized an 85% farm-out agreement with Woodside, Australia on its offshore Ireland acreage. The agreement covers all of Petrel's participating interest in Licensing Option 11/6 (comprising offshore blocks 45/6, 45/11 and 45/16) and Licensing Option 11/4 (comprising offshore blocks 35/23, 35/24 and the western half of 35/25) Woodside will be operator of the licensing blocks. Petrel Resources received US$1,300,000 from Woodside for the 85% farm-out.

Relating to the remaining exploration and evaluation assets at the financial year end, the directors believe there were no facts or circumstances indicating that the carrying value of these intangible assets may exceed their recoverable amount and thus no impairment review was deemed necessary by the directors. The realisation of these intangible assets is dependent on the successful discovery and development of economic reserves and is subject to a number of significant potential risks, as set below.

Directors' remuneration of €175,000 (2013: €175,000), salaries of €115,000 (2013: €110,000) and share based payments of €Nil (2013: €13,436) were capitalised as exploration and evaluation expenditure during the financial year.

The Group's exploration activities are subject to a number of significant and potential risks including:

· Licence obligations;

· Funding requirements;

· Political and legal risks, including title to licence, profit sharing and taxation;

· Geological and development risks;

· Exchange rate risk;

· Political risk; and

· Financial risk management.

The directors are aware that by its nature there is an inherent uncertainty in such exploration and evaluation expenditure as to the value of the asset. Having reviewed the carrying value of exploration and evaluation of assets at 31 December 2014, the directors are satisfied that the value of the intangible asset is not less than carrying value.

5. SHARE CAPITAL

Movements in share capital

On 13 August 2013 the Company issued 18,947,368 new ordinary shares to Amira Petroleum N.V. at a price of 20c per share as part consideration for the acquisition of a 20 per cent shareholding in Amira Hydrocarbons Wasit B.V. Details of this acquisition are provided in Note 3.

On 17 December 2013 the directors of the Company exercised 4,070,000 options at exercise prices ranging from 2.5p to 5p.

6. POST BALANCE SHEET EVENTS

There were no material post balance sheet events affecting the group.

7. ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on 29th July 2015 in the Westbury Hotel, Grafton Street, Dublin at 11am.

8. GENERAL INFORMATION

The financial information set out above does not constitute the Company's financial statements for the year ended 31 December 2014. The financial information for 2013 is derived from the financial statements for 2013 which have been delivered to the Companies Registration Office. The auditors have reported on 2013 statements; their report was unqualified with an emphasis of matter in respect of considering the adequacy of the disclosures made in the financial statements concerning the valuation of intangible assets, investment in subsidiaries and amounts due by group undertakings. The financial statements for 2014 will be delivered to the Companies Registration Office.

A copy of the Company's Annual Report and Accounts for 2014 will be mailed to all shareholders shortly and will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland. The annual report will shortly be available for viewing at Petrel Resources Company PLC's website at www.petrelresources.com