Petrel Resources Regulatory News (PET)

25 June 2014

Petrel Resources plc

("Petrel" or the "Company")

Preliminary Results for the Year Ended 31 December 2013

Petrel Resources announces its results for the year ended 31 December 2013. Highlights include:

· Porcupine Basin

o Farm out agreement concluded in March 2014 with Woodside Petroleum, an Australian independent with a top class exploration record in hydrocarbon discoveries and developments

o Exploration licences held by Petrel became Frontier Exploration Licences operated by Woodside, who have established an office in Dublin

o Subject to the results of the seismic, drilling will take place in 2016/2017

· Iraq

o Arman Kayablian, a director and significant shareholder in the Amira group, joined the board of Petrel. His experience and contacts will be very useful

· Ghana

o The Ministry of Energy awarded part of our exploration block to a US listed Nigerian controlled company We obtained an injunction stopping this in the Ghanaian High Court. With goodwill on both sides a satisfactory solution can be found.

John Teeling, Chairman, said, "The importance of a successful oil discovery offshore Ireland cannot be exaggerated. One oil discovery in the Porcupine is likely to be big enough to supply all of Ireland's oil demand if not more. Ireland currently imports all of its 132,000 barrel a day oil consumption and 95% of its gas needs. Apart from security of supply, the fiscal implications are immense.

"Exploring the Atlantic offshore Ireland will occur in the near future at no cost to Petrel. With over $2 million in cash we are well funded for the foreseeable future."

ENDS

Enquiries:

Petrel Resources Plc

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

David Horgan, Director +353 (0)1 833 2833

Northland Capital Partners Limited

John Howes / Alice Lane + 44 (0)20 7382 1100

Edward Hutton / Gavin Burnell

Blytheweigh +44 (0) 207 138 3204

Tim Blythe +44 (0) 781 692 4626

Eleanor Parry +44 (0) 755 129 3620

Halimah Hussain +44 (0) 772 597 8141

Pembroke Communications

Natalie Tennyson +353 (0) 1 649 6340

www.petrelresources.com

Statement Accompanying the Preliminary Results

This is a tough time to be a junior oil explorer. Despite improvements in the world economy, a high oil price and a rising stock market, junior explorers remain out of favour with investors. Your company was very active in the period under review but failed to persuade investors of the value created.

Our flagship project, two hydrocarbon exploration blocks in the Atlantic Ocean's Porcupine Basin offshore Ireland, had a stellar year. A farm out agreement was concluded in March 2014 with Woodside Petroleum, an Australian independent with a top class exploration record in hydrocarbon discoveries and developments. The agreement provided for repayment of 85% of all costs incurred by Petrel and a significant carry through exploration up to and including one well on each block. We estimate that Woodside could spend up to $200 million on our two blocks before we incur any expenditure. The deal was ratified by the Irish government and the frontier exploration licences held by Petrel became Frontier Exploration Licences operated by Woodside, who have established an office in Dublin. They have completed their review and analysis of available data and are expected to commission a seismic survey for 2015. The plan is, subject to the results of the seismic, to drill in 2016/2017.

The importance of a successful oil discovery offshore Ireland cannot be exaggerated. One oil discovery in the Porcupine is likely to be big enough to supply all of Ireland's oil demand if not more. Ireland currently imports all of its 132,000 barrel a day oil consumption and 95% of its gas needs. Apart from security of supply, the fiscal implications are immense.

The wave of investor interest in the Irish offshore which occurred in 2013 has declined significantly in recent times due to a number of factors, some of which are temporary. The Dunquin drilling by ExxonMobil in the South Porcupine Basin in 2013, while finding traces of hydrocarbons was seen by the market as a failure. The fact that this was a wildcat well in an area remote from most other offshore Porcupine blocks was ignored by the market. Secondly it was expected that Cairn would drill the Spanish Point block in the Porcupine Basin in 2014. Due to rig problems, this is not likely. Again, the market took this in a very negative way. The Spanish Point well is an important milestone for explorers in the Porcupine Basin as previous drilling in the early 1980s provided good oil flows. New technology and far higher oil prices make this an attractive target. Petrel has interests close to Spanish Point so we are disappointed by the delay.

The third factor has no relevance to the Porcupine Basin in the Atlantic but investors and analysts have not understood this point. Failure by the relevant partners to farm out the Barryroe discovery in the Celtic Sea off the South coast of Ireland has adversely affected attitudes toward offshore Irish exploration in general. It is frustrating to make repeated protestations, which are not accepted, that there is no relationship between Celtic Sea geology and that of the Porcupine Basin in the Atlantic. Drilling success will change this but we will have to wait until 2015 before drilling commences.

Additionally, ongoing potential problems with the development of the Corrib field offshore Mayo continue to reflect poorly on the attitudes of some Irish people toward hydrocarbon development. Due to continued agitation from a small minority the development is delayed by a decade and has tripled in capital cost. The Irish government has failed to take decisive action on the issue. Attitudes towards investment are important factors in board room decisions. If investors are not welcome they will go elsewhere.

Finally, there is concern that the Irish Government is changing the fiscal regime for explorers. Given that there has never been a commercial oil discovery in 44 years of exploration offshore Ireland this may be counterproductive. Oil and gas explorers can invest their scarce funds in over 200 countries in the world. Many countries have better geology than Ireland. Most of them have far lower exploration costs than those in the wild Atlantic ocean (the Dunquin Well cost $200 million). Despite 158 wells Ireland has yet to find any commercial oil discovery. Previous onerous fiscal terms, in the 1970s, and exploration failure, resulted in little exploration in the Porcupine for a generation. It is unfortunate that the government has decided to increase taxes and increase uncertainty before any drilling and before the next licencing round. Royalties and higher taxes reduce the potential rate of return so will reduce the number of wells to be drilled. Of more concern is the uncertainty introduced. There is now a question mark over all Irish hydrocarbon exploration despite the statement of no retrospective changes to existing licences. Successful explorers will need a Development Licence. Certainty is now gone. It is incumbent on the State to offset the weak geology and difficult environment with attractive terms. The Porcupine needs to be drilled.

The second Petrel area of activity is Iraq. Petrel has been in Iraq since 1999 with some success in the 2000s. We have held an interest in Block 6 in the Anbar province since 2002 and in 2013 we acquired a 5% carried interest in certain assets of the Amira Group, in Wasit province. Amira, an Iraqi group, have worked with the Iraqi provinces to obtain exploration rights. They have been successful particularly in the Wasit province where they have a joint venture with Oryx, a listed Canadian group, to explore and develop certain highly prospective areas. It was believed that the provincial government would authorise Oryx to commence seismic activities in 2014 followed by drilling. Negotiations continue. Petrel paid $500,000 cash for an effective 5% carry right through to production plus issuing new shares to Amira equal to 20% of the Petrel equity. If they spud a well within 5 years they get an additional 10,526,316 shares. If a discovery is commercial they get a further 10,526,316 shares. The issued shares are locked in and are cancelled in 2018 if milestones are not reached. We were pleased that Arman Kayablian, a director and significant shareholder in the Amira group, joined the board of Petrel. His experience and contacts will be very useful.

The situation in Iraq is now very uncertain. War has raged in Anbar province for months. Block 6 is in Anbar. The country as a whole is now on a war footing. Little work is being done or can be done. At the present time it is not possible to predict the results of these events but a fragmentation of the country looks possible. This could mean Block 6 being part of a Sunni dominated area while Wasit is predominantly Shia. We are not giving up on Iraq. Neither are Amira or Oryx. Iraq remains the best source of oil in the world. The geology will not change, but the political situation will change.

The third interest held by Petrel is a 30% stake in a licence, Tano 2A, onshore/offshore Ghana. Petrel has held the interest for some years and has undertaken a significant work programme. The expectation was that the signed agreement with the Ghana National Petroleum Company (GNPC) would be submitted to the Ghanaian cabinet for approval followed by parliamentary ratification. This did not happen. Instead Petrel and partners were subjected to a continuous stream of queries and requests culminating in a demand for a $25 million insurance bond on the agreed work programme. This was not part of a signed agreement but we complied.

Despite ongoing correspondence between the parties, in February/March 2014, the Ministry of Energy awarded an offshore block to a US listed Nigerian controlled company. This block overlapped one third of our licence agreement. We obtained an injunction stopping this in the Ghanaian High Court. Despite the injunction, the parliament ratified the award of the block in early May 2014. Difficulties obtaining exploration licences in Ghana are exacerbated by the rapid increase in activity due to the impressive development of the Ghanaian oil industry. Problems with co-ordinates and overlapping licence awards are part and parcel of international exploration. Often the bureaucrats lack the resources to implement the actions of politicians. Offices are overburdened and mistakes are made. We have maintained lines of communication with the relevant parties in Ghana. Some limited discussions have taken place. To assist the discussions we have suspended the ongoing court case. With goodwill on both sides a satisfactory solution can be found.

Future

Exploring the Atlantic offshore Ireland will occur in the near future at no cost to Petrel. The Ghanaian situation is coming to a head while we continue to monitor developments in Iraq. We are actively looking at ways to enhance shareholder value. An application for additional blocks offshore Ireland is being prepared and we keep an active discussion ongoing with other parties holding interests in the Irish offshore and elsewhere. With over $2 million in cash we are well funded for the foreseeable future.

John Teeling

Chairman

24 June 2014

PETREL RESOURCES PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

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 year and prior years.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2013

NOTES:

1. ACCOUNTING POLICIES

There were no changes in accounting policies from those used to prepare the Group's Annual Report for the financial year ended 31 December 2012. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and 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.

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 amortised cost. Fair value cannot be reliably measured as the investment is held in a private company. The company'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 in Note 4. 

4. INTANGIBLE ASSETS

Exploration and evaluation assets at 31 December 2013 represent exploration and related expenditure in respect of projects in Ireland, Iraq 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. In addition, the current economic and political situation in Iraq is uncertain.

During the year the group incurred expenditure of €19,658 on minor projects in Africa. These projects were terminated during 2013 and the assets were impaired to nil.

In 2012, the directors decided to impair in full the Morocco and Guinea exploration and evaluation assets to nil, amounting to a total impairment charge of €20,066. The decision was taken as the projects were terminated during the year and the assets were impaired to nil.

Relating to the remaining exploration and evaluation assets at the year end, the directors believe there were no facts or circumstances indicating that the carrying value of the 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 out below:

· Licence obligations;

· Funding requirements;

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

· Geological and development risks:

The Group is currently seeking clarification from the Ghanaian authorities that a petroleum agreement in the Tano Basin block ratified by the Ghanaian Parliament in March 2014 does not relate to an area covered by the license held by Petrel Resources plc. The Group has been granted an interlocutory injunction and an interim order protecting the Group's rights in the Tano Basin block. Further details are set out in Note 6.

Directors' remuneration of €175,000 (2012: €150,000), salaries of €110,000 (2012: €110,000) and share based payments of €13,436 (2012: €Nil) were capitalised as exploration and evaluation expenditure during the year.

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

On 4 March 2014 the Group 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 options. Petrel had a carrying value of €972,854 in relation to its Irish licences at the balance sheet date.

On 25 March 2014 the Group noted press reports and speculation regarding the ratification by the Ghanaian Parliament of a petroleum agreement in the Tano Basin block. The Group holds a 30 per cent interest in the Tano 2A Block. As a precautionary measure the Group applied for injunctive relief to prevent the award of any part of the Tano 2A Block to a third party while they seek clarification that the ratification does not relate to an area covered by the Tano 2A block.

On 8 April 2014 the High Court of Ghana granted an interlocutory injunction and also an interim order for the protection of the Group's rights in the Tano 2A block.

On 4 June 2014 the legal proceedings being pursued by the Group were temporarily adjourned while discussions take place with the Ghanaian authorities.

7. ANNUAL GENERAL MEETING

The Company's Annual General Meeting will be held on 31 July 2014 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 2013. The financial information for 2012 is derived from the financial statements for 2012 which have been delivered to the Companies Registration Office. The auditors have reported on 2012 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. The financial statements for 2013 will be delivered to the Companies Registration Office.

A copy of the Company's Annual Report and Accounts for 2013 will be mailed shortly only to those shareholders who have elected to receive it. Otherwise shareholders will be notified that the Annual Report will be available on the website at www.petrelresources.com. Copies of the Annual Report will also be available for collection from the Company's registered office, 162 Clontarf Road, Dublin 3, Ireland.