SALV.L Regulatory News (SALV)

3LEGS RESOURCES PLC

Preliminary Results

for the Year ended 31 December 2013

Highlights

3Legs Resources plc (the "Company" and, together with its subsidiaries, the "Group"), an independent oil and gas group focused on the exploration and development of unconventional oil and gas, is pleased to announce its financial results for the year ended 31 December 2013.

Operational highlights

· Continued primary focus, with ConocoPhillips, on our three western concessions in the Polish Baltic Basin, which we believe represent some of the most prospective shale acreage in Poland

· Further testing of the Lebien LE-2H lateral well on the Lebork concession for a 60 day natural flow test, following a 21 day natural flow test in 2012 and initial stimulation and testing in 2011

· Successful stimulation and testing of both target shales, the Piasnica and Sasino formations, in the Strzeszewo LE-1 vertical well on the Lebork concession, producing gas to surface from both zones

· 32 sq km 3D seismic survey on the Karwia concession, meeting licence commitments, plus 67 km 2D survey on the Lebork concession for future lateral well placement

· In order to reduce our expenditure elsewhere, we have allowed our two remaining southern Poland concessions to lapse, and we have sold our German concessions to Rose Petroleum plc in exchange for a €400,000 contribution to past costs and a 2% royalty interest

Financial highlights

· Group cash balances of £26.8 million at year end 2013, against £39.5 million at year end 2012, with no debt; fully funded for the current exploration and appraisal programme on our Baltic Basin concessions

· Net oil and gas assets of £25.9 million (2012: £17.7 million), reflecting the continuing work programme on the Group's western Baltic Basin concessions and consistent with its stated strategic plan

· Net loss for the year of £4.3 million (2012: £6.0 million), reflecting the Group's share of JV losses in Poland, other non-capitalised exploration expenses and the (largely unrealised) net effects of exchange rate movements

Outlook

· The 2013/14 work programme agreed with ConocoPhillips is well under way, and proceeding on time and on budget; the two planned vertical pilot wells have now been drilled in the high-graded area within our concessions in order to further delineate the extent of the Piasnica and Sasino horizons and to determine the optimum placement for the planned lateral well

· The programme will culminate in a long lateral well, to be drilled in the Sasino formation by way of a side-track from the vertical well at our Lublewo location and then completed with a multi-stage stimulation and test, over the period Q2/Q3 2014

· The significant learnings to date will help calibrate well and completion designs for the planned long lateral well, which is expected to provide a good indication of the commercial potential of our western Baltic Basin concessions

· The cost of the 2013/14 committed work programme is approximately US$63 million gross, or approximately US$19 million net to the Group; based on the budget agreed with ConocoPhillips, we currently anticipate a Group cash position of approx. £17 million at end Q3 2014, equivalent to approximately 20 pence a share

For further information contact:

CHAIRMAN'S STATEMENT

Introduction

During 2013 we have continued to progress our core strategy of evaluating the shale gas potential of our three western concessions in the Baltic Basin in northern Poland, which represent the more gas-prone part of our Baltic Basin acreage. We have long believed, and continue to believe, that the area of our western Baltic Basin concessions represents the most prospective region of Poland for shale gas exploration. ConocoPhillips acts as operator of the three concessions, following the exercise of its option to acquire a 70% interest in these concessions in September 2012.

Strategic overview

During the year under review, together with ConocoPhillips we drilled one vertical well on our concessions and performed three rounds of testing on two other wells, namely a third round of testing on the Lebien LE-2H horizontal well and two single-stage stimulations and tests on the Strzeszewo LE-1 vertical well. Towards the end of the year we agreed with ConocoPhillips, and subsequently announced, our 2013/14 drilling programme, which comprised the drilling of two vertical wells and is planned to culminate in the drilling of a long-length lateral well in the Sasino (or Ordovician O3) horizon, our primary shale target. This lateral section is planned to be stimulated with a multi-stage gel frac programme and tested for up to 90 days, in the third quarter of 2014. The design and execution of the lateral well programme will incorporate all our extensive learnings to date and we are looking forward to achieving a significant improvement over the rates achieved from the Lebien LE-2H lateral well, which was drilled in 2011 and was the last lateral well we drilled which targeted the Sasino shale.

In our 2012 Annual Report we announced that, following discussions with major shareholders, the Board had determined that we should limit the geographical focus of the Group's activities to Poland - which was already the Group's core area of activity in any case - so as to be able to give sufficient priority to our appraisal programme in the Polish Baltic Basin. We have therefore proceeded to reduce our commitments elsewhere and to restructure our overhead to reflect our more focused strategy. Further details are contained in the Chief Executive Officer's Review.

Changing political climate

We have been encouraged by more positive signals across Europe, suggesting that the shale gas sector may be winning greater acceptance in the region than it had previously enjoyed. In the UK, the coalition Government has put considerable effort into promoting shale gas as an important opportunity for the country to diversify its sources of energy, while at the same time bringing jobs and other benefits to the economy. In Brussels, the European Commission has recently adopted a recommendation designed to ensure that proper environmental safeguards are in place for hydraulic fracturing, while encouraging member states to develop their own regimes for the regulation of shale gas exploration and related activities.

In Poland, there has been an active debate between policymakers and industry for over a year now regarding the future taxation, licensing and regulation of shale gas activities. We were very pleased when the Government was effectively able to ease the deadlock which had developed, as was evidenced by some supportive statements from Prime Minister Tusk and the announcement of two new senior ministerial appointments. Since then, the Government has made it clear that it has no intention of placing obstacles in the way of the development of a shale gas industry in Poland, when the commercial potential of the Polish shale gas sector has yet to be demonstrated. The existing fiscal regime is expected to be maintained for the time being, while modifications to other aspects of the licensing and regulatory regime for shale activities in Poland are expected to address a number of the concerns raised by investors.

Our Chief Executive Officer has recently been re-elected as President of OPPPW, the Polish upstream industry group, placing him in an ideal position to ensure industry concerns are heard.

Extraordinary General Meeting

In February 2013, we received a requisition notice from a minority shareholder calling for an Extraordinary General Meeting to discuss possible changes to the Board composition and to Group strategy. The requisition notice proposed a number of resolutions including: the removal of the majority of the Directors (being all of the Directors except for Kamlesh Parmar and Richard Hills); the appointment of two new Directors, whom the Board understood to be representatives of the requisitioning shareholder; and the proposal that the Company adopt a new investment strategy as follows: "The investment objective of the Company is to manage the realisation of the Company's existing asset portfolio and to maximise the return of invested capital to shareholders during the period ending on 30 June 2015. During this period the Company shall not make any new investments other than to support its existing assets."

As required by the requisitioning shareholder, an EGM was duly convened and held on 19 April 2013, to coincide with our Annual General Meeting. The Board unanimously advised shareholders to reject the proposed EGM resolutions, and they were indeed rejected by majorities of a minimum of 56% of votes cast. The Board welcomed this affirmation by shareholders of the Group's existing Board and corporate strategy.

Board changes

A number of Board changes took effect during the first half of the year, as announced in last year's Annual Report. Robert Jeffcock and Clive Needham announced their resignations from the Board on 22 February 2013, although Clive Needham continues to sit on the board of a number of the Group's subsidiary companies. Barry Rourke retired by rotation at the Annual General Meeting on 19 April 2013 and decided not to present himself for re-election to the Board.

This year David Bremner will retire from the Board by rotation and will present himself for re-election. We continue to keep the composition of the Board under regular review.

Conclusion

We thank our shareholders for their continued support throughout the year and we look forward to sharing with them the results of our current drilling programme.

Tim EggarChairman20 March 2014

CHIEF EXECUTIVE OFFICER'S REVIEW

Introduction

2013 has seen the Group further consolidate and progress its activities in the Baltic Basin in northern Poland. Following the adoption of a narrower geographical focus in early 2013, we have disposed of our commitments in southern Poland and in southern Germany, while continuing to channel our resources into the exploration and appraisal of our western Baltic Basin concessions, working closely with US oil major ConocoPhillips.

Through the detailed analysis of data gathered from our seismic and drilling programmes and, where appropriate, from data exchanges with other operators, we continue to deepen our understanding of our target shales on our concessions and of how best to optimise our drilling and completion strategies. Our 2013/14 work programme is planned to culminate in the drilling, multi-stage stimulation and testing of a long lateral well on our concessions in the second and third quarters of this year, and we are confident that we are well placed to apply the lessons we have learned to date to this important well.

Baltic Basin concessions, northern Poland

Throughout the year we have focused our activities on our three western Baltic Basin concessions in northern Poland, which extend over some 500,000 acres and, we believe, represent some of the most prospective shale acreage in the onshore Baltic Basin and indeed in Poland as a whole. We hold a 30% interest in the three concessions, the remaining 70% interest being held by ConocoPhillips, which has acted as operator since September 2012. We have continued to collaborate with ConocoPhillips in all aspects of the design and implementation of our agreed 2013/14 work programme.

Both of our target shales, the Ordovician-age Sasino formation and the deeper Cambrian-age Piasnica formation, are believed to extend across substantially all of the three concessions. Our geological modelling indicates that the Sasino formation thickens towards the north of our concessions, while the Piasnica formation thickens towards the north and west. It is those areas of greater thickness that form the primary basis of our high-graded area, which will be a priority focus in any future development programme.

Further testing of Lebien LE-2H lateral well

The Lebien LE-2H lateral well was originally drilled into the Sasino formation in 2011 and was tested in 2011 and again in 2012. When tested on the second occasion, in the fourth quarter of 2012, the well had flowed at an average rate of 550 mscf/d during a 21-day natural flow test, flowing at approximately 470 mscf/d immediately prior to that test being suspended.

A third phase of testing was initiated in July 2013, using a 2 3/8 inch tubing string as opposed to the 3 1/2 inch string that was used on the previous occasion when the well was tested. Down-hole gauges were placed in the well, to collect pressure data, and pressurised samples of the produced fluids were also collected. These data had not, to our knowledge, been gathered from any previous testing in the Baltic Basin, and have assisted our understanding of reservoir conditions in the stimulated target formation.

Following the placing of down-hole gauges, the well was put on a 60-day natural flow test. The well flowed initially at 470 mscf/d, i.e. the same rate as when the second phase of testing was suspended, and at the end of the 60-day test period the well was continuing to flow at approximately 230 mscf/d. The well continued to clean up during the test and by the end of the test period approximately 45% of the frac fluid used during the hydraulic fracturing operation on the well in 2011 had been recovered. Down-hole gauges were then left in place in order to collect valuable bottom hole pressure data.

The intention in using a smaller diameter tubing string on the third phase of testing had been to provide additional flow-rate velocity during the test, and thereby achieve an improved liquid unloading. In the event, the use of the smaller diameter tubing string did not have a significant impact on flow rate, although it did enable the well to flow at more stable rates. On the other hand, analysis of the flow test data obtained on both the second and third phases of testing indicated an area of apparent low fracture conductivity, potentially impeding the flow of natural gas into the wellbore. This area of apparent low fracture conductivity may be explained by a number of factors, many of which are being addressed in subsequent well and completion design.

Testing of Strzeszewo LE-1 vertical well

The Strzeszewo LE-1 well was drilled in late 2012 as a vertical well within our high-graded area in order to enable us to evaluate and test both our target formations, the Sasino shale and the deeper Piasnica shale, in a key part of our acreage.

Following completion of coring and logging of the well in 2012, a first DFIT (Diagnostic Fracture Injectivity Test) was performed in the Piasnica formation, followed by a single stage hydraulic frac treatment in May 2013. Cleaning up commenced in August 2013, using a nitrogen lift as planned. After a temporary shut-in to enable the perforations to be checked and to set down-hole pressure gauges, the well flowed natural gas and a flare was lit for a short period. The well was eventually shut in after 15 days of testing in September 2013, by which time some 22.5% of the frac fluid originally injected had been recovered. The well flowed natural gas periodically during the test and gas samples were obtained. A pressure build-up test was then conducted.

The Strzeszewo LE-1 well is currently the only well where we have tested the Piasnica shale on our concessions, since our most recent core and log analysis, discussed below, now indicates that our Warblino LE-1H lateral well, drilled in 2011, did not in fact test this zone. As we have indicated previously, the excellent hydrocarbon generation properties of the Piasnica (or Cambrian Alum) shale in this region of Europe are well known, as has been confirmed by the encouraging total organic carbon (TOC), shale porosities and gas shows recorded when we have drilled through this formation on our concessions. These parameters would appear to indicate that the formation is potentially as prospective as the Sasino shale, and we continue with ConocoPhillips to consider possible strategies for demonstrating its potential.

Following a further DFIT, a second single-stage hydraulic frac treatment was successfully executed in the Sasino shale in the Strzeszewo well in December 2013. Cleaning up of the well commenced in December 2013, again using a nitrogen lift. The well continued to clean up for a period of 19 days, during which time the well flowed natural gas at modest rates and some 63% of the frac fluid originally injected was recovered. The well was shut in on 12 January 2014 and a pressure build-up test was conducted.

On both occasions, the stimulation was carried out using a cross-linked gel fluid, and post-frac evaluations indicated that in each case the proppant was successfully delivered into the target formation. Data gathered from the programme will help calibrate the completion programme to be used on our long lateral well, planned to be drilled in the second quarter of 2014.

Legowo LE-1 well

We drilled the Legowo LE-1 vertical well in 2010 on our Cedry Wielkie concession (one of our eastern Baltic Basin concessions), where we remain 100% owner and operator. The well was then cored, logged and tested with a DFIT. Following the decision to prioritise our western Baltic Basin concessions for further exploration activity, it was decided to plug and abandon this well and to reinstate the well location to its original condition. The plug and abandon work has now been completed and the well location has been re-instated and returned to the landowner. The cost of this work is funded in full by ConocoPhillips under the terms of the Joint Evaluation Agreement signed in 2009.

Core and log analysis

As in the case of previous vertical wells drilled on our concessions, a programme of extensive coring and logging was carried out on the Strzeszewo LE-1 well and, following the year end, on the Lublewo LEP-1 and Slawoszyno LEP-1 vertical wells (the latter being logged only).

Some 220 metres of core were taken from across the entire prospective section in the Strzeszewo LE-1 well and this, in combination with the well logs, has undergone detailed analysis. Further analysis has also been carried out on cores and logs taken from the Lebien LE-1 well and from the vertical pilot well drilled at Warblino LE-1. The analysis has enabled a significantly improved understanding of our principal target zones, including their reservoir properties and materiality.

Analysis of cores and logs from the Warblino LE-1 vertical well, drilled in 2011, now indicates that the lateral section sidetracked from this well, and tested in 2011 and 2012, in fact tested the overlying Sluchowo (or Ordovician O1) shale formation, instead of the Piasnica shale as originally intended. Log analysis also appears to confirm the very promising hydrocarbon generation properties of the Piasnica shale in this area, consistent with the strong gas shows which we have recorded when drilling through this formation.

Our primary objective on our concessions remains the Sasino shale interval, which is estimated to have a thickness of 25 to 40 metres across our high-graded area. The Piasnica shale interval represents a potentially important additional objective. This zone, which was not included in our Competent Person's Report at the time of our IPO, is estimated to have a thickness of 15 to 20 metres across the high-graded area. Each interval is being separately evaluated on the basis that either might potentially justify a field development.

Seismic acquisition

The acquisition of 32 sq km of 3D seismic data on the Karwia concession was completed in July 2013 and the new data have undergone processing and interpretation. This seismic survey was conducted both to meet existing licence commitments on the concession and to support future drilling activity.

A second campaign, involving the acquisition of 67 km of 2D seismic data on our Lebork concession, was completed in January 2014. This seismic programme, together with data gathered from the recent Lublewo LEP-1 and Slawoszyno LEP-1 vertical wells and the results of the planned long lateral well, will assist in the placement of a second long lateral well and ultimately will assist in the location and implementation of any future pilot development programme.

2013/14 drilling programme

During discussions on the 2013/14 drilling programme, we concluded with ConocoPhillips that although the testing of our target zones in a vertical well, as in Strzeszewo LE-1, could yield valuable data, it was nevertheless unlikely to provide sufficient information to enable flow rates from a long lateral section to be reliably projected. We therefore agreed to include in this programme a long-length lateral well, to be stimulated with a multi-stage treatment and then tested for up to 90 days. We agreed also that our primary target remains the Sasino horizon, while the Piasnica horizon remains an important secondary objective. The 2013/14 well programme is designed both to meet current licence commitments and to progress the exploration of our target shales.

The first stage of the 2013/14 programme comprised the drilling of two new vertical wells, the Lublewo LEP-1 and the Slawoszyno LEP-1. These wells are intended to improve our understanding of our two target formations in our high-graded area, including depth, thickness and shale reservoir properties, and hence to determine the optimum placement of the planned lateral section. The wells also enabled a decision on the location of the planned lateral well to be taken following an evaluation of our primary target, the Sasino horizon, at both locations.

Learnings to be applied

An important factor in maximising productivity from our target formations will be managing their sensitivity to water. Based on our core analysis, we are continually improving the mud programme and the choice of stimulation fluids.

Our completion designs are now based on a cross-linked gel, rather than a slick-water fluid as was used on the initial stimulation of the Lebien LE-2H lateral well in 2011. Using a cross-linked gel will effectively stimulate the target horizon while reducing the amount of water needed for each stage and optimising the amount of proppant delivered into the target formation.

Ongoing core analysis and testing from our wells is helping us to prepare for and manage other rock sensitivities with a view to optimising completion design. Test data have indicated that an optimum strategy for improving formation productivity is to stimulate a larger number of smaller fractures, but using high volumes of proppant in each case (i.e. significantly higher than those used in our Lebien LE-2H lateral well). We have also concluded that the most suitable proppant for the main part of the stimulation programme is a 30/50 mesh high quality white sand as opposed to, for example, a ceramic or resin-coated proppant.

Drilling of Lublewo LEP-1 and Slawoszyno LEP-1 vertical wells

The Lublewo LEP-1 vertical well was spudded in December 2013, reaching target depth in January 2014. The well was drilled to 2,924 metres true vertical depth into the Middle Cambrian interval. Some 141 metres of full-diameter 4-inch core were recovered from the well over the Lower Silurian, Ordovician, and Cambrian intervals, and an extensive suite of logs was also run on the well at total depth. The cores and logs are now undergoing processing and analysis.

Drilling of the Slawoszyno LEP-1 vertical well, the second well in our programme, was commenced on 15 February 2014 and has now been completed. The well was drilled to 2,819 metres true vertical depth into the Middle Cambrian interval. An extensive suite of logs has been run on the well over the Lower Silurian, Ordovician, and Upper Cambrian intervals, which are now undergoing processing and analysis. Both wells have been cased and cemented and temporarily suspended at intermediate casing depth.

Preliminary analysis confirms our earlier modelling of the Piasnica and Sasino formations across the northern portions of our western Baltic Basin concessions, and hence the extent of the high-graded area which we have previously identified. While the precise thicknesses of the two formations will be determined following final processing and analysis, the data indicate that both wells encountered a Sasino section of similar thickness to that seen in the Strzeszewo LE-1 vertical well, and a Piasnica horizon which is slightly thinner than the same formation encountered at the Strzeszewo LE-1 vertical well, thus confirming our earlier modelling in both cases.

Planned lateral well

Following a review of the data gathered from both the Lublewo LEP-1 and the Slawoszyno LEP-1 wells, and of the 2D seismic recently acquired in the Lublewo area, we have agreed with ConocoPhillips to select the Lublewo LEP-1 well as the location for the planned long lateral well, which is the third and final well in the 2013/14 drilling programme. This lateral well, Lublewo LEP-1ST1H, is planned to be drilled by way of a sidetrack in the Sasino shale and is expected to involve a long lateral section of up to 1,600 metres, as compared to the lateral section of 1,000 metres at the Lebien LE-2H well. The well will then be completed with a multi-stage stimulation using a cross-linked gel fluid. The completion programme is also expected to involve a larger number of perforations per stage, and larger volumes of proppant per stage, as compared with the Lebien LE-2H well.

We expect our refined completion design to yield a significant improvement in flow rates as compared with flow rates achieved to date. Once stimulated and cleaned up, the well will be put on test for up to 90 days. We expect testing of the planned long lateral well to take place in the third quarter of 2014.

We are pleased to report that our 2013/14 programme is to date proceeding on time and on budget. A decision on the drilling, stimulation and testing of a second long lateral well, most likely in the underlying Piasnica shale horizon, will be made following the receipt of results from the test of the first lateral well. If we achieve positive results from the tests of one or both lateral wells, we will then consider with ConocoPhillips whether to proceed to design and implement a pilot production programme.

Balance sheet impact

The cost of the 2013/14 work programme which we have committed to is expected to be approximately US$63 million gross, or approximately US$19 million net to the Group. We anticipate that following implementation of the programme outlined above and based on the budget we have agreed with ConocoPhillips, we will have cash reserves of approximately £17 million at the end of the third quarter of 2014, equivalent to approximately 20 pence a share.

While we are committed to the programme outlined above, we will not commit to any further expenditure on our western Baltic Basin concessions in the absence of positive initial results from the planned lateral well. If such positive initial results do not materialise, we will consider all options at that stage including discussing with ConocoPhillips alternative options for the further exploration and appraisal of the western Baltic Basin concessions, which may include reviewing our continued participation in these concessions. In addition, 3Legs has a one-time right to cease its participation in these concessions at the point that 3Legs' expenditure on this work programme reaches US$19 million on or before 31 December 2014.

Other assets

Following discussions with our shareholders, we committed last year to limit the geographical focus of our activities to Poland in order to enable us to maximise our focus on our Baltic Basin concessions, in particular our western Baltic Basin concessions. Since then, we have decided to relinquish our two remaining concessions near Krakow in southern Poland, rather than incur any further expenditure on these concessions. This follows the earlier surrender, in 2012, of one of our three concessions there.

In August 2013 we entered into a contract for the sale of our two German concessions (then undergoing renewal) to Rose Petroleum plc, in exchange for a 2% royalty interest and a €400,000 contribution to past costs, of which €300,000 was paid at signing. Renewal of the concessions was completed in December 2013 and the sale to Rose Petroleum was completed in January 2014, when the remaining €100,000 was paid. We continue to investigate possible options for our three eastern Baltic Basin concessions, and are in active discussions with potential partners in relation to these.

Polish oil & gas sector

Throughout the year we have played an active role in discussions relating to the future development of the oil & gas sector in Poland. In June 2013 I was elected President of the Management Board of OPPPW, the Polish exploration and production industry organisation, and in March 2014 I was re-elected for a further term as both a member of the Management Board and President.

The Polish Government continued throughout most of 2013 to advocate its previously-announced proposals for the modification of the fiscal and licensing regime relating to the Polish oil & gas sector. At the same time, industry representatives including OPPPW continued to express serious concerns about a number of aspects of the proposed reforms, including increases in the applicable tax and royalty rates, provisions for mandatory state participation in private sector exploration and production activities, and changes to the rules for granting and/or extending exploration and production licences.

It was pleasing to see the Government signal a change of policy in recent months, concluding that it was premature to create excessive fiscal and regulatory barriers to the development of a domestic shale gas sector, before its commercial viability had yet been demonstrated. As a result, there is now a good prospect that a number of the more contentious parts of the Government's proposals will be either dropped or postponed. We welcome the change of approach adopted by the Government, which we believe was to a large degree facilitated by the coordinated but collaborative attitude adopted by the OPPPW in its dialogue with the relevant ministries.

Overhead reduction

In our last Annual Report, we committed to make a number of changes in the way the Group is organised and staffed, with a view to tightening the Group's focus and reducing our cash administrative expenses, before foreign exchange movements, by approximately 50%. These changes were implemented so that, with effect from 1 July 2013, we are on track to achieve the targeted savings.

Conclusion

Although we have yet to demonstrate commercial flow rates, we believe that our activity in 2013 has enabled us to make substantial advances in our understanding of our target formations on our western Baltic Basin concessions, and of the techniques required to enhance the effectiveness of our stimulation and completion techniques in future wells. We look forward to continuing to improve our understanding as we proceed with the rest of our 2013/14 programme, with a view to applying the lessons learned to our long lateral well test planned for the third quarter of this year.

We thank our shareholders for their continued support and look forward to sharing with them information on the progress of our 2013/14 work programme as we go forward.

Kamlesh ParmarChief Executive Officer20 March 2014

FINANCIAL REVIEW

Introduction

3Legs continues to maintain a strong balance sheet, with sufficient funding to see it through its decisive 2013/14 exploration programme and the period beyond.

Balance sheet

Cash and cash equivalents at year end were £26.8 million (2012: £39.5 million), and the Group has no debt. Foreign exchange rate movements during the year increased the sterling equivalent of cash and cash equivalents at year end by £0.1 million (2012: foreign exchange loss of £1.2 million).

Investment in the Group's oil and gas assets at year end stood at £25.9 million (2012: £17.7 million). The additional investment in 2013 represents the Group's share of costs incurred in connection with exploration and appraisal activities on the Group's western Baltic Basin concessions, as described in the Chief Executive Officer's Review.

Trade and other payables at year end declined to £0.4 million against £1.0 million at year end 2012, as a result primarily of a reduction in staff bonuses. Provisions reduced to £nil million at year end, from £0.6 million at year end 2012, as the Group discharged its liability for decommissioning at the Legowo LE-1 well. The cost of this decommissioning is covered in full by ConocoPhillips.

Income statement

The Group recorded a net loss after tax of £4.3 million (2012: £6.0 million). This loss is attributable in part to: share of JV losses of £0.9 million (2012: £0.1 million); foreign exchange losses on the translation of foreign currency cash balances of £0.6 million (2012: £1.6 million); non-capitalised exploration expenses of £0.5 million (2012: £nil); the impairment of the Group's interest in its German concessions of £0.1 million (2012: £nil); and the impairment of a loan to Cowley Mining plc of £0.2 million (2012: £nil).

The Group recorded nil other income in 2013 (2012: £1.1 million), as no further payments were due from ConocoPhillips under the Joint Evaluation Agreement. The share of JV losses represents the Group's share of expenditure incurred by Lane Energy Poland on the western Baltic Basin concessions which cannot be capitalised under IFRS 6.

In previous years substantially all of the Group's exploration expenses incurred in connection with the Baltic Basin concessions have been capitalised as intangible exploration and evaluation assets, reflecting common industry practice. Following the transfer, in 2012, of operatorship of the three western Baltic Basin concessions to ConocoPhillips, the Group elected to account for its interest in the three concessions using the equity accounting method, in accordance with IAS 31 Interest in Joint Ventures. Consequently, exploration expenses incurred directly by the Group in connection with its western Baltic Basin concessions can no longer be capitalised as before. These expenses are therefore recorded separately in the income statement as non-capitalised exploration expenses.

In August 2013 the Group entered into a contract for the sale of its two German concessions to Rose Petroleum plc, in exchange for a 2% royalty interest and a €400,000 contribution to past costs, of which €300,000 was paid at signing. The sale to Rose Petroleum was completed in January 2014, when the remaining €100,000 was paid. The Group has recorded an impairment equal to the excess of the carrying value of the concessions over the disposal proceeds.

Cowley Mining plc was demerged from the Group in 2010, before the Group's initial public offering on AIM in 2011. Under the demerger terms, Cowley Mining retained an unsecured, non-interest bearing loan of £226,500 from the Group, later varied to an interest-bearing loan with warrants. In January 2014, Cowley Mining announced its intention to negotiate a restructuring with its shareholders and creditors. The Group has recorded an impairment for the full value of the loan.

The Group recorded aggregate administrative expenses of £2.1 million in 2013, against £3.6 million in 2012. Cash administrative expenses, i.e. excluding share-based payments, were £2.0 million in 2013 (2012: £3.4 million). Staff costs including share-based payments declined to £1.0 million (2012: £2.0 million), reflecting the staff reorganisation which was implemented following the adoption of a narrower focus for the Group's activities.

Foreign exchange losses in 2013 of £0.6 million (2012: £1.6 million) represent almost entirely the impact of unrealised foreign exchange movements on the Group's long-term intra-group funding arrangements, whereas in 2012 foreign exchange losses resulted primarily from translation losses on foreign currency cash balances.

Going concern

The Directors have reviewed the Group's budgets and forecast cash flows through to June 2015. Taking into consideration the risks outlined in this financial review, the Directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future. It is therefore appropriate to adopt the going concern basis in the preparation of its financial statements.

Outlook

The Group is well funded for the rest of its 2013/14 Baltic Basin exploration programme, which will see it through the drilling, stimulation and testing of a long lateral well, as described in the Chief Executive Officer's Review. Following the testing of the planned long lateral well, the Group will review its funding requirements in the light of its operational objectives in the Baltic Basin. The Group will continue to manage its cash resources in a conservative manner so as to ensure that it has sufficient funding to meet its near-term objectives.

Alexander FraserChief Financial Officer20 March 2014

1 General information

3Legs Resources plc (the 'Company' and, together with its subsidiaries, the "Group") is incorporated in the Isle of Man, British Isles under the Isle of Man Companies Act 2006. The address of the registered office is Commerce House, 1 Bowring Road, Ramsey, Isle of Man, British Isles, IM8 2LQ.

The nature of the Group's operations and its principal activities are the exploration, evaluation and development of oil and gas targets, primarily from unconventional resource plays.

These financial statements are presented in pounds sterling.

The financial information included in this preliminary results announcement does not constitute statutory accounts of the Group for the years ended 31 December 2013 and 31 December 2012 but is derived from the consolidated accounts prepared by the Company. As an Isle of Man Company, there is no requirement to prepare audited consolidated statutory accounts but audited consolidated non statutory accounts for the year ended 31 December 2012 are available from the Company's website and those for 2013 will be available in due course. The auditor has reported on the 2013 accounts; their report was unqualified and did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report.

The preliminary results announcement has been prepared in accordance with the accounting policies adopted in the financial statements which were approved by the Board of Directors on 20 March 2014.

2 Going concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore consider it appropriate to prepare the preliminary results on a going concern basis.

3 Critical accounting judgements and key sources of estimation and uncertainty

In the application of the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.

The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

Recoverability of exploration and evaluation assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources.  If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The carrying amount of exploration and evaluation assets at the balance sheet date was £2.4 million (2012: £2.8 million) and impairments of £0.1 million (2012: £2.1 million) were identified and recognised in the period.

Provisions for liabilities

As a result of exploration activities the Group is required to make provision for decommissioning. Significant uncertainty exists as to the amount of decommissioning obligations which may be incurred due to the impact of possible changes in environmental legislation. A provision of £nil has been recognised at 31 December 2013 (2012: £0.6 million).

Share-based payments

The Group has an equity-settled share option scheme available to certain Directors, employees and consultants. In accordance with IFRS 2 Share-based payment, in determining the fair value of options granted, the Group has applied the Black-Scholes and the Monte Carlo model. As a result, the Group makes assumptions for expected volatility and expected life.

4 Non-capitalised exploration and evaluation expenditure

5 Impairment of intangible exploration and evaluation assets

During the year, the Group entered into an agreement for the sale of the German concessions in exchange for a contribution of €400,000 towards past costs and a 2% royalty. The two licences were renewed for terms of two years each on 20 December 2013 and the sale was completed on 20 January 2014. The related exploration and evaluation cost has been impaired down to the value of the disposal proceeds.

6 Impairment of loan

The loan to Cowley Mining plc, a related party was impaired in full at 31 December 2013. The Directors consider this to approximate the fair value at the balance sheet date.

7 Share of loss of joint venture

Share of loss of joint venture represents the Group's share of exploration expenditure incurred on its western Baltic Basin concessions which is not capitalised on the balance sheet of Lane Energy Poland Sp. z o.o.

8 Loss per Ordinary Share

Basic loss per Ordinary Share is calculated by dividing the net loss for the year attributable to Ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year. The calculation of the basic and diluted loss per Ordinary Share is based on the following data:

Dilutive loss per Ordinary Share equals basic loss per Ordinary Share as, due to the losses incurred in 2012 and 2013, there is no dilutive effect from the subsisting share options.

9 Notes to the cash flow statement

Cash and cash equivalents (which are presented as a single class of assets on the balance sheet) comprise cash at bank and short term bank deposits with an original maturity of three months or less. The carrying value of these assets is approximately equal to their fair value.

10 Events after the balance sheet date

On 20 January 2014 the Group completed the sale to Rose Petroleum plc of Parkyn Energy Holdings plc, the holding company of Parkyn Energy (Germany) Ltd., which in turn held the Group's two German concessions and received payment of the remaining €100,000 due under the share purchase agreement. This completed the disposal of these two concessions.