SER.L Regulatory News (SER)

Sefton Resources, Inc.

("Sefton" or the "Company")

11 September 2012

Half Year Results for the six months ended 30 June 2012 and Operations Update for California and Kansas

Sefton Resources, Inc. (AIM: SER), the independent oil and gas exploitation and production company with interests in California and Kansas today announces its half year results for the six month ended 30 June 2012 and provides an update on operations.

Highlights

Financials

·; Oil revenue grew by 13% to $2.28 million ($2.03 million: 1H 2011).

·; Oil produced increased by 9% to 21,755 barrels (19,874 barrels: 1H 2011).

·; Capital expenditure increased by 110% to $2.8 million ($1.3 million: 1H 2011).

·; Cash and cash equivalents rose by 175% to $2.5 million ($0.9 million: 1H 2011).

·; Cash flow positive with a net loss of $0.064 million (profit of $0.074 million: 1H 2011) reflecting a required accounting change in expensing cyclic steaming which was previously capitalized.

California Update

·; Workovers and cyclic steaming continue to deliver production growth.

·; Plan to expand water disposal system to deal with increased water resulting from drilling, workovers and cyclic steaming.

·; Surface equipment and a second steam generator are being designed to meet current and future production growth targets.

·; Full field steam flood consultants, Petrel and Dr Ali, have confirmed they will complete the geologic model and full-field steamflood report in a timely fashion.

Kansas Update

·; Construction of the LAGGS-Southern Star Interconnect continues with completion being finalised by Southern Star who is working towards an October completion and commissioning.

·; Substantial increase in leased acreage in proximity to the LAGGS pipeline system has identified 22 oil well and 4 gas well recompletion candidates.

·; Rehabilitating existing surface and water disposal facilities to initiate oil production.

·; Oil production is being initiated by recompleting existing wells which could be boosted further by the potential acquisition of a producing field with an additional 14 oil wells and accompanying water disposal facilities.

Jim Ellerton, Chairman of the Board, commented that:

"Sefton continues to be financially stable with award winning operations and good market liquidity and we have significant expansion capability in our two main 100%-owned project areas. I am pleased to be able to report the first half of the year has seen continued progress in the development of our assets and operations.

Drilling, workovers and cyclic steaming have all helped increase oil production and we have witnessed periods when the production has been in excess of our target. With this increased oil production has come an increased amount of water which has resulted in downtime that required repairs to the water storage facilities and will necessitate improvements to the water disposal facilities to allow oil production to consistently hit our targeted levels.

A detailed piece on reporting oil production, volatility of production and the limitations of handling increased fluid levels are discussed in this release. In addition, a further detailed discussion with charts and diagrams will be included in our forthcoming newsletter which is to be posted on our website site at the end of the month.

Before the end of the year Sefton expects to make the following significant operational announcements in support of our production growth strategy:

·; Gas pipeline in Kansas becoming operational

·; Initial oil production from Kansas

·; Expansion of leasing and acquisitions in Kansas

·; Additional workover, drilling and improvement of surface facilities at Tapia

·; Dr Ali's full field steam flood report on Tapia

The Board is also looking forward to the revaluation of the assets in both California and Kansas in a Competent Persons Reports at year-end.

For further information please visit www.seftonresources.com or contact:

Financial review for the six months ended 30 June 2012.

Revenue increased in the 2012 period by 13% to $2.3 million ($2.03 million in 1H, 2011), primarily due to increased volumes of oil sold which rose by 8% to 21,652 barrels (19,968 barrels in the 2011 period). The revenue increase was also due to the average selling price increasing to $105 per barrel in the 1H 2012 against $103 per barrel received in 1H 2011.

Cost of sales (which consists of lease operating expense and royalties) increased from $0.607 million to $0.945 million in the 2012 period compared to the same period in 2011. This was largely due to the successful cyclic steaming activities undertaken at the Tapia Canyon field during the 2012 period. Previously in the 2011 comparable period the cyclic steaming project activities at the Tapia Canyon were undertaken on a pilot project basis and the associated costs were capitalized. However, in the 2012 period following the completion of the pilot programme these costs were recorded as lease operating expenses.

General, administrative and retirement liability expenses combined increased by 3.8% to $1 million (from $0.9 million), due to increases in Kansas operations. As a result, earnings before non-cash items, interest and taxes were $0.37 million in the 2012 period, ($0.48 million in the 2011 period). Combined, stock-based compensation, finance costs, depreciation and depletion remained largely unchanged in the 2012 period compared to the 2011 period.

A net loss of $0.064 million was reported compared with a profit of $0.074 million in the first half of 2011.

At the end of the period, total liabilities were reduced to $8.3 million from $8.7 million for the comparative period in 2011. Cash and cash equivalents grew to $2.5 million on 30 June 2012, compared to $0.9 million to the same period a year earlier.

Capital expenditure increased to $2.8 million up from $1.3 million in the first half of the current year.

30 June 2012 30 June 2011

Comparative financial highlights in $000's, except per barrel unaudited

Revenue $2,283 $2,028

Cost of sales $945 $607

Gross Profit $1,338 $1,421

Earnings before non-cash charges,

interest and taxes $365 $484

Total comprehensive income (loss) $(64) $74

Realised oil price per barrel $105 $103

Oil sold (barrels) 21,652 19,968

Oil production (barrels) 21,755 19,874

Cash and cash equivalents $2,527 $919

Total assets $27,015 $20,607

Total liabilities $8,260 $8,661

Net assets $18,755 $11,946

Capital expenditures $2,758 $1,293

Future financing

Looking ahead, with 100% ownership of all its assets, the Company is reviewing opportunities to bring in third party capital to help develop our projects while still retaining operating control. After the 31/12/12 audit (year-end) and the updated year-end engineering on both California and Kansas, the Company plans to utilise a combination of financing vehicles which is likely to involve a mix of debt, equity and joint ventures to develop its assets more fully.

Operations Update

California

Sefton's operations in California lie in the Ventura Basin where its wholly-owned subsidiary, TEG Oil & Gas USA, Inc (Colorado) ("TEG USA"), operates both Tapia Canyon, an oil field producing heavy gravity (17°-19° API) oil, and Eureka Canyon field, which produces medium gravity (28° API) oil.

Although oil production for the first half of 2012 at 21,755 barrels or an average of 120 barrels of oil per day (bopd) was higher than in the comparable period (19,968 barrels or an average of 110 bopd in 1H, 2011), there were several factors that served to restrict oil production. Encouragingly, since this period ended we have seen production in excess of our targeted level of 200 bopd and average in the vicinity of 170 bopd over a limited period. Production rates at these levels provide evidence in support of the effectiveness of the recent drilling, ongoing workovers and cyclic steam flood programmes. However care is needed in interpreting peak day production figures in a cyclic steam project. Oil production is affected by operational downtime due to the nature of the cyclic steaming process which requires wells being shut down while being steamed/soaked before being returned to production. In addition, there is downtime for planned maintenance, drilling activity as well as scheduled and unscheduled repairs. Daily production over recent months has seen wide fluctuations which result from a number of factors identified that are elaborated on below that served to restrict oil production in 2012:

1- Rig availability and resultant production restraints

The Company drilled three wells at the end of last year. Work-overs and drilling new wells impacts production as this activity occurs on a "surface pad" and this requires other wells located on the same pad being shut-in while work is being undertaken. The shortage of rigs has meant that the Company has had to wait for a workover rig which also results in downtime.

2 - Water handling and disposal

The success of our drilling and cyclic steaming has now resulted in an increase in total fluids along with increased oil. Peak daily oil production demonstrates the ability to hit our target levels but the increased water produced requires the Company to upgrade its water disposal facilities to allow oil production to remain at the target levels for sustained periods.

The Hartje #8 water injector well has exhibited declining injectivity since Q1 2012 and this limits the amount of total fluid that can be produced on a daily basis from the field. A well workover is currently in progress on the Hartje #8 water injector to identify whether this can be rectified and remedial action taken. The workover should also be able to confirm whether an additional water injector well is required.

3 - Heat from cyclic steaming

As a result of our accelerated cyclic steam programs, some wells produce fluids at temperatures in excess of 200º F. The elevated heat is causing expansion of surface steel flow lines. The Yule #7 well is only being produced a few hours each day until this heat dissipates, limiting total oil production.

TEG is now formulating budget items that will include plans to resolve this issue by incorporating heat expansion loops. The design can then be applied in other parts of the field over time as the cyclic steam programme is expanded and accelerated.

4 - Tank repairs

Increasing levels of fluids has put pressure on the tank facilities and unscheduled tank repairs occurred during 1H and in the early part of 2H, 2012 that resulted in loss of oil production from associated downtime for such repairs.

Note: Newsletter will elaborate on factors that impact oil production

As previously mentioned the Company will elaborate in more detail on the various factors that impact oil production in its drilling, workovers and cyclic steam flood projects in the forthcoming newsletter that we intend posting on Sefton's website at the end of September.

Plans to boost production for the remainder of 2012

TEG is in the process of implementing plans to boost production for the remainder of 2012 and addressing the production constraints that have recently and are still impacting production, by drawing on its experience in successfully dealing with a number of production challenges since it began to redevelop the Tapia oilfield, including mechanical (facilities improvements, well control), natural (fires, flooding), regulatory (permitting) and other challenges.

Plans to boost production for the remainder of 2012 are three-fold:

Continuation of the current Cyclic Steam Project.

We anticipate completing the steam injection into Yule #12 imminently. From there we will move the steam injection to Yule #11. Removal of the Yule #11 pump and rods and moving the high-pressure injection flex-hose is required for this move. This process will be augmented with the receipt of the steaming model and Dr Ali's report in the future.

Improving the water disposal system

The workover of Hartje #8 (one of the current water disposal wells) will allow TEG to make a decision whether a new water injection well is required.

Drilling of the Hartje #20 well later this year.

Well permits have been obtained and TEG is currently in the process of looking for a rig to undertake this work.

Future operational expansion opportunities from 2013

Originally there was over 11 million barrels of oil in place at Tapia and to date that only about 15% of that has been produced. A large amount of the remaining oil can be recovered by primary, secondary and tertiary methods.

Intermediate steaming step - expand cyclic steaming

Prior to implementing to the full-field steam flood, we envisage intermediate steps of improved cyclic steaming and water treatment by designing and acquiring a second steam generator and treatment facilities. The second steam generator will allow oil production to increase. Water treatment facilities allow water to be recycled thereby reducing the amount of water needing to be disposed of and is also expected to help mitigate corrosion in wells and associated equipment. We believe the full-field steam flood report that is due imminently will help us determine future water treatment facilities. We anticipate these will be designed, priced and incorporated in the year-end engineering update.

Following expansion of cyclic steaming, we believe that full-field steam flooding of the oilfield has the potential to accelerate production to a much larger degree.

Full-field steam flood report

Our planning for the further development of the Tapia Oilfield will be based on the results of the full-field steam flood report. Dr Ali's preliminary study suggested that a full-field steam flood could generate a recovery of between 51-78%. Certainly, if the report can demonstrate a recovery factor in excess of the current 50% used by our engineers, Sefton's reserve base will be increased. Detailed future capital requirements can then be determined with greater accuracy as this report will set out the optimum steam injector/development pattern, the appropriate well spacing, and allow sizing of steam and water treatment facilities.

In the first half of 2012, Core Lab completed the analyses on two cores, which includes analysis of the relative permeability, capillary pressure, vertical permeability, cap rock tensile strength and X-ray diffraction (clay identification).

The geologic model of the field now contains approximately one half million grid cells, each containing an updated inventory of geologic and engineering parameters required for accurate steam modeling. Petrel has incorporated the data determined from these cores into the geologic model, which is now being used by Dr. Ali to run the simulation analysis. Petrel and Dr Ali have confirmed they will complete the geologic model and full field steamflood report in a timely fashion.

Proposed drilling of the Eureka Canyon oil field

The Board expects to start initial development of its Eureka Canyon oil field in 2013 as outlined in our June 2012 newsletter. This property comprises more than 1,500 acres of minerals leasehold and is located in Ventura County. Early development will be the drilling of one or two wells close to existing production and also the drilling of a wildcat well based on geochemical work undertaken in recent years.

Excellence Award

Sefton is proud to report that its Californian subsidiary has again received an excellence award from the California Division of Oil Gas and Geothermal Resources (DOGGR) for the Tapia Field operations. This is the fourth year in succession that we have won this award. In 2012, the judging was more stringent and a total of only four operators received such awards. In fact, this year the competition was between operators on a state-wide basis, rather than within the 6 geographic divisions. The announcement was made later than the previous year, because of the additional scrutiny involved at the State level.

Kansas

Sefton's oil and gas interests in N.E. Kansas (Forest City Basin) are undertaken through two wholly-owned subsidiaries, TEG MidContinent, Inc. (Colorado) ("MidContinent"). MidContinent's assets include conventional oil and gas leases, and coal bed methane (CBM) leases that are located in and around Anderson and Leavenworth counties, while various transmission assets including three pipeline systems, Vanguard and LAGGS in Leavenwoth County and Waverley in Anderson County, are within TEG Transmission LLC ("Transmission").

Larry Culbertson has been appointed Operations Manager for both TEG MidContinent (exploration and production) and TEG Transmission (pipelines) and will be responsible for overseeing the development of the pipeline infrastructure along with the oil and gas exploration and production interests in Kansas.

TEG Transmission (pipelines)

LAGGS-Southern Star Interconnect

The LAGGS-Southern Star pipeline interconnect into the interstate gas transmission system is expected to be operational by mid-October; with equity gas and third party gas expected to be flowing in early 2013.Transmission has completed its work and now awaits Southern Star to complete their work at which time the system will be certified operational and gas can be input into the system. Gas revenues are scheduled to commence once the LAGGS-Southern Star interconnect is completed, joined to the Vanguard pipeline and sufficient economic production capacity can be brought on-line from gas recompletions and third party gas transportation deals.

Joining LAGGS and Vanguard pipelines

The Vanguard pipeline lies 2.5 kilometres away from the LAGGS-Southern Star system and is scheduled to be joined by the year-end. Ahead of that time, further existing gas wells will be accumulated in proximity to the pipelines as more leases are acquired. Sefton has commenced discussions with suppliers of third party gas which the Vanguard pipeline could transport to market. This move will allow for the transmission of potential third party gas and additional potential equity gas volumes to the Southern Star interstate sales point.

Appointment of gas sales agent

Earlier in the year a consulting contract was signed with Western Retail Energy Company (WREC) as the natural gas marketing agent for the sale of the Company's Kansas natural gas to interstate pipeline facilities. WREC will also negotiate gas transportation and marketing agreements with third party gas producers.

Additional pipeline opportunities

Sefton has plans to further extend its gas pipeline infrastructure to support the expansion of its oil and gas production in Kansas. Once the LAGGS and Vanguard systems are complete and operational, the team will move to refurbish the Waverley pipeline and processing facilities in Anderson County which we expect to become operational during 2013, using the Leavenworth project development programme as a blueprint.

In additional, there are a number of further pipeline opportunities within the Leavenworth area.

MidContinent (E&P)

On the back of a geologic/engineering field study by Dr Nafi Onat and MidContinent's internal geologic exploration maps, an oil and gas leasing programme has been initiated to acquire additional leases within proximity of the Company's pipeline facilities with partially developed reserves that can be produced or rehabilitated and it also offers the possibility to develop new oil and gas fields.

Recompletion Programme

First revenue from Kansas is already underway from the sale of oil and we will shortly have wells pumping on three different leases once updated surface facilities and a water disposal system have been installed.

The Company has a total of 22 potential oil wells and 4 potential gas wells available to be rehabilitated, based on land that has already been leased. In order to bring wells back on production, the recompletion programme will consist of taking existing oil wells and reworking them, which may involve recompleting in different zones along with replacing or equipping surface facilities and putting in place a water handling and disposal system.

Our engineers are investigating opportunities to supplement production from the recompletion programme by drilling new wells and, if appropriate, initiating a waterflood operation in selected areas. Any associated gas from the oil wells will be put into the gas pipeline system once the LAGGS-Southern Star Interconnect is operational.

Potential acquisition of a producing oil field

The Company has signed an updated Letter of Intent on a potential acquisition with vendors of a producing oil field in proximity to the LAGGS pipeline that could be finalised by early October. This field contains a total 14 oil wells and water disposal facilities. If this potential acquisition is completed, plans would include

Refurbishing the operating facilities and recompleting a number of wells over the coming months to boost expected oil production and possibly initiate a water flood programme.

Unaudited consolidated statement of comprehensive income

Six months ended 30 June Year ended 31 December

2012 2011 2011

Revenue 2,283 2,028 4,140

Gross profit 1,338 1,421 2,905

General and administrative expense 955 872 1,995

973 937 1,853

Earnings before non-cash charges, interest and taxes 365 484 1,052

Depletion, depreciation and amortisation 215 214 356

320 284 537

Operating income 45 200 515

Total comprehensive income (loss) for the period

Per share Per share Per share

$ $ $

Basic income (loss) per share (0.0001) 0.0003 0.0008

Unaudited consolidated balance sheets

30 June 31 December

2012 2011 2011

Non-current assets

Intangible exploration assets 3,871 2,857 3,538

Oil and gas properties 19,940 16,072 19,434

23,836 18,952 22,987

Current assets

Cash and cash equivalents 2,527 919 2,563

3,179 1,655 3,089

Non-current liabilities

Long- term borrowings - 5,950 5,750

Retirement obligation 182 339 165

1,801 7,609 7,519

Current liabilities

Current portion of borrowings 5,879 506 300

6,459 1,052 2,794

Shareholders' equity

Share capital 22,967 16,542 20,016

Unaudited consolidated statement of changes in equity

Common shares,

no par value

Retained

Amount deficit Total

Balances 1 January 2011 202,469,459 14,622 (4,670) 9,952

Shares issued for cash 195,181,547 5,729 - 5,729

Share issuance costs - (320) - (320)

Repurchase of common shares - (15) - (15)

Compensation expense related to share options - - 180 180

Balances 31 December 2011 Audited 397,651,006 20,016 (4,253) 15,763

Shares issued for cash 114,285,714 3,167 - 3,167

Share issuance costs - (216) - (216)

Compensation expense related to share options - - 105 105

Unaudited consolidated statement of cash flows

Six months ended 30 June Year ended

2012 2011 2011

Cash flows from operating activities

Earnings before non-cash charges, interest and taxes 365 484 1,052

Interest paid (107) (84) (226)

276 465 684

Changes in operating assets and liabilities:

Changes in accounts receivable (23) (32) 176

Changes in accounts payable and accrued liabilities (209) (121) 89

Net cash provided by operating activities (58) 205 949

Cash flows from investing activities

Net cash for the purchase and development of oil and gas

Cash flows from financing activities

Proceeds from notes payable 129 - -

Payments on notes payable (300) (790) (1,195)

Net increase in cash and cash equivalents (36) (29) 1,615

Notes to the unaudited consolidated financial statements

SEFTON RESOURCES, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements for the period ended 30 June 2012

1. The financial results for the half-year to 30 June, 2012 and the comparatives to 30 June 2011 are both unaudited. The financial information for the year to 31 December, 2011 has been extracted from the full audited financial statements. These financial statements can be viewed at

www.seftonresources.com.

2. The financial information included in this document has been prepared on a consistent basis and using the same accounting policies as the audited financial statements for the year to 31 December, 2011 and have been approved by the Directors of the Company.

3. There were no dividends paid in the reporting periods