SER.L Regulatory News (SER)

5 Sep 2007 07:00

Sefton Resources Inc05 September 2007 Sefton Resources, Inc. ("Sefton" or "The Company") Interim results for the six months to 30 June 2007 HIGHLIGHTS • Bank Financing agreed• Net income slightly up• Two new wells to be drilled at Tapia• Steaming program about to start Chairman, Jeremy Delmar-Morgan states that the financing, which has previouslyheld back Sefton's development, is now in place. This is the most significantevent for Sefton during the last few months and will mean that two new wells andthe steaming of two other wells will start in the next couple of weeks. Chairman's StatementThe first half of 2007 has been one of consolidation as far as the tradingposition is concerned. Oil production from the existing wells was relativelysteady at around 130 bopd. Oil and gas sales were down some 15% at $1.276m($1.508m) but with general and administrative charges down 18% and oil andproduction costs reduced by 23%, net income was slightly up on last year at$179,134 ($175,647). Last year's figures included TEG Oil & Gas Canada, whichwas sold during the period and provided a small trading income of $6,897. The most significant event, however, for Sefton during the last few months hasbeen the signing of an agreement with the Bank of the West for a $10m line ofcredit. We have started to drawn down an initial $1.5m, which will be investedin the development program at Tapia. The Tapia oil field is the major source ofproduction and revenue for our wholly owned subsidiary, TEG USA. With the newfinancing we are able to advance our drilling and steaming programmes at thisfield. A rig will be on site in the next couple of weeks and two wells will bedrilled on the Hartje lease, which is the site of some of our best wells. In addition we are preparing to start cyclic steaming at two wells located onthe Yule Lease. This Pilot Steam Test will provide invaluable data for planningour full scale steam programme. Oil produced from the steaming, and any newwells drilled, will move a significant amount of oil reserves into the ProvedProducing reserves category and increase the value of our operationsaccordingly. Once cash flow from the Tapia project increases, we will be able to pursue otheropportunities at Eureka Canyon. These include the drilling of one infill wellwithin the current producing area and conducting the second phase of thegeochemical mapping of Eureka's exploratory area. At TEG MidContinent, we continue to believe that the opportunities areextensive, but still take a cautious approach, selectively focusing on primeacreage in our lease acquisition programme and undertaking geologic andengineering studies. There has been increased industry activity adjacent to ourleased areas, the results of which support our belief in the areas potential.Our acreage covers both oil and gas possibilities and is close to both existingpipelines and drilling programs carried out by other operators in the area. Webelieve that the best way forward will be with joint venture partners, but thismust be the right partnership for Sefton, allowing us to recoup some of ourinvestment and providing capital for drilling. We are currently in discussionswith a number of potential joint venture partners for developing both ourLeavenworth and Anderson/Franklin County assets. We will not make a decisionuntil we find the right partner, as this will be crucial to the Company reapingthe reward for its far sighted acquisition programme, which has been carried outduring the last few years. We are now in an excellent position to start moving forward. The financing,which has previously held back Sefton's development, is now in place. The termsare very satisfactory and the draw down opportunities will increase as drillingand steaming increase our production and reserves. Providing the first phase ofour drill and steaming program is successful we can look forward to developingthe Snow, Yule, Hartje, and Lackie leases at Tapia during 2008. Jeremy Delmar-MorganChairman5 September 2007 For more information, please contact: Jim Ellerton, Chairman and CEO Tel: +1 303 759 2700Jeremy Delmar-Morgan, Chairman Tel: +44 77 8900 4874David Millham, Investor Relations Tel: +44 20 7796 9999Nicola Marrin/Jonathan Wright, Seymour Pierce Tel: +44 20 7107 8000 Consolidated Balance Sheets June 30, June 30, December 31 2007 2006 2006 (unaudited) (unaudited) (audited) ---------- ---------- ----------ASSETSCURRENT ASSETS:Cash $ 135,410 $ 148,350 $ 68,923Accountsreceivable 192,735 578,223 372,174Otherreceivables -related party 108,185 42,058 90,577Prepaidexpenses andother assets 1,975 31,223 19,849 ---------- ---------- ----------Total currentassets 438,305 799,854 551,523 OIL and GAS PROPERTIESFULL COSTMETHOD, net 7,861,600 7,386,719 7,517,673 EQUIPMENT ANDVEHICLES, net 43,410 58,883 47,957 ---------- ---------- ---------- TOTAL ASSETS $ 8,343,315 $ 8,245,456 $8,117,153 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES:Accountspayable $ 406,391 $ 536,326 $ 484,443Accruedexpenses 47,991 8,847 35,581Accruedexpenses -relatedparties 77,884 78,895 25,000Note payable,currentportion 163,825 - 128,810 ---------- ---------- ----------Total currentliabilities 696,091 624,068 673,834 NOTES PAYABLE:Note 681,485 910,100 705,056payableNote payable -related party - 270,160 - ---------- ---------- ---------- 681,485 1,180,260 705,056 ---------- ---------- ----------Less - -78,463 -discount ---------- ---------- ---------- 681,485 1,101,797 705,056 ---------- ---------- ---------- ASSET RETIREMENTOBLIGATION 134,440 162,167 134,440 ---------- ---------- ---------- Totalliabilities 1,512,016 1,888,032 1,513,330 ---------- ---------- ---------- STOCKHOLDERS EQUITY: Common stock, no par value, 200,000,000shares authorized,115,109,527 shares issued andoutstanding 12,790,863 12,026,845 12,742,521Stock subscriptionreceivable -30,047 -30,047 (30,047)Treasury stock -58,602 -58,602 (58,602)Accumulated(deficit) -5,870,915 -5,580,120 (6,050,049)Accumulatedother comprehensiveincome/loss 0 -652 - ---------- ---------- ----------Totalstockholders'equity 6,831,299 6,357,424 6,603,823 ---------- ---------- ---------- TOTALLIABILITIESANDSTOCKHOLDERSEQUITY $ 8,343,315 $ 8,245,456 $8,117,153 ========== ========== ========== Consolidated Statement of Operations For the Six Months Ended For the Year Ended June 30, June 30, 2006 December 31, 2007 2006 (unaudited) (unaudited) (audited) ------------ ------------ -------------REVENUES:Oil and gas sales $ 1,276,127 $ 1,508,114 $ 2,696,180 COSTS AND EXPENSES:Oil and gasproduction 274,967 356,104 833,716Depletion anddepreciation 149,000 82,323 314,145General andadministrative 644,434 785,689 1,478,696Share basedcompensation - - 447,957 ------------ ------------ ------------- 1,068,401 1,224,116 3,074,514 ------------ ------------ ------------- INCOME (LOSS)FROMOPERATIONS 207,726 283,998 -378,334 ------------ ------------ ------------- OTHER INCOME (EXPENSE):Interestincome 66 6,231 6,738Interestexpense (28,658) (114,582) (186,247)Income fromTEG Canada - 6,894Gain on saleof TEG Canada - 14,865Foreigncurrencytransactionexp - (56,693) ------------ ------------ ------------- (28,592) (108,351) (214,443) ------------ ------------ ------------- NET INCOME(LOSS) $ 179,134 $ 175,647 $ (592,777) ============ ============ ============= Basic anddiluted gain(loss) percommon share 0.0016 0.0016 (0.0058) Basic and Diluted Weightedaveragesharesoutstanding 115,109,527 1,629,158,744 115,109,527 ============ ============ ============= Consolidated Statement of Cashflows For the Six Months Ended For the Year Ended June 30, June 30, December 31, 2007 2006 2006 (unaudited) (unaudited) (audited) ------------ ------------ -------------CASH FLOWS FROM OPERATING ACTIVITIES:Net income(loss) $ 179,134 $ 175,647 $ (592,777)Adjustments to reconcile net income(loss) to net cash from(used in) operating activities: Depletion and depreciation 149,000 82,323 314,145 Amortization of discount on 78,463 119,000 convertible notes payable Compensation expense related to stock - 447,957 options Gain on disposal of subsidiary - (14,866) Changes in operating assets and liabilities: Accounts receivable 161,831 (309,324) 96,324 Prepaid expenses 17,874 13,507 27,438 Other assets - related party - (19,541) (68,060) Accounts payable (78,052) 202,466 (241,344) Accrued expenses - related party 52,884 19,269 (54,058) Accrued expenses 12,410 7,368 11,893 ------------ ------------ ------------- Net cash provided by (used in) 495,081 250,178 45,652 operating activities ------------ ------------ ------------- CASH FLOWS FROM INVESTING ACTIVITIES:Purchase ofoil and gasproperties (488,380) (382,766) (738,790)Purchase ofproperty andequipment - (26,249) (27,492)Acquisition ofminorityinterest -Canada - (36,484) -Proceeds fromdisposal ofsubsidiary - - 284,728Net cashtransferredwithsubsidiary - - (18,060) ------------ ------------ ------------- Net cash (used) by investing (488,380) (445,499) (499,614) activities ------------ ------------ ------------- CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds fromnotes payable 11,442 242,005 376,315Payments onnotes payable - (41,059) -75,176Proceeds fromsale of commonstock 48,342 42,305 38,944 ------------ ------------ ------------- Net cash provided by financing 59,784 243,251 340,083 activities ------------ ------------ ------------- EFFECT OFEXCHANGE RATECHANGES ONCASH - (25,689) 56,693 ------------ ------------ ------------- NET INCREASE(DECREASE) INCASH AND CASHEQUIVALENTS 66,485 22,241 (57,186) CASH AND CASHEQUIVALENTS ,BEGINNING OFYEAR 68,923 126,109 126,109 ------------ ------------ ------------- CASH AND CASHEQUIVALENTS,END OF PERIOD 135,408 148,350 $ 68,923 ============ ============ ============= Notes to Consolidated Financial Statements 1. The financial results for the half-year to 30 June 2007 and the comparatives to 30 June 2006 are both unaudited. The financial information for the year to 31 December 2006 has been extracted from the full audited financial statements. Thefinancial statements presented in the 30 June 2007 interim statement incorporateby reference the full audit report that is available in the Company's annual report from 31 December 31 2006. 2. The June 30, 2007 statements do not include the Canadian Balance sheet itemsin consolidation or the Canadian operations as a result of the sale of TEG Oil &Gas Canada Inc. (Note 5). All other financial information included in thisdocument has been prepared on a consistent basis and using the same accountingpolicies as the audited financial statements for the year to 31 December 2006and has been approved by the Board of Directors of the Company. 3. The reporting currency of the Company is the U.S. dollar. The functional currency of the Company's Canadian subsidiary was the Canadian dollar. Translation into U.S. dollars is performed for assets and liabilities atthe exchange rate as of the balance sheet date. Income and expense accounts aretranslated at average exchange rates for the reporting period. Adjustmentsresulting from the translation are reflected as a separate component of othercomprehensive income. Transaction gains and losses that arise from exchange ratefluctuations on transactions denominated in a currency other than the functionalcurrency are included in the results of operations as incurred. 4. On February 15, 2006 the Sefton Board of Directors authorized the acquisitionof shares in TEG Oil & Gas Canada, Inc. owned by minority interests. This was completed with an offer to all TEG Oil & Gas Canada shareholders by way of an exchange of Sefton shares for their shares owned in TEG Oil & Gas Canada, Inc. or effective repayment of original investment. As of March 31, 2006, TEG Oil & Gas Canada became a 100% wholly owned subsidiary of Sefton Resources, Inc. 5. On June 30, 2006 TEG Oil & Gas Canada Inc. was sold by Sefton Resources, Inc.for $450,000.00 (Canadian) and 100% of the shares of TEG MidContinent, Inc. The effective date of sale was May 1, 2006 6. As discussed in Note 5, TEG Oil & Gas Canada was sold effective May 1, 2006 and oil and gas operations costs have been included in the 2006 statements. Canadian oil and gas production costs consist of actual figures through April 30, 2006 7. In accordance with Emerging Issues Task Force Issue No.98 ("EITF 98-5"), "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and EITF Issue No. 00-27, Applicationof Issue No 98-5 to Certain Convertible Instruments, the Company recognized the advantageous value of conversion rights attached to convertible debt as a discount to the related debt and an addition to capital in excess of par value. As the market price exceeded the conversion price a beneficial conversion feature of $157,000 was recorded at issuance. Amortization of the discount of $78,463 is included in interest expense for the period ended June 30, 2006. 8. Copies of the Interim Statement will be sent to shareholders in October 2007. Copies of the Interim Statement will be available from the Company Secretary, Masons Secretarial Services Limited, 30 Aylesbury Street, London EC1R 0ER. This information is provided by RNS The company news service from the London Stock Exchange