SER.L Regulatory News (SER)

13 August 2013

Sefton Resources, Inc.

("Sefton" or the "Company")

California Production Report

and Update on Thermal Simulation Report

Sefton Resources, Inc. (AIM: SER), the independent oil and gas exploitation, transmission and production company with interests in California and Kansas USA, announces an update on production and the thermal simulation study in California.

Highlights:

· Oil production for July 2013 to be filed with the DOGGR is 5,308 barrels (171 barrels of oil per day (BOPD)), despite the current water disposal and heat related issues.

· Cyclic steaming of wells on the Hartje lease in the Tapia Canyon ("Tapia") oil fields has shown a significant response to steam stimulation which was not unexpected as the Hartje lease has been the best productive lease historically within the field.

· Meeting with Dr Ali (2 August 2013) regarding his findings on a thermal simulation study for Tapia provided insight into the behaviour of the Tapia Canyon reservoir and what parameters will be necessary to implement a full field development plan. 

Commenting today, Jim Ellerton, Chairman of the board said:

"The significant improvement in production from cyclic steaming the most productive lease at Tapia, combined with resolving water disposal issues and gaining a clearer path to the full development plan for Tapia will result in a more defined economic understanding of the field's development and Sefton's part in such."

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

Oil production

Oil production figure for California reported to the California Division of Oil, Gas & Geothermal Resources ("DOGGR") for the month of July 2013 were 5,308 barrels of oil (171 BOPD). The table below shows oil production for the year to date.

Net oil production figures reported to the DOGGR

With no tank repairs being required in July 2013 (as in February, March and June 2013 - no additional tank work is expected until normal planned maintenance towards the end of the year) and the benefits of cyclic steaming the Hartje lease being realised, production is expected to continue at this level (tank readings for the first 10 days of August 2013 are averaging in excess of 180 BOPD - before API, bottom sediments and water adjustments), or improve as more wells from the Hartje lease are brought on stream after being cyclic steamed and water disposal capabilities are improved.

Cyclic steaming

As a whole the Hartje lease has improved from a production baseline of 2,204 BOPM/ 73 BOPD (2012 average) to a July total of 3,477 barrels of oil (112 BOPD), a 55% increase.

Hartje #14,#16 and #17 have now been stimulated via cyclic steaming, and the Hartje #15 was brought back on production for the latter part of July, after concluding its steam and soak period.

The Hartje #19 well recently concluded the steam injection cycle and is now in the soak period (has been one of the best primary producers).

There are two additional wells on the Hartje lease to be cyclic steamed (Hartje #11 and #13). The Hartje #13 will be steamed later this week.

An illustrated version of this announcement with steaming charts for the individual lease will be displayed on the Company's website. (ww.seftonresources.com)

Thermal simulation study

On August 2, 2013, Dr. Ali met with TEG Oil & Gas USA, Inc's (Sefton 100%-owned subsidiary - "TEG") operations and development team and presented the findings of his thermal simulation study. The details discussed gave TEG great insight into the behavior of the Tapia reservoir and what it will take to implement a full field plan. All options were on the table and discussed at length. Dr. Ali provided numerous simulation run examples that illustrated the complexity of the process and of the model utilized. Many of these will be part of the final report that is currently in draft form. TEG staff was able to provide to Dr. Ali some operational, technical and logistical guidelines that can guide further refinements.

To summarize the discussions, the cyclic steam work to date, combined with the 3-D simulation modeling runs made over the many months, demonstrate that steam flooding at Tapia can be a successful economic project when properly implemented. TEG has a number of options in this development process and now has a firm understanding of the volume, rate and distribution requirements for steam injection and successful tertiary oil recovery. Because the field is broken into geologic fault blocks, these can be initially treated as separate oil recovery areas. In fact, the process of the modeling did just that. The development of the steam flood can thus be approached in a similar modularized manner on the ground. This approach not only makes sense scientifically as we continue to learn more and more about the Tapia reservoir, but also from a capital expenditure perspective, as this approach may be more palatable to TEG as the developer and operator of this project.

Lastly, TEG requested of Dr. Ali to make one additional model run (to be completed after the current report is finalized which Dr Ali expects within a week) whereby steam injectors are placed in the field with topography and existing facilities taken into account. The purpose is to determine if there are significant differences in recovery and economics between such and a grid-like development that would have significantly larger up-front costs for drilling and surface facilities additions. An example of this will be shown on the website report. These types of model runs will be done periodically going forward as part of an ongoing process of refinement of the model with empirical data, melding it with a realistic redevelopment plan for the oil field.

Second steam generator

TEG will now be moving forward with plans to design and construct a second, and larger, steam generator now that the parameters for such have been better defined by the simulation study. The purpose of this will be to steam individual wells more quickly and also have the ability to steam multiple wells at once. The target result of all this is efficiency and improved economics of the project. The cost of this equipment is expected to be in the range of $2 million, based on preliminary bids and information from other heavy oil operators in California. Many details remain to be worked out in this process including satisfying the need for this equipment to transition seamlessly from the expansion of cyclic steaming to full steam flooding of the oilfield. We believe the equipment can be designed to do both.

Water injection

TEG has executed a Purchase and Sales agreement for the acquisition of a 10-acre lease, wells, and production facilities located at the east end of the Tapia oilfield. Although this parcel is small in size, it is advantageous for TEG to acquire this acreage for two reasons:

1) The well(s) on the lease can be converted to water injection and this will alleviate some of the injection volume that is currently limiting our production on existing Tapia leases.

2) The lease, although isolated from the main Tapia reservoir geologically, is considered by the state to be part of the same oilfield. Acquisition of this lease will benefit TEG in the unitization of the oilfield. This process will be a necessary part of implementing our planned steam flood.

TEG expects to close this acquisition by the end of the month. Once completed, TEG will submit to the DOGGR necessary paperwork for gaining approval for water injection. This approval process will take approximately 120 days. TEG has already been in discussions with the DOGGR regarding this process and also has a signed letter agreement with the surface owner (dated July 24, 2013) outlining the terms for gaining approval for water injection on the property.

The inability to fully dispose of produced water has limited the amount of oil that can be produced from the field on a daily basis. Water production increases over time are a natural progression in the life of any oilfield. We currently produce our highest oil-cut wells on a full-time basis, however certain high water producing wells such as Lackie #A-4, Hartje #13 & #15, and Yule #5 are all on a managed production schedule, that is, they are produced on a part-time basis to facilitate water reinjection. We estimate the loss in daily oil production at this point to be about 15 BOPD and possibly as much as 20 BOPD. This total varies with steaming different wells but will be gradually increasing as more wells are steamed (more water being produced and more stimulated oil lost per well-day loss). The addition of increased water disposal ability from this lease acquisition and subsequent permitting will add considerable value back into the project.

Project funding

Management is currently in discussions with several third-party sources of funding. Some of these have the added benefit of heavy oil expertise that can be utilized at the field level. As referenced above, modular development of the field can ease immediate needs for larger up-front capital infusions and provide for self-funding opportunities in the project development timeline with the use of generated cash flow.

TEG will follow up with an additional report once Dr. Ali submits his now current draft report in final form.

In accordance with the guidelines of the AIM Market of the London Stock Exchange, Jim Ellerton, Chairman of Sefton Resources, Inc. a qualified geologist with over thirty years oil & gas industry experience, is the qualified person as defined in the London Stock Exchange's Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement. Jim Ellerton has also relied on primary information supplied by staff and third party consultants in carrying out his review.

About Sefton

Sefton Resources is an oil and gas exploitation, tranmission and production company with significant scope to develop its three major areas of interest in onshore United States. Sefton's business strategy is to acquire long life, partially developed reserves with controlling interests, and maximize shareholder value through asset development using the Company's own funds initially then involve third party capital, farm-out or merger. At this time, Sefton operates all its assets, the majority of which are 100% owned.

Currently Sefton has a market capitalisation of approximately £4 million and a higher PV(10) value for its unrisked proved reserves and unproved resources. The key operational focus at this time is on developing three revenue sources from both California and Kansas:

Enhanced Oil Recovery (EOR) projects in California

Sefton owns 100% of two oil fields in the East Ventura Basin, California - Tapia (heavy gravity oil) and Eureka Canyon (medium gravity oil). The current operational focus is to develop Tapia with an active well drilling and work-over programme in conjunction with the use of cyclic steam production enhancement. Sefton engaged Petrel Robertson Consulting to construct a geologic model to be utilised by Dr Farouq Ali, a recognised expert, in a thermal simulation study to fully optimise production and reserve development of the Tapia field. Tapia generates the majority of Sefton's revenue at this time and has 2012 year-end estimated Proved Reserves (P1) of 3.5 million barrels.

Natural Gas Transmission in Kansas

Three gas pipelines have been acquired by Sefton in North East Kansas. The LAGGS pipeline in Leavenworth County has been fully refurbished and is now connected to the Southern Star Interstate Pipeline system which allows gathering, transportation and sales of natural gas outside local Kansas markets. Plans are to join the Vanguard pipeline to the LAGGS system (Leavenworth County) which will increase the scale of this gathering system. This means Sefton will be able to transport its own and third party natural gas to a national market and generate additional revenues. A third pipeline in Anderson County is planned to be connected to an interstate pipeline system in the future, which will provide additional opportunities for redevelopment of oil and natural gas.

Exploration and Production in Kansas

In North East Kansas (Forest City Basin), Sefton has a significant and growing acreage position (Leavenworth and Anderson Counties) where conventional oil, gas and coal bed methane (CBM) prospects have been identified. The current operational focus is in Leavenworth County where a workover, recompletion, surface equipment replacement and leasing programme is under way that will see oil, gas and CBM wells brought back into production. Initial revenues are from oil whilst additional gas assets are being assembled for future development as pipelines become operational. Estimated 2012 year-end Proved Reserves (P1) for the Leavenworth portion of our Kansas assets are 82,653 barrels of oil and 2.06 Bcf of gas; and total unrisked Proved Reserves and Unproved Resources of 832,485 barrels of oil and 14.4 Bcf of gas for the same area.