SER.L Regulatory News (SER)

25 Jan 2007 07:01

Sefton Resources Inc25 January 2007 Sefton Resource Inc Trading Update Sefton Resources Inc. (the "Company") today provides a trading update for the first half of the financial year to 31 December 2006. The Board anticipates that trading for the Group will be in line with itsexpectations, and that it thus continues to trade profitably, during the secondhalf of 2006. During this period the Group has utilised its cash flow torefurbish and renew all its surface equipment at Tapia, provide capital toevaluate Eureka and continue development opportunities in Kansas. TEG OIL & GAS USA, INC. Tapia Oil production at Tapia remained steady averaging over 4,000 BO/mo with the exception of November when a key well was down for repair for part of the month. Early decline rates from initial production of the newer wells have flattened considerably and the current rates are being sustained. Facilities upgrades and repairs continue at Tapia. Once the work has been completed later this year, it will be capable of handling an additional 500 barrels of oil a day. The Company has now received preliminary approval for the drilling of three additional wells on its Snow USL lease. Permits for 5 wells (Hartje and Yule Leases) had previously been received and these can be drilled at any time. Several rigs are now available once the Company has its financing (See Below) and permits in place. In December, the Company commissioned the building of a steam generator that will initially be used to stimulate production at the Tapia field. Constructionis expected to be completed and the steam unit operational about mid-year. Eureka The reconnaissance geochemical mapping of the Eureka Canyon field is completed. Preliminary data is encouraging and supports the Board's plans to develop further this field. Current production at Eureka is approximated 435 BO/Month. TEG MIDCONTINENT, INC. The Board believes that opportunities in Kansas continue to be extensive. Anderson/Franklin Counties A recent project developed to the West of the Company's acreage holding has encouraged TEG MidContinent to consider a number of options. Sure Engineering was contracted to consolidate and expand the available data, and one of its conclusions was that: "Net coal thickness of the Company's leases is 11 to 22 ft in Anderson County,and 13 to 19 ft in Franklin County, exceeding the averages of the Bourbon Arch. Thicknesses for the Riverton and Bevier coals on TEG acreage are near the maximum for the region. TEG owns over 30,000 leasehold acres." Additional work is now being carried out by Sure Engineering as a result ofsuccessful drilling in the vicinity by other companies. Leavenworth County At Leavenworth County, TEG MidContinent has continued to acquire leases in an area which the Board believes to be very viable. Its total acreage holding is now over 7500 acres, acquired at competitive prices. In addition TEG is currently in contract negotiations with several pipeline operators that provide gas gathering system infrastructure or market access. FINANCING Based on the investment to date and the capital requirement needed to develop these projects, Sefton Resources, Inc. is continuing to evaluate options with a number of entities regarding the possibility of using debt and/or joint venture arrangements with an industry partner to maximise the potential and minimise risks. CAZA LITIGATION As indicated in the interim results reported September 22, 2006, Caza Drilling Inc., and TEG Oil & Gas U.S.A. Inc., a wholly owned subsidiary of Sefton Resources, Inc., were parties to two law suits following the 2002 "blowout" in Tapia Field. The wrongful death lawsuit relating to the blowout was settled for $4,200,000 with no liability or costs to Sefton Resources, Inc. or its subsidiaries. In the lawsuit to claim damages against Caza, an initialruling on the litigation went against the Company. Following analysis of theRuling and available options, the Parties have agreed to settle the case andhave executed a Settlement Agreement that was agreed to and entered into theCourt records on January 3, 2007. The Settlement Agreement calls for Sefton topay $250,000 in exchange for resolution of all matters between the Parties.The Company's balance sheet includes the contingent liability ($178,000) fromthe litigation and as such, there will be no major impact to the Company'sfinancials. BOARD AND MANAGEMENT CHANGES The Board has unanimously agreed that the position of Chairman and Chief Executive should be divided. As a result Jeremy Delmar-Morgan will become Non-executive Chairman with Jim Ellerton continuing as Chief Executive. In addition Cynthia Campbell, who joined the Group from Accountants, Gordon Hughes & Banks LLP, has been appointed Group Financial Controller. 31/12/06 AUDIT The Company is pleased to announce that Chantrey Vellacott DFK has been engaged as the Company's auditors and we expect results to be released in April/May of this year with an annual meeting expected in May/June. For more information please contact Jeremy Delmar-Morgan, ChairmanTelephone: 077 8900 4874 Jim Ellerton, CEO303 759-2700 This information is provided by RNS The company news service from the London Stock Exchange