Sirius Pet Regulatory News (SRSP)

30 June 2014

Sirius Petroleum PLC

("Sirius Petroleum" or the "Company")

Final Results for the year ended 31 December 2013

Sirius Petroleum (AIM:SRSP), the Company focused on oil and gas development and production opportunities in Nigeria, announces its final results for the year ended 31 December 2013.

Summary of 2013 and Current Year Update

• The company's focus is the re-entry of the Ororo-1 well, originally drilled and flow tested by Chevron, located on the Ororo Field in OML 95. Management expects the field to be producing at an initial production rate of approximately 2,000 bopd which is expected to ramp up to 3,000+ bopd as the asset is developed.

• Off-take agreement with Glencore, facilitating the secure marketing and sale of the Company's crude.

• The company has constructed an exciting pipeline of Nigerian off-shore asset opportunities and has strong local relationships that are aligned with the company's success. Sirius is ideally positioned to participate in the upcoming marginal field bid round through these partnerships.

• Technical partnership with Schlumberger, the world's largest petro-technical services company, who has completed an independent Field Evaluation Study on the Ororo Field in OML 95 and, the well development plan, and will be conducting the drilling operations for the Ororo field when they commence.

• The financial results represent the costs of developing our strategy and reviewing interests in both potential oil and gas blocks and individual marginal field opportunities. Total comprehensive loss for the year amounted to $6,570,000 (2012: $3,867,000). 

• The Board continues to review potential project finance to bring the Ororo field into production. We will seek to conclude on funding which maximises value for shareholders.

Outlook

Sirius, with the assistance of the technical partner Schlumberger, has continued to make good progress on the Ororo field development plan and on building a pipeline of investment opportunities. We look forward to working with our partners in Nigeria as we move into the next stage of developing our portfolio of assets and taking the first of these into near term production, which remains conditional upon the completion of our financing strategy. We continue to actively review a number of funding options to complete our financing strategy and look forward to bringing news of further progress to shareholders in due course.

Jack Pryde, Chairman, Sirius Petroleum, said: "I am pleased with the progress made during the last twelve months as we continue our focus of putting the Ororo Field into production. The independent Field Evaluation Study completed by Schlumberger confirmed significant recoverable resources in the field that are higher than the Company's original estimates. The well re-entry proposal and other preliminary work done by Schlumberger and our Nigerian partners brings us closer to putting our assets into production."

Enquiries:

Chairman's Statement

I am pleased to report on the progress of Sirius covering the twelve month period to 31 December 2013. During this period Sirius conducted a detailed assessment of the potential recoverable reserves around the Ororo-1 well, utilising existing Chevron data.

The company subsequently engaged Schlumberger to produce a well re-entry proposal based on the sub-surface analysis of the Schlumberger reserve report, with a view to putting the Ororo Field into production.

Overview

• The company's initial focus is the re-entry of the Ororo-1 well, originally drilled and flow tested by Chevron, located on the Ororo field in OML 95. Management expects the field to be producing with an initial production rate of approximately 2,000 bopd which is expected to ramp up to 3,000+ bopd as the asset is developed.

• Off-take agreement with Glencore for up to 60,000 bopd, facilitating secure marketing and sale of the Company's crude.

• The company has constructed an exciting pipeline of Nigerian off-shore asset opportunities and has strong local relationships that are aligned with the company's success. Sirius is ideally positioned to participate in the upcoming marginal field bid round through these partnerships.

• Technical partnership with Schlumberger, the world's largest petro-technical services company, who has completed an independent Field Evaluation Study on the Ororo Field in OML 95 and, the well development plan, and will be conducting the drilling operations for the Ororo field when they commence.

Well Re-entry Program - Ororo-1

The Group is focussing its initial drilling activities on the re-entry of the Ororo-1 well located in the Ororo Field (OML 95). The well flowed at approximately 2,200 barrels of crude oil per day (bopd) from a single zone, and 600 bopd from another oil-producing sand of light crude oil (43 API) when originally tested by Chevron in 1986.

Sirius acquired rights to 40% of the Ororo field in 2011 and is entitled to a preferential cash flow of 88% while it is net invested in the project, which reverts to 40% post recovery. The field is situated in shallow water offshore in depths ranging between 23 ft and 27 ft.

Summary of Independent Assessment of the Ororo Field by Schlumberger

Schlumberger has been involved in the Ororo Field from the earliest stages and, due to the results from the Field Evaluation, we are now in discussions with them to provide Project Management and Drilling Services to accelerate our development activities on OML95 in order to get it to first oil. A summary of the Field Evaluation is as follows:

· Ororo Field hydrocarbon in place estimated at 35.2- 44.1 MMstb (P50 - P10 oil-in-place).

· Seven oil bearing sands (D1, D2, D3, D4, D5, F and G) were identified in the Ororo-1 well.

· The P50 - P10 Recoverable Oil from the single Ororo-1 well estimated at 10.0 MMstb - 12.8 MMstb.

· In 1986, the Ororo-1 well flow tested at a combined production rate of approximately 2,800 barrels of oil per day (bopd) from two oil producing sands.

· Ororo-1 well contains 125ft true vertical thickness (TVT) of net oil pay.

· The P50 - P10 Gas Initially In Place estimated at 396.5 - 557.6 Bscf with Recoverable Gas of 276.9 - 390.66 Bscf (P50 - P10).

· Ororo-1 well did not encounter any hydrocarbon water contact in any of the seven hydrocarbon bearing reservoirs which suggests that the contacts are located down dip of the Ororo structure.

· The combined results from the petro-physical analysis, seismic interpretation and volumetric studies shows the exploitation potential of the field is good.

 Loss of Capital

The financial statements show that the Company's net assets are less than half its called up share capital. In these circumstances, the directors of the Company are obliged by section 656 of the Companies Act 2006 to convene a general meeting for the purposes of considering whether any and, if so, what, steps should be taken to deal with the Company's current financial position. The Directors will consider this issue at the Company's forthcoming annual general meeting. 

Board Changes

During the year, Sirius announced the appointments of Olukayode ('Bobo') Kuti as Chief Executive, Stephen Fletcher as Finance Director and Ajay Kejriwal as a Non-Executive Director. The new appointments align the Board and executive management team with the next stage of our strategy and the transition of the Company from an investment company to a fully fledged owner and developer of oil and gas assets. Bobo has been instrumental in both building Sirius Petroleum's business base in Nigeria and securing the Company's options to acquire oil and gas assets. As Chairman, I have also spent a significant amount of time in the past few years helping to progress the Company's plans to reach first oil and I believe that we are on the cusp of achieving this goal.

I would also like to thank Toby Hayward and Mike Hirschfield who stepped down from the Board of Directors. The Board would like to thank Toby and Mike for their significant contributions to the Company during the formative stages of its development. Kitwell Consultants, of which Mike Hirschfield is a Director, has been retained as Company Secretary to Sirius. Mr Babatunde Agboola also stepped down from the Board to pursue other interests.

Outlook

Sirius, with the assistance of the technical partner Schlumberger, has continued to make good progress on the Ororo field development plan and on building a pipeline of investment opportunities. We look forward to working with our partners in Nigeria as we move into the next stage of developing our portfolio of assets and taking the first of these into near term production, which remains conditional upon the completion of our financing strategy. We continue to actively review a number of funding options to complete our financing strategy and look forward to bringing news of further progress to shareholders in due course.

Annual general meeting

The AGM will be held at 10.00 a.m. on Wednesday 23rd July 2014 at the offices of Fladgate LLP, 16 Great Queen Street WC2B 5DG.

Finally, I would like to thank our shareholders for their on-going support as we continue to develop the business. 

Jack Pryde

Chairman

30 June 2014

Strategic Report

Business review

The results of the Group are shown below. The directors do not recommend the payment of a dividend.

The results represent the costs of developing our strategy and reviewing interests in both potential oil and gas blocks and individual marginal field opportunities. Total comprehensive loss for the year amounted to $6,570,000 (2012: $3,867,000). Finance costs on loans increased from $785,000 to $1,590,000, and share based payments increased from a credit of $121,000 to a charge of $990,000.

Since the end of the period, Sirius has issued a further 63,230,681 new ordinary shares of 0.25p each, in settlement of outstanding professional and other fees, and repayment of loans for general working capital, and now has 1,019,730,666 shares in issue. Sirius does not hold any shares in treasury and, hence, the total number of voting rights in the Company is 1,019,730,666. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

Aims and objectives

The strategy of the company is to target and develop offshore proven oil discoveries in Nigeria that have beneficial indigenous tax regimes. The Company's initial focus will be to bring the Ororo field (OML 95) into production. The company has commenced the initial work program activities and will seek to develop and drill additional appraisal wells on the field to reach full field production, as funding becomes available.

Key Performance Indicators

As the Group has not undertaken any trade in the year it has no key financial or non-financial performance indicators.

Principal risks and uncertainties

The Group's overall strategy to risk management is to employ suitably skilled personnel, and implement appropriate policies and procedures. The risks we face have evolved over the course of the year as the business has grown and external factors have impacted the environment in which we operate.

Responsibility for reviewing the system of Risk Management rests with the Audit Committee of the Board which has reviewed and approved the measures that are being taken to mitigate the most significant risks.

The principal risks faced by Sirius during 2013 relate to, political risks in respect of the situation in Nigeria, and strategic risks associated with the growth of the organisation and the economic climate.

Exploration Risk

Exploration activities can be capital intensive and may involve a high degree of risk. Thus budgets are produced by experienced individuals and reviewed to ensure best practice exists. Exploration programmes are approved by the Board.

Nigeria country risks

Political instability in this developing economy could result in the loss of the business. Ongoing monitoring and close liaison on the ground are utilised to monitor the situation.

Loss of key employees

Loss of knowledge and skills to the Group in particular countries of operation is a key risk. In response remuneration policies are designed to incentivise, motivate and retain key employees.

Taxation and other legislation changes

Operating in developing countries has additional risk of significant changes in taxation legislation on oil field profits or other legislation. Maintenance of good open working relationships with local authorities in the countries of operation are key.

Going concern

The directors have prepared cash flow projections through to 30 June 2015. These projections only take account of the on-going management costs of the Group, and the clearance of all payables outstanding at the date of this report. The payment of accrued directors' remuneration and certain of the directors' remuneration payable in respect of the current year has been excluded as the directors have agreed to defer payment until such time as funds are available. The projections also do not assume any oil extraction or income from oil trading nor do they assume any acquisitions take place or that any additional assessment of the prospective resources is undertaken over and above that authorised as at the date of this report. 

On 30 April 2013 the Company signed a convertible loan facility with Calvet International Limited which provides up to £1.5 million ($2.4 million) of funding for general working capital, of which only £250,000 has been drawn down to date. On the basis that the remaining £1.25 million of this facility is drawn in full, the cash flow projections indicate that the Group has sufficient headroom to meet its working capital requirements.

On the basis of the assumptions above and following a detailed review by the directors of the Group's cash flow forecast, the directors believe that the Group has sufficient cash resources to meet its liabilities as they fall due for a period of at least 12 months from the date that the financial statements are signed. Consequently, the financial statements have been prepared on a going concern basis.

Fundraising

The Board continues to review potential project finance to bring the Ororo field into production. We will seek to conclude on funding which maximises value for shareholders.

Future prospects

The company is actively pursuing additional oil assets which are being divested by the Department of Petroleum Resources ("DPR") and the International Oil Companies ("IOCs"). There is a marginal field bid round ongoing which commenced in December 2013. The Company will seek to farm-in to these assets when the bid round is concluded. The DPR have stated the bid round winners will be announced in H2 2014.

IOCs like Shell and Chevron continue to divest their onshore assets as strategic moves to focus on developing deep offshore assets. This divestment process continues to be monitored by the Board as a potential source of new producing and development assets in Nigeria.

Jack Pryde

Director

30 June 2014

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2013

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2013

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2013

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2013

Basis of Preparation

The group financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS). The Company's ordinary shares are quoted on AIM, a market operated by the London Stock Exchange.

The principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

GOING CONCERN

The directors have prepared cash flow projections through to 30 June 2015. These projections only take account of the on-going management costs of the Group, and the clearance of all payables outstanding at the date of this report. The payment of accrued directors' remuneration and certain of the directors' remuneration payable in respect of the current year has been excluded as the directors have agreed to defer payment until such time as funds are available. The projections also do not assume any oil extraction or income from oil trading nor do they assume any acquisitions take place or that any additional assessment of the prospective resources is undertaken over and above that authorised as at the date of this report. 

On 30 April 2013 the Company signed a convertible loan facility with Calvet International Limited which provides up to £1.5 million ($2.4 million) of funding for general working capital, of which only £250,000 has been drawn down to date. On the basis that the remaining £1.25 million of this facility is drawn in full, the cash flow projections indicate that the Group has sufficient headroom to meet its working capital requirements.

On the basis of the assumptions above and following a detailed review by the directors of the Group's cash flow forecast, the directors believe that the Group has sufficient cash resources to meet its liabilities as they fall due for a period of at least 12 months from the date that the financial statements are signed. Consequently, the financial statements have been prepared on a going concern basis.

SIRIUS PETROLEUM PLC

NOTES TO THE ACCOUNTS

FOR THE PERIOD ENDED 31 DECEMBER 2013

1. SEGMENTAL INFORMATION

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The chief operating decision maker has defined that the Group's only reportable operating segment during the year is oil extraction and related activities.

The Group has not traded and has not generated any revenue from external customers during the period.

In respect of non-current assets $1,000 (2012: $3,000) arise in the UK and $1,981,000 (2012: $1643,000) arise in Nigeria.

2. LOSS PER SHARE

There are 76,000,000 share options and 990,000,000 warrants outstanding. Their effect is anti-dilutive, but are potentially dilutive against future profits.

3. SHARE CAPITAL

The movement in share capital is analysed as follows:

On 23 April 2013, 857,143 ordinary shares of 0.25p were issued at 3.5p in settlement of fees.

On 11 July 2013, 625,000 ordinary shares of 0.25p were issued at 4p in settlement of fees and 3,750,000 ordinary shares of 0.25p were issued at 4p in settlement of consultancy fees at fair value.

On 7 August 2013, 888,889 ordinary shares of 0.25p were issued at 3.38p in settlement of fees.

On 19 September 2013, 774,194 ordinary shares of 0.25p were issued at 3.38p in settlement of fees.

On 25 September 2013, 42,862,358 ordinary shares of 0.25p were issued at 4p in settlement of arrangement fees for loans. A further 61,300,000 ordinary shares of 0.25p were issued at par, 875,000 were issued at 3p and 8,537,500 were issued at 4p in settlement of fees, Also on 25 September 2013, 4,500,000 ordinary shares of 0.25p were issued at 4p for cash proceeds of £180,000 and 5,250,000 were issued at 4p in repayment of loans.

On 16 December 2013, 625,000 ordinary shares of 0.25p were issued at 4p in settlement of consultancy fees at fair value, 1,250,000 were issued at 4p in repayment of loans and 7,500,000 were issued at 3.3p in settlement of arrangement fees for loans.

The ordinary shares carry one vote each and on winding up of the Company the balance of assets available for distribution will, subject to any relevant restrictions, be divided amongst the members.

4. publication of non-statutory accounts

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The consolidated statement of financial position at 31 December 2013, the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and associated notes for the year then ended have been extracted from the Group's 2013 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

The accounts for the year ended 31 December 2013 will be posted to shareholders shortly and laid before the Company at the Annual General Meeting which will be held on 23 July 2014 at 10.00 a.m. at the offices of Fladgate LLP, 16 Great Queen Street, London, WC2B 5DG. Copies will also be available on the Company's website (www.siriuspetroleum.com) in accordance with AIM Rule 26.