Sirius Pet Regulatory News (SRSP)

29 June 2016

Sirius Petroleum Plc.

("Sirius" or the "Company")

Final Results for the year ended 31 December 2015

Sirius (AIM:SRSP), the investing Company focussed on oil and gas development and production opportunities in Nigeria, announces its audited Final Results for the twelve-month period ended 31 December 2015. During the period, the Company's focus has been on reviewing the opportunities available to the Company, both in terms of assets in Nigeria and the optimum financing and long-term strategy for developing those assets.

Overview

· Entered into a definitive agreement with our technical partner Havoc Partners, for the necessary technical geological and geophysical services. Our initiative ties in with our strategy to build a significant portfolio of oil and gas producing assets through local partnerships.

· Board changes: This year saw Steve Fletcher and Ajay Kejriwal leave the Board. The Board welcomed Chris Neal and Simon Hawkins as Non-Executive Directors to replace them. Simon Hawkins also replaced Kitwell Consultants Limited as Company Secretary.

· The Company raised £1.1 million ($1.7 million) by way of a placing at 0.4p per share, and £0.75 million ($1.14 million) in loans. The Company also converted £0.875 million ($1.35 million) of loans into shares.

· The Company reorganised the majority of its existing warrants cancelling 900 million at an average price of 6.67p over a period of up to 10 years and issuing in their place 185 million at 2p per share valid for a three-year period ending in 2018. There are 399 million warrants in place and 63 million options in place following the restructuring which is a total of 462 million representing 19.66% of the current fully diluted share capital of 2,350,029,523.

· Despite the challenging oil price environment, the Company made good progress on a number of business development opportunities geared to maturing Ororo and reviewing other potential assets.

Post 2015 events

· The Company raised £500,000 at 0.3p per share.

· The Company commissioned a Competent Person's Report on the Ororo Field, which is due to be published soon. Rockflow has reported gross Mid to High Case liquid hydrocarbon volume range for the Ororo field of 7.65 MMstb - 20.48 MMstb. The High Case confirmed significant potential exists on the field, which is located in a world-class petroleum system.

Going concern

The Directors have undertaken a detailed review of the Group's cash flow forecast. Based on the assumptions set out in the Going Concern section of the Strategic Report below, we believe that the Group will have 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. The auditor's report in the Group financial statements contains an Emphasis of Matter on going concern.

Annual General Meeting

Details of the Annual General Meeting will be sent separately to shareholders in due course and an announcement will be made when this has been done. The accounts for the year ended 31 December 2015 will be posted to shareholders shortly.

End

Enquiries

CHAIRMAN'S & CEO'S STATEMENT

We report on the progress of Sirius Petroleum plc ("Sirius", "the Group" or "the Company") for the twelve-month period ended 31 December 2015. The Board of Sirius continued to actively review its strategy in the light of volatile oil prices and its impact on the oil and gas sector. The focus of the Company is on acquiring assets not readily available to other international companies through our unique knowledge base, technical and commercial competencies and our deep relationships in Nigeria. Significant milestones achieved during 2015 included:

· Entered into a definitive agreement with our technical partner Havoc Partners, for the necessary technical geological and geophysical services. Our initiative ties in with our strategy to build a significant portfolio of oil and gas producing assets through local partnerships.

· Board changes: This year saw Steve Fletcher and Ajay Kejriwal leave the Board. The Board welcomed Chris Neal and Simon Hawkins as Non-Executive Directors to replace them. Simon Hawkins also replaced Kitwell Consultants Limited as Company Secretary.

· The Company raised £1.1 million ($1.7m) by way of a placing at 0.4p per share, and £0.75 million ($1.14m) in loans. The Company also converted £0.875 million ($ 1.35m) of loans into shares. 

· The Company reorganised the majority of its existing warrants cancelling 900 million at an average price of 6.67p over a period of up to 10 years and issuing in their place 185 million at 2p per share valid for a three-year period ending in 2018. There are 399 million warrants in place and 63 million options in place following the restructuring which is a total of 462million representing 19.66% of the current fully diluted share capital of 2,350,029,523.

· Despite the challenging oil price environment, the Company made good progress on a number of business development opportunities geared to maturing Ororo and reviewing other potential assets.

Post 2015 events

· The Company raised £500,000 at 0.3p per share.

· The Company commissioned a Competent Person's Report on the Ororo Field, which is due to be published soon. Rockflow has reported gross Mid to High Case liquid hydrocarbon volume range for the Ororo field of 7.65 MMstb - 20.48 MMstb. The High Case confirmed significant potential exists on the field, which is located in a world-class petroleum system.

Financial Summary

The loss after tax has been reduced to $4,066,000 in 2015 from $5,668,000 in 2014, with a reduction in administrative expenses of $192,000, a reduction in share-based payments of $621,000 and a reduction in finance charges of $752,000. Total assets have increased from $2,369,000 in 2014 to $4,057,000 in 2015, with liabilities rising from $3,412,000 to $4,102,000 and total equity has increased by $998,000 from ($1,043,000) in 2014 to ($45,000) in 2015. Net cash has increased from $19,000 in 2014 to $45,000 in 2015.

Vendor Finance

In tough market conditions, major oil service providers are offering turn-key services, equipment and personnel to finance low-risk development projects. The Board has received a proposal from a service provider but are pursuing other vendor finance opportunities to secure the most optimal deal. It is an industry trend being implemented in other parts of West Africa which capitalises on the availability of drilling equipment and personnel which is currently not under contract to an oil company, or under which the contract is about to expire or be terminated.

The major cut in spending by multinational oil companies is resulting in service providers offering turn-key services on proven assets to drill a well in order to cover their daily operating costs of drilling rigs, being paid out of oil revenue. The Board is confident we will be able to secure a vendor finance proposal to drill on the Ororo field.

Nigeria Oil Sector

President Buhari's administration initiated many structural reforms within the Nigerian National Petroleum Corporation ("NNPC") and the Ministry of Petroleum Resources ("MPR) to provide clarity, transparency, and accountability within the Nigerian Oil & Gas Industry.

These reforms continue to support indigenous projects and the Company's partnership with the Ondo State government, through Owena Oil & Gas Limited which is owned 100% by the Ondo State government, provides valuable access to proven oil discoveries located within Ondo State.

In the NNPC, a major internal restructuring was undertaken, whereby the NNPC was reorganised into four autonomous business units (Upstream, Downstream, Refineries, Gas & Power) and three services components (Finance & Accounts, Corporate Services and Venture Unit for non-Core assets management).

Efficient monetisation of associated gas, which could replace flaring and help develop the country's power sector, is a key focus of the Federal Government. The managing director of the NNPC reiterated their commitment to increasing Nigeria's gas production which is in line with our strategy to commercialise the gas on the Ororo field and generate additional sources of revenue.

Global Oil Outlook

The slowdown in upstream investment as a result of the oil price decline is expected to cut next year's global oil and gas production by 4 per cent. The IEA reported in mid-May 2016 that 1Q16 data is suggesting that global oil demand was growing at a pace of 1.4mmbpd (just over 1.5% yoy), up from 1.2mmbpd previously forecast. This follows from demand growth of c.1.8mmbpd (2%) in 2015 v 2014. The fundamental data points continue toward a rise in oil prices. Demand growth remains strong, global oil supply is contracting and there is little evidence of any reversal of the recent massive cuts to investment that have been made across the oil & gas industry.

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 purpose 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.

Going concern

The Directors have undertaken a detailed review of the Group's cash flow forecast. Based on the assumptions set out in the Going Concern section of the Strategic Report below, we believe that the Group will have 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. The auditor's report in the Group financial statements contains an Emphasis of Matter on going concern.

Annual General Meeting

Details of the Annual General Meeting will be sent separately to shareholders in due course and an announcement will be made when this has been done.

We have made significant progress over the past year to ensure the Company has all the necessary skills and resources to develop its pipeline of assets. While market conditions remain challenging, management is determined to maximise the value of its asset and the opportunities open to the Company in Nigeria.

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

Jack Pryde

Chairman

28 June 2016

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 $4,066,000 (2014: $5,668,000). Finance costs on loans decreased from $1,589,000 in 2014 to $837,000 in 2015, and share-based payments decreased from $1,516,000 to $895,000.

Since the end of the period, Sirius has issued a further 166,666,667 new ordinary shares of 0.25p each for cash, and now has 1,888,029,523 shares in issue. Sirius does not hold any shares in treasury and, hence, the total number of voting rights in the Company is 1,888,029,523. 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 Company's core corporate strategy is to work alongside financial and technical industry partners on a joint farm-in basis to exploit larger oil blocks (typically, marginal fields that have flowed oil in the past) in Nigeria, and to continue the development work completed on the Company's first marginal field, the Ororo Field, located in OML95, to optimise the well entry plans and field development.

Key Performance Indicators

At this stage in the Group's development, the key performance indicator is the loss after tax. As the Group has not undertaken any trade in the year it has no other key financial or non-financial performance indicators.

Principal risks and uncertainties

The Group's overall approach 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 developed 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 2015 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.

Oil Price Risk

The oil price is subject to market conditions which are outside of the Group's control. The decision to invest in any oil drilling will be made based on the latest and forecasted oil prices and 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 to this risk, remuneration policies are designed to incentivise, motivate and retain key employees.

Taxation and other legislation changes

Operating in developing countries has the 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 is therefore critical.

Going concern

The Directors have prepared cash flow projections for the period up to 30 June 2017. These projections only take account of the on-going management costs of the Group and the clearance of all payables which the Directors consider are currently due as 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 costs in relation to bringing the Ororo field into production or 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. These projections show a minimum cash requirement of $830,000. As at the date of signing the Financial Statements the Group has indicative commitments of equity funding from potential investors for up to $530,000 (approximately £400,000), and this funding is expected to be received into the business during July 2016. Given the progress made in relation to securing vendor financing highlighted within the Chairman's and CEO's statement and Strategic Report the Company is hopeful that these discussions will be concluded shortly. The directors are exploring options to raise additional funds to meet the balance of our anticipated working capital requirement. Although these discussions have not yet been concluded the Board is confident it will be able to raise these funds given its success in the past.

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 will have 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 funding which maximises value for shareholders.

Future prospects

Sirius, with the assistance of its broker, financial advisors and technical partners have made progress attracting investment in a difficult oil market. There is a growing trend on proven oil assets to partner with major oil service contractors who can provide vendor financing on a turn-key solution to drill wells to production and be repaid through oil revenues generated from the crude oil sales. The Company is focusing its efforts on partnering with major oil service companies who own and operate drilling equipment and rigs, along with experienced technical personnel, to provide vendor financing in exchange for revenues to repay the drilling costs.

Oil service providers and rig owners are keen to keep their equipment, staff, and rigs operating in the current oil market, and therefore, the Board consider this as the optimal solution to deliver the Ororo field to production in order to take advantage of the surplus of rigs that are currently available and not under contract.

The Board also continues to review additional asset opportunities, as well as distressed producing opportunities, that require funding.

O Kuti

Chief Executive Officer

28 June 2016

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2015

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 shares are listed on the AIM market of 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 2017. These projections only take account of the on-going management costs of the Group, and the clearance of all payables which the Directors consider are currently due 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 costs in relation to bringing the Ororo field into production or 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. These projections show a minimum cash requirement of $830,000. As at the date of signing the Financial Statements the Group has indicative commitments of equity funding from potential investors for up to $530,000 (approximately £400,000), and this funding is expected to be received into the business during July 2016. Given the progress made in relation to securing vendor financing highlighted within the Chairman's and CEO's statement and Strategic Report the Company is hopeful that these discussions will be concluded shortly. The directors are exploring options to raise additional funds to meet the balance of our anticipated working capital requirement. Although these discussions have not yet been concluded the Board is confident it will be able to raise these funds given its success in the past.

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 will have 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 2015

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 $Nil (2014: $Nil) arise in the UK and $3,902,000 (2014: $2,311,000) arise in Nigeria.

2. LOSS PER SHARE

There are 63,000,000 share options and 399,000,000 warrants outstanding as at 31 December 2015. Their effect is anti-dilutive, but are potentially dilutive against future profits.

3. TRADE AND OTHER RECEIVABLES

The fair value of these short-term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value. All trade and other receivables have been reviewed for indicators of impairment.

4. TRADE AND OTHER PAYABLES

Included in accruals is a liability to Havoc Services Pty Ltd of $454,000 (2014: $191,000) for technical services provided. Payment of this amount is deferred until:

a) the Company secures project funding for the next phase of Ororo field development or

b) acquires an interest in a significant oil discovery offshore Nigeria or

c) accepts any proposal resulting in a change of control of the Company or

d) as may otherwise be mutually agreed between Havoc Services Pty Ltd and Sirius.

Also included within accruals are Directors' salaries which are payable in cash upon commencement of drilling of $1,497,000 (2014: $1,599,000). There are also other amounts in both accruals and other payables which are due on commencement of drilling.

The fair value of trade and other payables has not been disclosed as, due to their short duration, management consider the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

5. LOANS PAYABLE

During the year the Company received loans from several unconnected parties to fund working capital amounting to $1,142,000 (2014: $2,420,000), which incurred initial loan fees of $1,142,000 (2014: $2,146,000) and additional fees of $Nil (2014: $455,000) as the loans were not repaid by their due dates. The loans are unsecured and do not bear interest.

The loan agreements and initial loan fees represent compound instruments. The fair value of the financial liability component of the arrangement was initially recognised at $348,000 (2014: $1,698,000). Associated finance charges of $803,000 (2014: $1,121,000) have been recognised during the period in accordance with the effective interest method. During the year $1,352,000 (2014: $3,765,000) of the debt was repaid in shares at between 1p and 2.88p. At 31 December 2015, the carrying value of the financial liability is $518,000 (2014: $738,000), including a $19,000 (2014: $8,000) exchange movement and is included within loans payable.

The initial loan fees may be settled, at the Group's discretion, in cash or as a fixed number of shares, to be issued at between 1p and 2.88p per share. This component represents an equity instrument and has been recognised within other reserves at the residual value of $794,000 (2014: $722,000), being the difference between the $1,142,000 (2014: $2,420,000) cash consideration received and the initial fair value of the financial liability component of $348,000 (2014: $1,698,000).

The additional loan fees may also be settled, at the Group's discretion, in cash or as a fixed number of shares. This represents an equity instrument which is recognised when the Group expects that the further fees will be incurred. Additional fees of $Nil have been recognised in 2015, and $455,000 were recognised in 2014, in other reserves as the loans were not expected to be repaid by 31 December 2014, with the associated cost being recognised as a finance charge.

During the year ended 31 December 2015 $2,117,000 of the initial and additional loan fees were settled by the issue of 108,804,348 ordinary shares at between 1p and 2.88p. This has resulted in a debit to other reserves of $1,107,000 and a debit to the profit and loss reserve of $1,009,000, representing the difference between the value of loan fees which were settled and the carrying value of the equity instruments in respect of these fees. There was an exchange movement of $9,000 in the carrying value of the other reserves.

During the year ended 31 December 2014 $2,326,000 of the initial and additional loan fees were settled by the issue of 74,777,326 ordinary shares at between 2.625p and 4p. This resulted in a debit to other reserves of $596,000, and a debit to the profit and loss reserve of $1,388,000, representing the difference between the value of loan fees which were settled and the carrying value of the equity instruments in respect of these fees. There was an exchange movement of $13,000 in the carrying value of the other reserves.

6. SHARE CAPITAL

The movement in share capital is analysed as follows:

On 3 March 2015, 7,500,000 ordinary shares of 0.25p were issued at 2p and 11,304,348 ordinary shares of 0.25p were issued at 2.88p in settlement of loan fees, 2,500,000 ordinary shares of 0.25p were issued at 2p, 4,000,000 ordinary shares of 0.25p were issued at 2.5p, 2,727,273 ordinary shares of 0.25p were issued at 2.75p and 6,956,522 ordinary shares of 0.25p were issued at 2.88p in settlement of loans. A further 8,900,000 ordinary shares of 0.25p were issued at 1p in settlement of consultancy fees.

On 1 May 2015, 20,000,000 ordinary shares of 0.25p were issued at 1p in settlement of consultancy fees and 15,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loan fees.

On 8 May 2015, 50,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loan fees and 20,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loans.

On 22 June 2015, 10,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loan fees, 10,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loans and 40,000,000 ordinary shares of 0.25p were issued at 0.8p in settlement of consultancy fees.

On 31 July 2015, 15,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loan fees, 15,000,000 ordinary shares of 0.25p were issued at 1p in settlement of loans and 937,500 ordinary shares of 0.25p were issued at 1p in settlement of consultancy fees.

On 22 September 2015, 275,000,000 ordinary shares of 0.25p were issued at 0.4p for cash raising £1,100,000 before costs.

On 23 September 2015, 60,000,000 ordinary shares of 0.25p were issued at 0.8p in settlement of consultancy fees.

On 30 September 2015, 22,800,000 ordinary shares of 0.25p were issued at 0.5p in settlement of unpaid directors' fees.

On 30 September 2015, 2,500,000 ordinary shares of 0.25p were issued at 0.4p in settlement of unpaid directors' fees.

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 shareholders.

7. 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 2015, 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 2015 financial statements upon which the auditor's opinion is not modified and does not include any statement under Section 498 of the Companies Act 2006, but does include an Emphasis of Matter on going concern.

The accounts for the year ended 31 December 2015 will be posted to shareholders shortly and laid before the Company at the Annual General Meeting. Copies will also be available on the Company's website (www.siriuspetroleum.com) in accordance with AIM Rule 26.