Sirius Pet Regulatory News (SRSP)

22 April 2016

Sirius Petroleum plc


(the "Company" or "Sirius ")

Operating Update

Sirius Petroleum (AIM: SRSP), the investing company focused on oil and gas exploration and development opportunities in Nigeria, is pleased to provide the following update: the commissioning of a Competent Persons Report ("CPR"); updated volumetrics associated with the Ororo field and formulation of a gas commercialisation strategy; and update on DPR/other agreements and permits.

Competent Persons Report on Ororo Field

Sirius is pleased to announce that it has engaged independent petroleum consultants, Rockflow Resources Limited ("Rockflow"), to produce a Competent Person's Report ("CPR") on the Ororo Field located in OML 95, in shallow waters offshore Nigeria, to assist the Company in its discussions with potential funding providers.

Summary of Rockflow's analysis:

· Rockflow has carried out comprehensive subsurface analysis on the Ororo field, building on the previous work carried out by Schlumberger, which was announced on 10 December 2013.

· Following completion of the subsurface review, ahead of publication of the full CPR, Rockflow has reported a gross Mid to High Case liquid hydrocarbon volume range for the Ororo field of 7.65 MMstb - 20.48 MMstb. This compares to previous estimates calculated by Schlumberger of 10.08 MMstb to 12.87 MMstb.

· The High Case confirms that significant potential exists on the field, which is located in a world-class petroleum system.

· The High Case illustrates that an increase in oil column thickness of the shallow reservoirs (D1, D2, D3) would result in a major improvement of the Estimated Ultimate Recovery (EUR) to 16.63 MMstb. This scenario reflects re-interpretation of existing data rather than any new exploration work. The Gross number of all liquid hydrocarbon reservoirs in this case exceeds Schlumberger's previous estimates by 59%. It also supports the case that additional prospectivity exists within the licence area, which the Directors expect to be further defined with future appraisal wells and studies.

Highlights

· Gross Mid to High Case STOIIP of 48.55 MMstb - 79.65 MMstb

Gas BOE conversion factor: 1 barrel of oil equivalent = 5800 cu ft gas

In addition to the volumetrics work, which has now been concluded, Rockflow will incorporate the Company's Field Development Plan ("FDP"), which sets out the optimal development strategy and project economics, into the CPR. Rockflow will be in a position to issue the CPR in due course once this further work has been completed. The gross volumetrics will be classified according to the Petroleum Resources Management System (PRMS) categorisation within the CPR.

For the avoidance of doubt, the gross volumetric data set out in this announcement is not the net volume attributable to Sirius, which will be further defined in the CPR when issued.

Gas Commercialisation Revenue Stream

In addition to the increased range of oil volumetrics at Ororo, Rockflow has also estimated significant volumes of gas of 99.34 - 133.95 Bcf gas, approximately 17.13 - 23.09 (Million Barrels of Oil Equivalent) gross Mid to High Case respectively.

The potential to exploit gas in addition to the oil revenue has generated interest from international oil and gas companies to secure and purchase such gas in the form of Compressed Natural Gas ("CNG") and Natural Gas Liquids ("NGLs"), which are produced as a by-product of the crude oil.

As a result, the Company expects the FDP will contain a Gas Commercialisation Strategy utilising a simple containerised Marine CNG solution for delivery onshore for sale. This is expected to be value accretive for the Ororo field, as it represents a further source of revenue, helping to improve the overall economics of the asset. Developing the gas option also reduces the need to flare gas during the early phase of the extended well testing period.

With the potential High Case volumes of gas available, alternative gas monetisation schemes are also being reviewed.

DPR/Other Agreements and Permits

In accordance with the Department of Petroleum Resources ("DPR") guidelines and regulations, Sirius, together with its partners, Guarantee Petroleum and Owena Oil & Gas ("Partners"), have filed the following permits and agreements as part of its development activities in anticipation of the rig mobilisation for the Ororo field:

· Executed a Global MOU with local communities impacted by drilling Ororo, as required by the Ministry of Environment as part of CSR initiatives;

· Commenced statutory NNRA licence with approved Radiation Safety Advisor (RSA);

· Submitted the Environmental Impact Assessment (EIA Survey) for approval by the Ministry of Environment; and

· Submitted the Emergency Response Plan (ERP) for petroleum drilling operations to the DPR.

The Directors also confirm that, further to the announcement on 3 November 2015 in respect of the issue of the well permit for the Ororo 2 well, the Company together with its Partners, is in the process of renewing the well permit, which is due to expire on 26 April 2016 ("Well Permit"). Due to the progress that has been made in respect of certain agreements and permits as outlined above, and the dialogue the Company and its Partners are having with the DPR, although there is no guarantee, the Directors are confident that the Well Permit will be renewed although any decision by the DPR is likely to be after the 26 April 2016. 

Whilst an environment of comparatively low oil prices compared to previous years has made it difficult for companies in the Oil & Gas sector to attract funding, the Directors are encouraged to be currently considering several funding options. Although conversations with potential funders remain subject to binding terms being presented, the Directors remain optimistic that the Company will secure the necessary funds to achieve commencement of production.

The Company will update Shareholders in the event that the Well Permit is renewed and as and when binding terms in relation to funding are put in place for drilling off the Ororo 2 well.

Licencing obligations update

Further to the announcement by the Company on 22 September 2015 in respect of clarifying the licensing obligations in relation to the Ororo Field, the Directors believe the DPR Well Permit issued on 26th October affirmed the Partners right to continue operations and drill Ororo-2A.

Additionally, having previously announced that the Company and its Partners would apply to the Ministry of Petroleum Resources in Nigeria to legally ratify Sirius' 40 per cent interest in the Ororo Field, the Directors no longer consider that this step is necessary. According to recent DPR guidelines, approval by the Minister of Petroleum Resources (the "Minister") is required for assignment of any right, power or interest in an Oil Prospecting Licence ("OPL"), Oil Mining Lease ("OML"), Marginal Field ("MF") or Oil and Gas Pipeline Licence ("OGPL") as required under the provisions of the Petroleum Act Cap P10 Laws of the Federation of Nigeria ("LFN") 2004 ("PA") and of the Oil Pipelines Act Cap O7 LFN 2004 ("OPA") respectively. However, the Company entered into the FTSA agreement, which sets out Sirius' 40 per cent economic entitlement with its Partners prior to the introduction of these aforementioned guidelines and therefore the Directors are of the opinion that Ministerial approval is not required. When funding for the Ororo 2 well has progressed, Sirius expects to be able to conclude the amendment or waiver of certain terms of the FTSA as referred to in the announcement of 22 September 2015.

Basis of preparation of volumetric calculations

All volumetric calculations are based on independent mapping undertaken by Rockflow Resources International ("Rockflow") using data provided to Rockflow. The reservoir properties input to the volumetric calculations and the associated volume uncertainty ranges are based on Rockflow's experience and the statement on risking in this announcement represents the independent view of Rockflow.

The volumetric estimates presented in this announcement have been prepared in accordance with reserves definitions presented in the Society of Petroleum Engineers' Petroleum Resources Management System.

As is expected to be reported in the CPR, although 3D seismic data are available for the field, its quality is rather poor, so the structure of the trap is only moderately imaged. This, together with the fact that only one well has been drilled in the Ororo Field and hydrocarbon contacts could not be defined, leads to significant uncertainty with regards in-place oil and gas volumes. These have been calculated probabilistically.

Review by Competent Person

In accordance with the guidelines of the AIM Market of the London Stock Exchange, the technical information contained in this announcement has been reviewed and approved by Tom Gunningham MA (Oxon) CEng MEI, a chartered petroleum engineer and reserves auditor for Rockflow Resources, who has over 27 years industry experience and meets the criteria of a qualified person under the AIM guidance note for mining and oil and gas companies.

Bobo Kuti, CEO of Sirius, commented:

"We are delighted that Rockflow has independently confirmed the significant potential of the Ororo field over and above our initial expectations. It is also an important precursor to attracting the necessary funding. We are pleased to have identified additional potential revenue streams through gas commercialisation which is in line with Nigeria's policy on gas flaring and also our objective to be a high-quality operator."

Enquires:

Glossary of technical terms

Bcf Billion Cubic Feet

CNG Compressed Natural Gas

CSR Corporate Social Responsibility

EUR Estimated Ultimate Recovery

MMstb Million Stock Tank Barrels

MMboe Million barrels of oil equivalent

NGLs Natural Gas Liquids

OML 95 Oil Mining Lease 95

STOIIP Stock-tank Oil Initially in Place