Sirius Pet Regulatory News (SRSP)

1 February 2013

Sirius Petroleum plc

("Sirius Petroleum" or "the Company")

Proposed Funding Strategy

The board of directors of Sirius (the "Board" or the "Directors") announces that it is in discussion with a number of potential funding partners through its advisers and would like to provide shareholders with background information on the Board's proposed approach to the execution of its strategy in the event that a transaction is concluded with these partners, and to obtain shareholder approval for that approach, together with related authorisations.

Key Points

·; Sirius entered a Financial and Technical Services Agreement in October 2011 in respect of the Ororo Field (located in OML 95) and, has been granted exclusive options over equity interests in two Nigerian Oil Prospecting Licences (the "First Oil Block" and the "Second Oil Block").

·; The Company has most recently been progressing discussions with potential financial partners with a view to raising approximately US$50 million, predominantly by way of debt funding.

·; The Board is now proposing to issue equity and warrants, as and when the Company's advisers procure minimum funding of US$18 million to meet its initial requirements. This funding may take the form of debt, prepayment for production, off-take or similar, or a combination thereof, with a proportion of equity if this is deemed to be most appropriate for the Company.

·; In addition it is proposed to issue new equity and warrants which, if exercised in full, are designed to provide the further funding necessary for additional drilling operations and infrastructure costs in respect of the First Oil Block and the Ororo Field and the development costs of the Second Oil Block and negate the requirement for Sirius to raise further funds through the issue of additional equity.

·; Shareholder authority is being sought for the issue to subscribers or placees for up to 300 million shares at 4p raising up to £12m and warrants in two tranches of 300 million Ordinary Shares each, with exercise prices of 6 pence and 10 pence respectively (together the "Warrants"). If, and when, exercised or subscribed for in full the equity and Warrants will provide equity-based funding of £60m (approximately US$100m).

·; A circular and notice will be sent to shareholders convening a General Meeting of the Company to be held at 11.00 a.m. on Tuesday 26 February 2013 at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG.

Jack Pryde, Chairman, said:

"We are aiming to partner with a strategic international oil trading company providing debt facilities to support the acquisition and development of up to three oil assets and in addition, we also aim to provide the platform to raise an additional $100m in new funds via the issue of equity. We believe that this combination of debt and equity will provide an efficient funding package under which we will be able to develop an array of exclusive oil assets through to production."

Proposed Funding Strategy

Background

Following the Company's readmission to AIM as an Investing Company on 24 March 2011, the Board, together with its advisers, has been working, via its in-country network of business contacts and consultants in Nigeria and the UK, to secure access to opportunities in the oil and gas sector. To date, the Company has entered a Financial and Technical Services Agreement in respect of the Ororo Field (otherwise known as OML 95) and, as announced on 21 June 2012, the Company has been granted exclusive options over equity interests in two Nigerian Oil Prospecting Licences (the "First Oil Block" and the "Second Oil Block"). The Company's UK management team has worked to obtain the financing necessary to undertake development work on these licence areas, which concludes Sirius' equity participation in the licences. Such work will include the preparation of the technical reports required in accordance with the AIM Rules for Companies.

The Company has been progressing discussions with potential financial backers with a view to raising approximately US$50 million, predominantly by way of debt funding, which will enable it to progress work on the First Oil Block and the Ororo Field such that each can be brought into production. These potential financial backers have been introduced by the Company's key advisers and discussions have, to date, been led by these advisers.

In seeking to secure appropriate, sufficient finance to fulfil its investing strategy, as set out in its AIM Admission Document dated 28 February 2011, the Board is mindful of the importance of Sirius' key advisers, and their wider business relationships, to the Company's future prospects and to enable Sirius to fulfil its stated strategy.

The Funding Strategy

The central tenet of the Funding Strategy is based on the provision of debt facilities of approximately US$50 million (which might include pre-pay or off-take arrangements) together with equity warrants which, if exercised in full, are designed to provide the further funding necessary for additional drilling operations and infrastructure costs in respect of the First Oil Block and the Ororo Field and the development costs of the Second Oil Block.

The Board is proposing to issue warrants as and when the advisers procure minimum funding of US$18 million to meet its funding needs. The funding may take the form of debt, prepayment for production, off-take or similar, or a combination thereof, with a proportion of equity if this is deemed to be most appropriate for the Company.

The Board expects the advisors to procure subscribers or placees for up to 300 million shares and intends to divide the warrants into two tranches of 300 million Ordinary Shares each, with exercise prices of 6 pence and 10 pence respectively (together the "Warrants"). If, and when, exercised in full the equity and Warrants will provide equity-based funding of £60m (approximately $100m) in addition to the debt facilities currently under negotiation. If subscribers or placees for 300 million shares are not sought, the Board will issue these shares as warrants, with an exercise price of 4p.

The price of an Ordinary Share as at 31 January 2013, the latest practicable date prior to the posting of this circular, was 3.625 p and hence the warrants will be issued at a premium to the current share price of 10.3 per cent., 65.5 per cent. and 175.9 per cent. respectively.

It is currently envisaged that the debt facilities under negotiation and the Warrants (if exercised) will provide all the necessary funding for Sirius to achieve its short and medium term objectives and negate the requirement for Sirius to raise further funds through the issue of additional equity, thus avoiding future dilution to existing Shareholders. If the Company has surplus capital available, following a full or partial exercise of the Warrants, the Board will consider further investment opportunities in line with the Company's investing strategy.

In structuring the Funding Strategy, the Board has taken into account the Company's limited financial resources, the Company's need for further capital in addition to the proposed debt facilities and the fact that exercise of the Warrants will lead to a significant inflow of capital to the Company at prices which largely represent a substantial premium to the current market price of an Ordinary Share.

Shareholders should note that there is no guarantee that a financing on the terms currently envisaged will be concluded successfully, nor that any Warrants issued will be issued or exercised subsequently. In such case, the Company will require alternative sources of finance to develop its operations. Such finance may not be available or available on terms acceptable to the Board. Shareholders' attention is also drawn to the fact that any Warrants issued will only be of value to the recipients in the event that the value of the Ordinary Shares increases significantly, representing the transformative nature of a transaction which will have been introduced to Sirius. Further, funds received assuming full exercise of the Warrants will represent 202.9 per cent. of the Company's market capitalisation in the business day prior to the dates of this circular.

If exercised in full, the Ordinary Shares arising on exercise of the Warrants will represent 52.42 per cent of the issued share capital of the Company as enlarged by the issue of such shares.

The Warrants will not be issued to any of the Directors or persons connected (within the meaning of sections 252-254 Companies Act 2006) with them.

Summary of the principal terms of the Warrants

The Company proposes to issue warrants over 600 million Ordinary Shares, with half of the Warrants being exercisable at 6p within five years of date of issue and half at 10p per share within ten years of date of issue. If subscribers or placees for 300 million shares are not sought, the Board will issue the remaining shares as warrants, exercisable at 4p within three years of date of issue.

The Warrants will be exercisable in whole or part, subject to a minimum exercise amount of 50 million Ordinary Shares or such lesser amount equal to the total number of Warrants held by a single party, should that be less than 50 million.

The Warrants contain undertakings from the Company to maintain sufficient shareholder authorities to permit the issue and allotment of Ordinary Shares arising on exercise of the Warrants. The Company has given warranties regarding its power and authority to grant the Warrants. In addition, the Company has agreed to typical protections afforded to warrant-holders regarding a re-organisation of the Company's share capital. The Warrants are assignable, with the Company's consent, such consent not to be unreasonably withheld or delayed.

Prior to any exercise of the Warrants, the Warrant Holder is required to consult with the Company so as to consider whether exercise of the Warrants could result in the Warrant Holder or any person acting in concert with it incurring an obligation under Rule 9 of the City Code on Takeovers and Mergers. Any exercise of a Warrant must comply with the provisions of the City Code on Takeovers and Mergers.

No Warrant Holder, other than certain specified parties, are permitted to exercise any Warrants which would result in the Warrant Holder or their associates holding 10 per cent or more of the issued share capital of the Company without seeking the approval of the Company's nominated adviser from time to time.

Current trading and prospects

The Company continues to operate on a prudently managed overhead and has also sought to satisfy outstanding creditors via the issue of Ordinary Shares in order to allow the maximum level of cash resources to be applied to the fulfilment of the Company's strategy. The Company is confident that, should a suitable funding agreement be consummated, it will be very well placed to capitalise on and develop the assets that it has identified and which it already has the option to participate in at the equity level.

General Meeting and irrevocable undertakings

The General Meeting is to be held at 11.00 a.m. on Tuesday 26 February 2013 at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG for the purpose of seeking Shareholders' approval of the Resolution. Notice of the General Meeting will be sent to shareholders today and is also available on the Company's website at www.siriuspetroleum.com.

The Board has sought and received irrevocable undertakings to vote in favour of the Resolution from the holders of 419,092,036 Ordinary Shares representing 51.3 per cent. of the Company's issued share capital, including 83,525,000 Ordinary Shares in which the Directors are interested and which represent 10.22 per cent. of the Company's issued share capital.

Ends.