4th May 2005 07:00
Sefton Resources Inc04 May 2005 SECTON RESOURCES, INC. ("Sefton" or "The Company") RESULTS FOR YEAR TO 31 DECEMBER 2004 Chairman's Statement: I am pleased to be able to report to shareholders that during the past year wehave made significant progress in our expressed aim to build a strong stableplatform of assets, generating sufficient cash flow to operate and grow thebusiness. This has involved continuing to consolidate and rebuild, drillingadditional production wells and replacing surface equipment. The net result isthat by the end of the year, Sefton was producing the 75 barrels of oil per dayrequired to be cash positive. Oil and gas sales increased 6% to $563,231 ($531,427), but as a result ofcontinuing workovers at both Tapia and Eureka, production cost increased to$402,425 ($235,071). General and administrative costs also increased to$1,085,407 ($713,071) as we put in place the structure necessary to drive Seftonforward. This involved opening a new office in Ventura, California and engaginga full-time president for our California operations. The group's U.S. proven reserves have now increased by 3% to 4,743,088 BBLS(4,608,735 BBLS) and at the year-end have a before tax present value of$38,338,570 ($27,501,477) up 39% based on constant costs and the price at 31December 2004 with a 10% discount factor. Significant progress was also made in improving the balance sheet. As a resultof placings during the latter part of 2003 and early in 2004, total assets standat $7,114,551 ($3,978,654) an improvement of 79%. Liabilities were down 5% at$911,844 of which $348,554 has been converted into long-term debt; workingcapital increased substantially to $2,256,000 (-$200,000). TAPIA The company continued to improve and repair the facilities during the year. Asix well drilling programme to test the entire field to better define the oiland gas deposits and increase production was initiated late in December. Due toexcessive rain in Southern California, the drilling was suspended and has nowresumed. In addition, substantial road upgrading and drilling pad preparationwork has been completed. EUREKA Again, Sefton continued to repair and upgrade the well site and tank facilities.A new logging technique was used to better evaluate the re-completion methodemployed. This allowed a 100% increase in production as well as confirmingadditional reserves and drill locations. Due to torrential rain damage,significant road upgrading that had been completed, had to be undertaken againin order to gain access to the tank battery and well site(s). FOREST CITY BASIN Our acreage acquisition programme in the Forest City Basin of Eastern Kansas hascontinued. This is an area where Coal Bed Methane production has beenestablished in addition to conventional oil and gas deposits. During the year,more leases were acquired adding acreage to our total, which now stands atapproximately 20,000 acres. This project was initiated to give diversificationof commodity; gas (Forest City Basin) versus oil (Tapia/Eureka) and geography;(Kansas versus California) so as to decrease dependence on California oilproduction. LITIGATION During 2002, the Company experienced a blowout when drilling a well in the Tapiafield. During 2003, the Company was named in a wrongful death lawsuit resultingfrom the blowout. The Company has denied any wrongdoing and the drillingcompany's insurance carrier has indemnified Sefton, against any liability thatmay arise. Additionally, the Company is in litigation with the drilling company relating todrilling costs and possible damages and the outcome is unknown at this time. BOARD During the year, we also strengthened the Board of Directors with theappointment of Jeremy Delmar-Morgan. Jeremy, who is based in London, brings awealth of financial experience to the Board, having previously been chiefexecutive and chairman of stockbrokers, Teather and Greenwood. He will be a mainrepresentative in London and provide a vital link with our investors. 2005 Since the beginning of 2005, we have experienced exceptional rainfall inCalifornia with over 32 inches falling during January and February. As a result,the new drilling program was suspended until recently. The programme, however,is now well underway with two wells being drilled in the Northern part of theTapia Canyon field, two in the Central field and two in the South. We havereceived regulatory permission for steam stimulation of this field, which willhelp maximize our production and return. I will be in a better position toreport on these developments at the Annual General Meeting on 15 June 2005 inLondon. John James "Jim" EllertonChairman and Chief Executive Officer SEFTON RESOURCES, INC. AND SUBSIDIAIRES CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2004 AND 2003 Assets Current assets 2004 2003 Cash and cash equivalents $2,485,513 $362,688Accounts receivable 59,200 99,402Other receivables - related party 157,973 38,526Prepaid expenses and other assets 41,914 28,906 ________ _______Total current assets $2,744,600 $529,522 ________ _______ Oil and gas properties, full cost method, net 4,325,195 3,410,714Equipment and vehicle, net 44,756 38,418 ________ ________Total assets $7,114,551 $3,978,654 ________ ________ Liabilities and Stokholders' Equity Current liabilities 2004 2003 Accounts payable $438,382 $652,776Accrued expenses 2,697 5,078Accrued expenses - related parties 46,871 21,840Note payable, current portion - 27,500Notes payable - related party, current portion - 22,006 _______ ______Total current liabilities 487,950 729,200 Asset retirement obligation 75,340 227,736Note payable 348,554 - _______ _______Total liabilities 911,844 956,936 _______ _______ Stockholders' equityCommon stock, no par value, 3,000,000,000shares authorised, 1,493,369,500 (2004) and736,569,500 (2003)Shares issued and outstanding 10,922,853 6,696,395Stock subscription receivable (30,047) (41,479)Accumulated (deficit) (4,789,335) (3,700,349)Accumulated other comprehensive income (loss) 99,236 67,151 _________ _________Total stockholders' equity 6,202,707 3,021,718 _________ _________Total liabilities and stockholders' equity $7,114,551 $3,978,654 ________ ________ CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 Revenues 2004 2003 Oil and gas sales $563,231 $531,427 Costs and expensesOil and gas production 402,425 235,071Depletion and depreciation 166,662 197,743General and administrative 1,085,407 713,571 ________ _______ 1,654,494 1,146,385 (Loss) from operations (1,091,263) (614,958) Other income (expense)Interest income 10,464 1,231Interest expense (11,203) (7,580)Foreign currency transaction (losses) 3,016 (1,502) _______ ______ 2,277 (7,851) ________ _______ Net (loss) before cumulative effect of change inaccounting principle (1,088,986) (622,809)Cumulative effect of change in accountingprinciple, net of income tax - (20,332) _________ _______Net (loss) available for common stockholders $(1,088,986) $(643,141) _________ ________Basic and diluted (loss) per common share:(Loss) before cumulative effect change inaccounting principle $(0.001) $(0.002)Cumulative effect of change in accounting - -principle, net of income taxes _________ ________Net (loss) per common share $(0.001) $(0.002) _________ ________ Basic and diluted weighted average sharesoutstanding 1,133,348,189 406,867,705 ____________ ___________Other comprehensive gain (loss):Net (loss) $(1,088,986) $(643,141)Foreign currency translation adjustment 32,085 117,359 ___________ __________Comprehensive (loss) $(1,056,901) (525,782) ___________ __________ CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS DENDED 31, 2004 AND 2003 2004 2003 Cash flows from operating activities:Net (loss) $(1,088,986) $(643,141) Adjustments to reconcile net (loss) to net cash (usedby operating activities:Depletion and depreciation 166,662 197,743Change in accounting principle - 20,332Stock issued for oil and gas interest - -Stock issued for services 19,349 26,000Stock options issued for services 49,000 -Note payable issued for services - 31,275Accrued interest added to note balance - 5,431(Increase) decrease in:Accounts receivable (70,657) 47,941Prepaid expenses (13,008) (4,789)Other assets - related party (8,588) 47,178Increase (decrease) in:Accounts payable (214,394) 249,365Accrued expenses - related party (21,840) 11,239Accrued expenses 44,490 (34,431) ________ _______Net cash (used) by operating activities (1,137,972) (45,857) Cash flows from investing activities:Proceeds from sale of oil and gas properties 23,824 11,574Purchase/additions of oil and gas properties (1,274,028) (807,141)Purchase of property and equipment (25,356) - _________ ________Net cash (used) by investing activities (1,275,560) (795,567) _________ ________Cash flows from financing activities:Proceeds from sale of common stock 4,158,109 1,134,926Collection of stock subscription receivable 11,432 44,000Proceeds from notes payable - related party - 66,960Payments on notes payable - related party (22,006) (41,210)Proceeds from notes payable 370,000 5,000Payments on notes payable (48,946) (74,956) ________ ________Net cash provided by financing activities 4,468,589 1,134,720 ________ ________Effect of exchange rate changes on cash 67,768 35,329 Net increase (decrease) in cash and cashequivalents 2,122,825 328,625 Cash and cash equivalents - beginning of year 362,688 34,063 _________ _______Cash and cash equivalents - end of year $2,485,513 $362,688 _________ _______ SEFTON RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003 (CONTINUED) Supplemental disclosure of cash flow information; Cash paid during the year for interest was $11,203 and $7,580 for the yearsended December 31, 2004 and 2003, respectively. The Company paid no income taxes for the years ended December 31, 2004 and 2003. Supplemental non-cash financing and investing activities: During 2004, the Company recorded a reduction in its asset retirement obligationtotaling $154,894 in accordance with Statement of Financial Accounting StandardsNo. 143. During 2003, the Company received a favorable ruling on a lawsuit and received aroyalty interest in the Tapia field valued at $214,894 and forgiveness ofaccounts payable of $17,570. During 2003, the Company recorded an asst retirement obligation totaling$227,736 in accordance with Statement of Financial Accounting Standards No. 143. During 2003, the Company paid $87,500 of debt with the issuance of stock. Notes 1. Financial Statements The summary financial statements set out above have been extracted from theCompany's audited financial statements for the year ended 31 December 2004, (notpresented herein). Those financial statements were prepared in accordance withUnited States Generally Accepted Accounting Principles. These summary financialstatements do not constitute financial statements in accordance with UnitedStates Generally Accepted Accounting Principles as they omit substantially allthe disclosures required by United States Generally Accepted AccountingPrinciples. The annual repot of accounts will be posted to shareholders by 20 May 2005,copies of which will be available from the Company Secretary, Pinsent MasonsSecretarial Services Limited, Dashwood House, 69 Old Broad Street, London EC2M1NR or at www.seftonresources.com. The Annual General Meeting of the Companywill be held on Wednesday 15 June 2005 at Nominated Advisors (NOMAD) LondonOffice: - Seymour Pierce, Bucklersbury House, 3 Queen Victoria Street, LondonEC4N 8EL. 2. Net Loss Per Share The Company applies the provisions of Statement of Financial Accounting StandardNo. 128, "Earnings per Share" (FAS 128). All dilutive potential common shareshave an anti-dilutive effect on dilutive per share amounts and therefore havebeen excluded in determining net loss per share. The Company's basic and dilutedloss per share are equivalent and accordingly only basic loss per share has beepresented. 3. Dividends The Directors are not recommending the payment of a dividend For further information, contact: John James "Jim" Ellerton, Chairman & CEO Tel: 011 303 759 2700Jeremy Delmar-Morgan, Director Tel: 020 874 84066David Millham, Investor Relations Tel: 020 779 69999 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SER.L