Half Yearly Report

29 September 2014

Sirius Petroleum Plc.

("Sirius" or the "Company")

Half Year Reportfor the six month period ended 30 June 2014

Sirius Petroleum (AIM:SRSP), the Company focused on oil and gas development and production opportunities in Nigeria, announces its interim results for the six month period ended 30 June 2014.

Enquiries:

Results 

I hereby present the interim results for the six month period ended 30 June 2014. These results reflect the costs incurred during the period to evaluate the optimum field development strategy of the Ororo Field in collaboration with Schlumberger and commence some of the pre-development work prior to our intended drilling programme. The operating loss in the half year amounted to $1,394,000 (six months to 30 June 2013: $1,245,000, year to 31 December 2013: $4,798,000) giving a loss per share of 0.20c (30 June 2013: 0.41c, 31 December 2013 0.75c).

Marketing Agreement with BTG Pactual Commodities

I am delighted that we have entered into an Agreement with BTG Pactual Commodities (UK) LLP ("BTG Pactual") relating to the marketing of crude oil from the Ororo Field and other marketable products from other fields owned by Sirius Petroleum. BTG Pactual has agreed to be Sirius' exclusive representative to perform all necessary marketing, negotiation, sales and contract execution in relation to the sale of crude oil, from the Ororo Field and other fields subsequently owned by Sirius. BTG Pactual may also market other physical crude oil of Nigerian origin sourced by Sirius from fields which it does not wholly or partially own. Sirius has agreed with BTG Pactual to split equally the proceeds from the marketing of any crude oil from sources introduced by Sirius outside of its own production, which allows us to market crude where opportunities become available.

Conditional Placing and Subscription

Following the Half Year End, the Company announced on 23 July 2014 that it had entered into a Conditional Placing and a subscription of up to 389,863,548 new Ordinary Shares at 3 pence per share, to raise up to £11,695,906 (before expenses). The remaining condition is to put the Further Funding in place to bring the Ororo Field into production and a long stop date has been set for 7 November 2014. The optimum funding for the field is a mixture of debt and equity and we have agreed with subscribers to scale back the equity, if required, to minimise dilution for shareholders. The Company looks forward to concluding the Further Funding and will update shareholders accordingly when further information is available.

Financing

During the period the Company issued a total of 63,230,681 new ordinary shares of 0.25p each, to capitalise fees and repay loans at an average price of 3.64p per share.

Outlook

The underlying quality of our assets and the progress made by the management team lead me to believe that Sirius will conclude the funding of the first phase of development of the Ororo field.

Once concluded, and looking further forward, the strategy for Sirius remains to acquire off-shore assets. Specifically, we will target assets which have been drilled but do not tie-in to any onshore infrastructure, do not have significant farm-in fees and where we have the right to operate and to market the crude oil produced. We will endeavour to fund all our assets in the most efficient way for existing shareholders and following completion of existing discussions, I am confident that we will continue to execute this strategy.

Jack Pryde, Chairman

29 September 2014

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2014

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2014

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

SIRIUS PETROLEUM PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 30 JUNE 2014

SIRIUS PETROLEUM PLC

NOTES TO THE INTERIM REPORT

FOR THE PERIOD ENDED 30 JUNE 2014

1. BASIS OF PREPARATION

The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention. The financial information set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2013 have been delivered to the Registrar of Companies. The auditor's report on those financial statements was unmodified.

Going concern

The directors have prepared cash flow projections through to 30 September 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 ($2.0 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.

Segmental reporting

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 reviews financial information for and makes decisions about the Group's performance as a whole, as the Group has not generated revenue during the period.

Subject to further acquisitions and the future development of the business in Nigeria the Group expects to further review its segmental information during the forthcoming financial year.

2. LOSS per share 

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period. The impact of the options and warrants on the loss per share is anti-dilutive.

3. INTANGIBLE EXPLORATION AND EVALUATION ASSETS

Cost of oil and gas exploration - pending determination

During the year ended 31 December 2011 Sirius Ororo OML95 Limited entered into an agreement with Guarantee Petroleum Company Limited and Owena Oil and Gas Limited which gives it the right to acquire a 40% interest in the Ororo Oil Field.

The consideration for the 40% interest in the field was $1,000,000 paid on the date of the agreement with a further $500,000 due on the commencement of the operation of the well.

At the time of signing the agreement, the directors considered the fair value of the liability in respect of the additional $500,000 payable. Based on an assessment of how likely it would be that this would be paid discounted at 15%, the directors considered the amount to be immaterial and therefore did not recognise a liability at that time.

At 31 December 2012 the directors reassessed their estimate of the future cash flows in accordance with the Group's accounting policies. Following the additional work as noted below and the completion of the feasibility report along with the ongoing funding negotiations, the directors were confident of commencement of the operation of the well. As a result this liability was now expected to become payable. The directors have reviewed the assumptions made and do not consider them to have changed. Therefore the carrying value of the liability has been assessed at the same value at 30 June 2014 at $318,000 (30 June 2013 and 31 December 2013: $318,000).

The movement in the carrying value of the liability has been shown in profit and loss in line with the accounting policy for financial liabilities.

The Group has undertaken certain works including commissioning the preparation of a Competent Persons Report and has conducted an environmental impact assessment. It has also commenced planning appropriate community projects and site surveys to finalise the subsequent drilling programme and will also cover certain operational costs related to the field. Under the agreement the Group will cover all costs of this phase of the project. Costs plus interest of LIBOR+3% will be recoverable on the production of oil before the profit interest split is applied; these costs are being added to the costs of the asset.

The directors have reviewed the investment for impairment. During the year a Volumetric Estimation report has been received, which shows the field is economically viable.

The Volumetric Estimation report was commissioned by Sirius and produced by an experienced third party. This gives expected recoverability statistics from the well hole already drilled. These indicative predictions support the value of investment held on the balance sheet.

The Group intends investing further amounts into the Ororo Oil Field, as part of its strategic development plans. The costs of the capital and operating costs will be covered by separate funding facilities expected to be a mixture of debt and equity.

4. trade and other receivables

Trade and other receivables are usually due within 30 - 60 days and do not bear any effective interest rate. The fair value of these short term financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

5. trade and other PAYABLES

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

6. SHARE CAPITAL

The movement in ordinary shares and share premium in the period was as follows: