Half Yearly Report

22 August 2014

Sefton Resources, Inc.

("Sefton" or the "Company")

Half Yearly Report for the six months to 30 June 2014

The Board of Directors of Sefton (the "Board") wishes to advise shareholders of the Company's performance during the first half of 2014 (the "Period").

Sefton has been, and continues to deal with a series of events which have constricted cash flows and operational flexibility during the Period. Principally among them has been the drain on cash flows needed to meet commitments on the Company's banking facilities. Beginning in Q3 2013, payments required to be made to the bank drained cash that would have normally been re-invested in operational activities. As a result, all three areas of operation have been negatively impacted:

· The heavy oil operations in California as they are dependent on cyclic steaming to maintain and grow the level of oil production, water disposal facilities to recirculate water produced with the oil and also on regular maintenance and care of equipment;

· In Kansas, the producible wells require regular maintenance and investment to exploit the asset. Without free cash flow, re-investment is not possible and production inevitably declines, as has been the case in the Company's main properties; and

· Sefton has been unable to move forward in developing its TEG Transmission assets in Kansas due to cash constraints.

An agreement with Hawker Energy to acquire an 80% interest in the heavy oil operations in California (see the announcement of 30 June 2014) has provided vital cashflow to Sefton during the Period, and the closing of this transaction, approved by shareholders at an Extraordinary General Meeting on 23 July 2014, is a key step in getting to a stable viable ongoing Company. The Hawker transaction is proceeding with a prospective close, possibly in Q3 2014, but more likely early Q4 2014, subject to a replacement debt financing package being put in place and continuing financial support by Hawker and its affiliates in dealing with the current bank, expanding operations in TEG USA and freeing other cash for investment in Kansas.

The Board are currently evaluating a production linked financing for the Kansas exploration and production assets (see the announcement of 22 August 2014) and are also in very early stage discussion with third parties interested in joint venture participation in co-owning and utilising the Kansas pipeline facilities.

The Company has been operating without the benefit of any executive directors, relying on experienced incumbents in field and operating locations in Kansas and California, as well as the Denver administration office.

The non-executive directors have been taking leading roles managing the external side of the business including stock exchange and capital markets, business development, M&A/disposals and multiple legal issues..

Whilst the appointment of a CEO and additional directors is a near term goal, doing so is unlikely before the Hawker transaction closes.

Whilst uncertainties continue, a platform is in place to get the Company through to the next phase of opportunity and development of the Company's remaining assets. Employees, directors and service providers have come together to keep the Company viable. The short term strategic goals are to complete the Hawker transaction, secure additional finance for Kansas and add directors knowledgeable in the areas of business of interest to the Company. Longer term direction will come from that new leadership team.

For further information please visit www.seftonresources.comor contact:

Summarised financial information (unaudited)

Revenue in the period to 30 June 2014 is significantly lower than for the comparative period due predominantly to the significantly lower production and sales volumes, in addition to a slight drop in oil prices.

General and administrative expenses have decreased in the 2014 period to $805k compared to $1.080 million in the 2013 period. This decrease is largely due to reduction in staff costs.

The depletion, depreciation and amortisation charge has decreased to $152k in the period to 30 June 2014, compared to $277k in the period to 30 June 2013. This is mainly due to the decreased production, because the depletion charge is calculated on a units-of-production basis (% of estimated reserves).

The retirement obligation expense has increased compared to the comparative period due to an additional employee accruing retirement benefits.

Share-based payments are $103k in the six months to 30 June 2014 compared to $105k in the comparative period. No new options have been issued in the current period. Whilst a number of options have now vested resulted in a reduction in the expense for the period, 17,999,999 options have also been cancelled at 30 June 2014. This cancellation has resulted in an acceleration of the remaining expense for those options, in accordance with IFRS 2, of $24k which is included in the total share-based payments for the period.

Finance costs have increased significantly - from $120k in the 2013 half year period to $264k in the current period due to the combination of additional borrowings and increased interest rates.

There were no cash receipts from the issue of new shares in the period - compared to $967k in the period to 30 June 2013.

New loans issued in the period amounted to $892k, of which $102k was received in cash and $790k represents payments made directly by Hawker to repay capital and interest on the Group's existing bank loan ($129k of loans were issued in the period to 30 June 2013 for cash).

Conversion of loan notes and other share issues are explained in notes 2 and 3 below.

Unaudited consolidated statement of comprehensive income

Unaudited consolidated balance sheet

Unaudited consolidated statement of changes in equity

Unaudited consolidated statement of cash flows

Notes to the Unaudited Financial Information

for the 6 months ended 30 June 2014

Accounting policies

The interim financial information in this report has been prepared on the basis of the accounting policies set out in the audited financial statements for the year ended 31 December 2013, which complied with International Financial Reporting Standards as adopted for use in the European Union ("IFRS").

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the IFRS Interpretations Committee and there is an on-going process of review and endorsement by the European Commission.

The condensed financial information for the period ended 31 December 2013 set out in this interim report has been extracted from the full audited financial statements. These financial statements can be viewed at www.seftonresources.com .

1. Loss per share attributable to the equity shareholders of the Company

As at 30 June 2014, 30 June 2013 and 31 December 2013 the options in issue are not dilutive under IAS 33, Earnings per Share, because they would have the effect of decreasing the loss per share. As such there is no difference between the basic and dilutive loss per share at these dates.

2. Share Capital

During the period to 30 June 2014, 83,720,700 Common Shares were issued as follows:

· On 17 January 2014, 7,154,724 common shares were issued in settlement of future contractual payments totalling £20,000, equivalent to 0.28 pence per share.

· The following conversions of the convertible loan notes have taken place:

Following the above conversions, the convertible loan notes principal was reduced to $55,000.

During the comparative 6 month period to 30 June 2013, 108,333,333 Common Shares were issued at 0.6p raising £650,000.

Following the issue of Common Shares in the period to 30 June 2014, there were 787,810,441 Common Shares in issue.

3. Events after the balance sheet date

Subsequent to the balance sheet date, 58,582,651 Common Shares were issued during July and August:

· On 18 July 2014, 32,168,554 common shares were issued in settlement of outstanding accounts payable, employee compensation and directors' fees and expenses in the amount of US$88,045, equivalent to 0.1592 pence per share.

· The following conversions of the convertible loan notes have taken place, as a result of which the loan notes have been converted in full:

Following these issues of Common Shares, there are 846,393,092 Common Shares in issue.

The agreement with Hawker Energy to acquire an 80% interest in the heavy oil operations in California was approved by shareholders at an Extraordinary General Meeting on 23 July 2014. The Hawker transaction is proceeding with a prospective close, possibly in Q3 2014, but more likely early Q4 2014, subject to a replacement debt financing package being put in place.