Interim results for the six months to 30 June 2013

18th September 2013

Eland Oil & Gas PLC

 ("Eland" or the "Company")

Interim results for the six months to 30 June 2013

Eland Oil & Gas PLC (AIM: ELA), an oil & gas development and exploration company operating in West Africa with an initial focus on Nigeria, today announces its financial results for the six month period to 30 June 2013.

HIGHLIGHTS

Operational

· Installation of new flowlines in the Opuama Field nearing completion and the export pipeline survey and repairs are underway.

· The Opuama Flowstation integrity survey has been completed and recertification and repairs of the flowstation underway.

· First oil production scheduled for October 2013.

· Drilling of the initial development wells within the Opuama Field (Gross Certified Gross 2P Reserves of 54.2 Million bbls) is planned to commence upon the release of the Depthwize Imperial swamp rig currently on a single well assignment with Conoil on OPL 2007.

· Technical evaluation of the option to acquire 40% equity in OPL 452 in the Eastern Niger Delta is on-going.

Corporate

· Updated CPR in relation to the Group's interest in OML 40 commissioned from Netherland Sewell Associates Inc enhancing Eland PV10% value to $445.5 million at the 2P level (195% increase), assuming licence extension to 2026.

Financial

· Loss before tax of US$11.0 million for six months to 30 June 2013 (1H 2012: US$5.4 million, Full year 2012: US$14.2 million loss). This reflects the additional investment in staffing and studies undertaken by the Company in preparation for re-starting production and the drilling program on OML 40.

· Cash and cash equivalents held as at 30 June 2013 of US$11.8 million (30 June 2012: US$0.3 million, 31 December 2012: US$24.5 million).

· As at 5 September 2013 the Group held cash and cash equivalents of US$8.7 million.

· Debt facility of US$22 million agreed with Standard Chartered Bank available on first oil from OML 40 remains undrawn.

· The Company negotiated two £10 million equity options with key shareholders available to the Company in 2013.

Leslie Blair, CEO of Eland, commented:

"Our immediate focus is on returning OML 40 back to production and with that, bringing in the Company's first cash revenues. We have worked hard to achieve this in close co-operation with the operator of OML 40, NPDC, and look forward to the start of oil production in October. We will then turn our attention to the development drilling programme, for which we have a rig identified, and the task of building our production revenues over the long term."

For further information:

Eland Oil & Gas PLC (+44 (0)1224 737300)

www.elandoilandgas.com

Leslie Blair, CEO

George Maxwell, CFO

Canaccord Genuity Limited (+44 (0)20 7 523 8000)

Henry Fitzgerald O'Connor

Peter Stewart

FirstEnergy Capital LLP (+44 (0) 207 448 0200)

Majid Shafiq

Khalid Ahmed

Citigate Dewe Rogerson (+44 (0)20 7 638 7571)

Martin Jackson

Jack Rich

Note to Editors

OML 40 Overview

OML (Oil Mining Lease) 40 is an asset lease with existing production facilities and world class exploration potential, located onshore Nigeria within the Niger Delta it covers an area of 498 square kilometres. Since it was awarded to Shell in 1964, 18 wells have been drilled, based on 2D seismic with 15 wells intersecting hydrocarbon reservoirs including one developed oil field (Opuama) and four undeveloped fields, a success rate of 83%

The Opuama field was in production from 1975 to 2006 when SPDC (Shell Petroleum Development Company) JV undertook a controlled shut down of the facility due to nationwide security concerns. The field was producing 2,500 bopd at the time of the shut-in. The field facilities consist of a flow station with a nominal capacity of 30,000 bopd and pipeline access to the Shell operated Trans Escravos Pipeline and Forcados Terminal.

OML 40 represents an asset with 81.8 million barrels of gross lease 2P Reserves, 105.4 million barrels of gross lease 3P Reserves and 45.3 million barrels of gross lease 2C Contingent Resources, as outlined in a report prepared by Netherlands Sewell Associates Inc in July 2013. In addition, there is a significant identified exploration portfolio based on 2D and 3D seismic with total unrisked crude oil Prospective Resources of 119.5 million barrels[1].

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2013

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

The first six months of 2013 have seen continued progress towards re-commencing production activities on OML 40. The Company now has an organisation of over 20 staff in Drilling, Facilities, Investor Relations, Accounting, Community Relations and Operational functions where we are well placed to build upon the success achieved to date.

The re-start of production on OML 40 had been expected within the first half of 2013 however this was delayed primarily due to contracting and procurement issues. The revised timetable agreed with the operator, NPDC, is for production to re-start during October and work on the ground in OML 40 is progressing well towards meeting this objective.

The operational activities required to re-start production are to a) re-open two production wells, which were closed during a controlled shut down; b) install new field flowlines where the existing lines have been in place for a number of years; and c) the inspection and repair of the export line prior to its entry into the Shell operated Trans Escravos oil pipeline network.

Re-certification of all pressure vessels and valves on the flow station has been concluded, with refurbishment of the gas and diesel generators and exports pumps on-going.

The Company has also secured an option to participate in OPL 452 with Amocon. The lease is a highly prospective oil exploration block on the eastern side of the Niger Delta which would entail the acquisition of additional seismic on top of that acquired by Shell and the drilling of an exploration well in 2014. In the event of a commercial discovery the asset would be developed quickly as the licence is a sole concession agreement and has nearby oil export facilities.

We previously announced that we would revise our CPR to include a review of the technical data which we had obtained from Shell post completion of the transaction last year, in particular the reprocessing and interpretation of the 3D seismic that had been acquired by Shell but which was not available to the Company until post completion of the acquisition of OML 40.

The Company contracted Netherland Sewell & Associates (NSAI) in February to begin this review of reserves and resources. The results have now been released and show very significant increases for the Company's entitlement reserves, with 1P increasing 307% in volume to 13.8 MMBBLs and a 2P increase of 86% to 23.5MMBBLs. The modified carry arrangement, as set out in the original agreement with Starcrest in March 2011, was also reflected in this CPR increasing Eland's net entitlement value to $445.5 million PV 10% on a 2P basis an increase of 195%.

In conjunction with NPDC, the drilling programme for OML 40 is moving forward with the drilling rig planned to be on site during the 4th Quarter, after completing a single well programme for another operator. This will be the first new production well on OML 40 since the 1970's and the first step to realising the world class potential that we see in OML 40. Drilling will commence in the Opuama field which has gross 2P reserves of 54.2 Million bbls and is planned to continue throughout 2014.

Harry Wilson Leslie Blair

Chairman Chief Executive Officer

Forward-looking statements

This report has been prepared to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The Statement should not be relied on by any other party or for any other purpose.

The report contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report but such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. 

INDEPENDENT REVIEW REPORT TO ELAND OIL & GAS PLC

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual financial statements.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance with the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Aberdeen, United Kingdom

17th September 2013

FINANCIAL RESULTS

The Group has not recorded any operating revenue and does not anticipate any operating revenues until the commencement of oil production from OML 40. During the first six months of 2013 the Company has been focused on the restart of existing facilities in OML40.

CONDENSED CONSOLIDATED INCOME STATEMENT

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED BALANCE SHEET

CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

General information

Eland Oil & Gas PLC is a limited liability company incorporated in Scotland and listed on the Alternative Investment Market of the London Stock Exchange. The address of the registered office is 34 Albyn Place, Aberdeen, AB10 1FW, United Kingdom. The principal activities of the Company are oil and gas exploration and development, with a focus on West African opportunities for acquisition and development.

The condensed financial statements for the six months ended 30 June 2013 were authorised for issue in accordance with a resolution of the Board of Directors on 16 September 2013.

The information for the year ended 31 December 2012 contained within the condensed financial statements does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006 but has been derived from those accounts. Statutory accounts for the year ended 31 December 2012 were approved by the Board of Directors on 28 May 2013 and delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not included a reference to any matters to which the auditors drew attention by way of emphasis without qualifying. The report did not contain any statement under section 498(2) or 498(3) of the Companies Act 2006.

The financial information contained in this report is unaudited. The condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and the condensed consolidated cash flow statement for the six months to 30 June 2013, and the condensed consolidated balance sheet as at 30 June 2013 and related notes, have been reviewed by the auditors and their report to the Company is attached.

Basis of preparation

The condensed financial statements for the six months ended 30 June 2013 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with the accounting policies the Group intends to use in preparing its next annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 December 2012.

The Group incurred a net loss of $11 million during the period to 30 June 2013 and had net current assets of $10.6 million as at that date. Currently the Group does not generate any operating revenues.

After making reasonable enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue operations for the foreseeable future. For that reason, they continue to adopt the going concern basis in the preparation of the accounts.

Accounting policies

The accounting policies applied in these condensed financial statements are consistent with those of the annual financial statements for the year ended 31 December 2012, as described in those annual financial statements.

2. LOSS FOR THE YEAR

3. FINANCE COSTS

4. LOSS PER SHARE

From continuing operations

The calculation of the basic and diluted loss per share is based on the following data:

The above number of shares does not take into account a total of 31,248,263 potentially dilutive ordinary shares, in relation to the equity options and share option, which are anti-dilutive in the current year, but which may have a dilutive impact on future periods. Basic loss per share is equal to diluted loss per share as a result of the business being loss making.

5. PROPERTY, PLANT & EQUIPMENT

The Group's Oil and Gas assets at 30 June 2013 principally relate to the Group's interest in OML40 in Nigeria

6. CONVERTIBLE LOAN NOTES

The First Round Loan Notes and the Third Round Loan Notes were converted into ordinary shares of the Company on 3 September 2012. Round One, Two and Three Loan Note interest of £2,081,982 was converted into ordinary shares at par on 3 September 2012. Further loan note interest with an aggregate value of £391,232 was converted into ordinary shares at par on 17 September 2012. The Second Round Loan Notes were fully redeemed in October 2011.

7. PROVISIONS

The provision for decommissioning is in respect of OML 40. The provision represents the present value of amounts that are expected to be incurred in the end of licence term, discounted to the present value using a 5% discount rate.  

8. SHARE CAPITAL

9. RECONCILIATION OF OPERATING LOSS TO OPERATING CASH FLOW

10. OPERATING LEASE COMMITMENTS

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

11. SHARE BASED PAYMENTS

Equity settled share option scheme

The Company has a share option scheme for all Directors and key personnel of the Group. The options were granted on 3 September 2012. 2,669,763 Founder options are exercisable at £1.00 each, 8,210,000 share options are exercisable at £1.00 each and 368,500 share options are exercisable at £1.13 each. The options will be exercisable in full if the average closing price per Share over any continuous thirty (30) day period, ignoring any days which are non-dealing days for AIM, occurring wholly during the period of ten years from the date of grant, is equal to or greater than one hundred and fifty per cent (150%) of the Placing Price. Management has determined a 70% probability of this condition being satisfied. All of the share options have a vesting period of 3 years from the date of grant. The £1.00 Founder options are exercisable for a period of eight years (less one day) from the second anniversary of the date of the grant. The other options are exercisable for a period of seven years (less one day) from the third anniversary of the date of grant. If the options remain unexercised after the day preceding the tenth anniversary of the date of the grant the options expire. Details of the share options outstanding as at 30 June 2013 are as follows.

The options outstanding at 30 June 2013 had a weighted average exercise price of £1.00, and a weighted average remaining contractual life of 9 years and 9 months. The aggregate of the estimated fair values of the options granted on those dates is£2.557 million. The inputs into the Black-Scholes model are as follows:

Expected volatility was determined by calculating the historical volatility of the Company's share price from the date of admission to AIM to the financial year end. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The Group recognised total expenses of $715,039 (Full Year 2012: $498,397) related to equity settled share based payment transactions for the six months ended June 2013.

12. DIVIDENDS

No interim dividend is proposed and no dividend has been paid in the period to 30 June 2013 (Full Year 2012: US$nil).

13. POST BALANCE SHEET EVENTS

As at 17th September 2013, there were no significant post-balance sheet events, other than those disclosed above.