Interim results for the six months to 30 June 2016

21 September 2016

Eland Oil & Gas PLC

 ("Eland" or the "Company" and, together with its subsidiaries, the "Group")

Interim results for the six months to 30 June 2016

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 2016.

George Maxwell, CEO of Eland, commented:

"The first half of 2016 was successful for Eland, with operational success at the Opuama-3 well workover in OML40 testing at rates in excess of 10,500 barrels/day of oil, reserves additions reported in CPRs for both the Ubima marginal field and the Gbetiokun field, and an oversubscribed equity raise for $18.5 million. Although sales have been impacted by the Forcados terminal being shut-in since mid-February, we expect production and revenue generated cash-flow will reach an all-time high upon terminal operations resuming. We also look forward to further operational progress with workovers being planned on OML 40 and the Ubima field".

H1 2016 HIGHLIGHTS

Operational

· Average gross production for the Opuama field in licence OML 40 was 4,140 bopd based on actual production days. Production was halted following the shut-in of the Forcados terminal from mid-February.

· Following successful workover operations in April, testing of the Opuama-3 well achieved a combined initial flow-rate from two separate horizons of over 10,500 bopd under three separate sequential production tests, materially ahead of expectations.

· Maintenance activity and equipment re-certification at the Opuama Flow Station have been completed to ensure continued high equipment uptime once the Forcados terminal comes back on line.

· In April Eland announced a CPR for the Ubima field with

o gross 2P Reserves of 2.4mmbbl (net 1.1mmbbl) to the Ubima-1 early production system and assumed initial gross production of 2,500 bopd; and

o 2C Contingent Resources of 31.1mmbbls (net 13.1mmbbls) to the full field development plan.

· In April Eland announced a CPR for the Gbetiokun field with

o gross 2P Reserves of 10.8mmbbls (net 3.9mmbls) to the Gbetiokun-1 early production system on OML 40 and assumed initial gross production of 7,800 bopd.

· During the period planning commenced on two supplementary and independent export routes to diversify crude deliveries. Barging proposals were reviewed with options for logistics, storage and offtake all finalised and actionable to be operational within 30 days. The Company is also advancing preparation for the installation of a dedicated 6 km pipeline extension directly into a nearby terminal.

· Completed tie-in point into OML 40 export line for barging operations and Gbetiokun crude injection point.

Financial

· Ended the period with cash balances of $20.6 million, following a successful equity placing of GBP 12.4 million (c.a. $18.5 million) in April 2016, priced at a premium to the previous closing mid-market price.

· In the first half of 2016 total liftings were 38,200 barrels of oil (H1-2015 liftings were 163,100 barrels), generating revenues of $1.1 million (H1-2015 revenues $9.9 million). Elcrest Exploration and Production Nigeria Ltd ("Elcrest"), Eland's joint venture company, has an immediate cargo shipment programmed since February for 42,975 barrels of oil upon Forcados operations resumption.

· Reduced loss after tax despite the significant drop in revenue. This was achievable from the cost reductions on operational assets, combined with foreign exchange gains arising from the revaluation of Naira liabilities.

· The borrowing base amount was unchanged as at end June at $25.4million. Drawdowns to date remain at $15 million. There may be an interim review of the Borrowing Base before the end of the year to reflect the resumption of the Forcados terminal and production performance of Opuama-3. The Company does not intend to make any further drawdowns this year in order to execute its work programme.

Outlook

· A return to operation of Forcados terminal shortly will allow Eland to bring Opuama production back onstream at significantly higher production rates following the successful workover of Opuama-3. We will update the market on stabilised production rates in due course.

· During the prolonged shut-in of Forcados we continued to evaluate our portfolio. After the success of Opuama-3, and the very positive flow rates observed from the D1000 and D2000 reservoirs, we believe significant upside exists from further workovers on OML 40 alongside Gbetiokun-1. Following this further technical work the Company still expects to re-enter, complete and produce from a further workover on OML 40 by the end of the year. This is expected to significantly increase our production by year-end further proving the attractive return on investment our shareholders gain from these workover opportunities.

· Re-entry and completion of Ubima-1 targeting four oil zones to prove up the contingent resources and move towards the early production system scheduled for end of 2016 subject to weather.

· Continue planning and implementing the establishment of two alternative oil export routes.

For further information:

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

www.elandoilandgas.com

George Maxwell, CEO

Olivier Serra, CFO

Finlay Thomson, IR

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

Henry Fitzgerald O'Connor/Nilesh Patel

Panmure Gordon & Co Ltd (+44 (0) 207 7886 2500)

Adam James/Atholl Tweedie/Tom Salvesen

Camarco (+44 (0) 203 757 4980)

Billy Clegg / Georgia Mann

Notes to editors:

Eland Oil & Gas is an AIM-listed independent oil and gas company focused on production and development in West Africa, particularly the highly prolific Niger Delta region of Nigeria.

Through its joint venture company Elcrest, Eland's core asset is OML 40 located in the Northwest Niger Delta approximately 75km northwest of Warri and covers an area of 498km². In addition, the Company has a 40% interest in the Ubima Field, onshore Niger Delta, in the northern part of Rivers State and has been carved out of OML 17.

The Company's strategy is to sharply grow its production base through low cost operations and well re-entries. Since November 2015, the Company has delivered a three-fold increase to its production base from the Opuama field in OML 40 through a number of lower-cost workovers and the field most recently produced at over 4,400 bopd (exit 2015). The Company's current export route is via the Forcados terminal and is currently working on adding two supplementary evacuation routes to diversify its crude deliveries

The OML 40 licence area holds gross 2P reserves of 83.2 mmbbls, gross 2C contingent resources of 41.2 mmbbls and a best estimate of 254.5 mmbbls of gross unrisked prospective resources. The Ubima field holds gross 2P reserves of 2.4 mmbbl of oil and gross 2C resource estimates of 31.1 mmbbl.

REVIEW OF H1 2016

Diversification of export routes

Forcados remains shut-in due to deliberate damage to the oil export line, although the Company believes that it will become operational in the near-term. As previously reported, in order to alleviate the Company's single export route option, Eland has identified two supplementary and independent export routes to diversify its crude deliveries:

· A barging option utilising a tie-in point on the Benin river; and

· A dedicated 6 km pipeline extension directly into a nearby terminal

The Benin River tie in is completed, which will allow shipping of oil via a shuttle vessel from the Benin River and then on to an alternate terminal. Barging proposals for storage and offtake have now been finalised. We are therefore in a position to implement the barging of production, with a short lead-time, subject to economics and the timing and status of Forcados operations.

A bid for the pipeline survey has commenced to identify the optimal route for the 6 km pipeline into the nearby terminal directly linked from the OML 40 JV's export pipeline.

On completion the Company will have significantly increased production security with three evacuation routes for its OML 40 crude oil.

Opuama

Elcrest successfully re-completed the Opuama-3 well in April 2016. Three sequential production tests confirmed a combined flow-rate from two separate reservoir intervals of over 10,500 bopd and a reduction of over 1,000 bpd in produced water. The well initiated production from the D1000 Upper and D2000 reservoirs, as well as providing valuable field data for future workover and development activities. The combined production from Opuama Flow Station is expected to be in excess of 10,000 bopd when production re-starts and flow rates have been optimised.

Since the Forcados shut down, the Company has used the downtime to perform critical maintenance activity and equipment re-certification at the Opuama flow-station, which have now been completed. This will ensure high equipment uptime once Forcados comes back on line.

In addition, work has been completed to maximise efficiency of our production and reduce operating cost per barrel. Dewatering of Opuama production currently takes place at Forcados at a cost in the region of $2.50 per/bbl. We now have de-watering tie in connections at the Opuama Flow-station. Our full de-watering initiative, in conjunction with the water shut off work completed on Opuama 3 will considerably reduce operating costs and allow production and transport of dry crude.

During the prolonged shut-in of Forcados we continued to evaluate our portfolio. After the success of Opuama-3, and the very positive flow rates observed from the D1000 and D2000 reservoirs, we believe significant upside exists from further workovers on OML 40 alongside Gbetiokun-1. Following this further technical work the Company still expects to re-enter, complete and produce from a further workover on OML 40 by the end of the year.

Gbetiokun-1 

In April the Company announced the results of a Reserves and Resources evaluation on Gbetiokun-1, OML 40, provided by Netherland Sewell as at 31 March 2016 which assigned 2P reserves of 10.8 mmbbls (net 3.9 mmbls) and oil-in-place estimates for E2000 and E6000 reservoirs on OML 40 to be 25.9 and 12.8 MMstb respectively, increases of 73% and 45% compared to its previously announced 30 June 2014 evaluation of these reservoirs.

Storage, offtake and barging work on Gbetiokun is progressing, and mirrors the planning undertaken to barge OML 40 aggregate crude. The Gbetiokun injection point on the OML 40 export line at the Benin River was completed in September which will allow crude export from the Gbetiokun field upon completion of the workover.

During the prolonged shut-in of Forcados we continued to evaluate our portfolio. After the success of Opuama-3, and the very positive flow rates observed from the D1000 and D2000 reservoirs, we believe significant upside exists from further workovers on OML 40 alongside Gbetiokun-1. Following this further technical work the Company still expects to re-enter, complete and produce from a further workover on OML 40 by the end of the year.

Ubima

In April 2016, AGR TRACS International Limited ("TRACS") assigned 2P Reserves of 2.4 mmbbl (net 1.1 mmbbl) to Ubima 1, and 2C Contingent Resources of 31.1 mmbbls (net 13.1 mmbbls) to the full field development.

Following the publication of the Ubima CPR the Company announced plans to accelerate the development of this asset, and achieve early production with its partner AllGrace Energy by re-entering, completing and producing Ubima-1.

Site clearance and well site preparation continues, utilising local community contractors. Tenders have been issued for well and rig services and a rig has been identified for award of contract. The re-entryand completion of Ubima-1 will target four oil zones to prove up the contingent resources and produce through an early production system.

Production from the Ubima Field will diversify the Eland portfolio, bringing in a secondary cash flow stream while appraising the larger upside on the block, and remains an exciting opportunity for the Company in the second half of 2016 subject to weather.

Financial

At 30 June 2016, the Company had a strong unaudited cash position of $20.6 million and is fully funded for its 2016 work programme.

As at 30 June 2016 the position of the RBL Facility through Standard Chartered Bank remains unchanged. Drawdowns to date amount to $15 million and the Company does not intend to make any further drawdowns this year in order to execute its outlined work programme.

In April 2016 the Company announced that it had successfully undertaken an equity placing which raised gross proceeds of GBP 12.4 million (circa $18.5 million) increased from the base size of $15 million owing to strong investor demand. The placing was executed at a price of 34p/share which was at a premium to the previous closing mid-market price.

In May 2016, the Company made forward sales to its offtake partner, Shell Western Supply and Trading Limited, which accelerated the receipt of $3 million during the period of Forcados shutdown.

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.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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

Year ended 30 June 2016

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 ("AIM") 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 2016 were authorised for issue in accordance with a resolution of the Board of Directors on 20 September 2016.

The information for the 6 months ended 30 June 2016 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 2015 were approved by the Board of Directors on 27 May 2016 and delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor 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 and has not been reviewed.

Basis of preparation

The condensed financial statements for the six months ended 30 June 2016 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 2015.

The Group incurred a net loss of $9.1 million during the period to 30 June 2016 and had net assets of $176.9 million as at that date.

Going Concern

In assessing its conclusion on going concern, the Group has prepared cash, funding and liquidity forecasts through this year and next, and has appropriate plans in place to maintain its access to funding when required and that it is compliant with its covenants. Following the share placement and forward sale agreement in the first half of 2016, the Group has significant cash reserves as at June 2016, totalling approximately $20.6 million.

Despite the closure of the Forcados terminal in February 2016, as at the date of this report the Group continues to be compliant with all covenants. In addition, the Group is forecast to remain so based on our expectations for the restart date of Forcados, subject to uncertainties and judgements over the timing and volume of liftings, and the timing and value of settlement of expenditures.

We note that under the terms of the Group's reserves based lending facility, the "Borrowing Base" is reviewed every 6 months. However, there may be an interim re-determination in 2016, to reflect production and cash flow following the return to operation of the Forcados terminal. For the purpose of the going concern assumption, the Directors have assumed the Borrowing Base, and therefore funding available, remains unchanged. Covenants could come under pressure in the short term and require a dialogue with the bank should the Forcados terminal be shutdown longer than the Directors anticipate.

The Directors acknowledge that the above risks may be considered material uncertainties which could cast significant doubt on the Group's ability to continue as a going concern, but believe they are mitigated by plans in place to counter these risks in both the short and long term. For example, the Group has advanced plans in place in relation to an alternative export route from the Opuama field to an offshore FSO via barging should Forcados not reopen in the short term, and sufficient cash on hand to meet its obligations.

As such, having regard to the matters above, and after making reasonable enquiries and taking account of uncertainties discussed above, 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 2015, as described in the 2015 Annual Report. There has been no new IFRS's come into effect during the period.

2. REVENUE

 An analysis of the group's revenue is as follows:

Revenue derives from an offtake contract with its partner, Shell Western Supply and Trading Limited. Revenue declined in the period February 2016 to June 2016 due to the prolonged disruption experienced at the Forcados terminal, the Group's oil export route.

3. OPERATING EXPENSES

The analysis of operating expenses is as follows:

*Restated to reclassify $1.6 million of depreciation from administrative expenses to operating expenses. The first six months depreciation charge in 2015 was reclassified from administrative expenses to operating expenses within the full year to 31 December 2015 accounts, therefore the 2015 full year figures are not restated.

The foreign exchange gain within operating expenses in the current period relates principally to the drop in the value of the Nigerian currency, Naira (NGN). The NGN: US Dollar rate moved from NGN 198: US$1 at 2015 year-end to NGN 280:US $1 at 30 June 2016. The Naira liabilities of the Group have been devalued resulting in in a large foreign exchange gain. All Naira balances are held for the purpose of settling operating liabilities. As such, the foreign exchange impact on Naira revaluations are classified with operating expenses.

4. ADMINISTRATIVE EXPENSES

The analysis of administrative expenses is as follows:

*Restated to reclassify $1.6 million of depreciation from administrative expenses to operating expenses. The first six months depreciation charge in 2015 was reclassified from administrative expenses to operating expenses within the full year to 31 December 2015 accounts, therefore the 2015 full year figures are not restated.

5. FINANCE COSTS

6. LOSS BEFORE TAX

7. TAXATION

The Group has recognised a deferred tax asset of $3.96 million as at 30 June 2016 in relation to the temporary difference that arises between the net book value and the tax written down value of the oil and gas assets. Capital allowances can be deferred during the Pioneer tax relief period and will be available following the tax relief period, whilst the book value of the asset is depreciated following commencement of production in July 2014.

As at 30 June 2016, the Group has taxable losses of $221 million (31 December 2015: $184 million) for which no deferred tax asset has been recognised as it is not probable that there were be future taxable profits against which the asset will be offset. In particular, Elcrest Exploration and Production Nigeria, which account for the majority of these tax losses ($200 million) was granted Pioneer tax status on OML 40 during 2014. When granted, Pioneer tax relief provides relief from Petroleum Profits tax for an initial period of three years and can be extended for an additional two years. The initial three-year period expires in May 2017.

8. EARNINGS / (LOSS) PER SHARE

From continuing operations

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

9. INTANGIBLE OIL AND GAS ASSETS

The Group's oil and gas exploration and evaluation assets at 30 June 2016 relate to the Group's and All Grace carried interest in the Ubima marginal field in Nigeria.

The other intangible asset relates to the approval fee paid on grant of Pioneer tax status in 2014. The cost is being amortised on a straight line basis over the maximum expected tax relief period of three years with two further annual periods of extension and the charge for the period has been included within operating expenses in the income statement for the period ended 30 June 2016.

10. PROPERTY, PLANT AND EQUIPMENT

The Group's oil and gas development and production assets at 30 June 2016 entirely relate to the Group's interest in OML40 in Nigeria.

11. TRADE AND OTHER RECEIVABLES

12. TRADE AND OTHER PAYABLES

13. DECOMMISSIONING PROVISIONS

The provision for decommissioning is in respect of both OML 40 and Ubima. The provision represents the present value of amounts that are expected to be incurred to the end of licence term, discounted to the present value using a 2.75% discount rate.

14. OTHER PROVISIONS

The above provision represented management's best estimate of the Group's liability under an agreement with a service provider for logistical and general support services from 2011 to 2014. Management consider the likelihood any payment to be remote and released the provision in 2015. No further transactions have been recorded in 2016.

15. SHARE CAPITAL

15. SHARE CAPITAL (CONTINUED)

A total of 37,352,941 Placing shares were issued during the period, the movements are summarised below:

· 36,442,441 new ordinary shares and 910,500 new non-voting ordinary shares were issued pursuant to the Share Placing announced on 29 April 2016. The company raised approximately $18.6 million (gross) through the placing at 34 pence per share. Of the net proceeds received $5,458,000 has been recorded in share capital, $13,099,000 in share premium with expenses of $648,000 also included in share premium.

· In addition to the Placing, on 23 February 2016 a shareholder, Helios Natural Resources ("Helios") requested the conversion of 4,613,685 of its non-voting shares into voting shares. Following both this conversion and subsequent Placing, as at 30 June 2016, Helios held 6,296,815 of non-voting shares.

16. RECONCILIATION OF LOSS FOR THE PERIOD/YEAR TO OPERATING CASH FLOW

17. OPERATING LEASE ARRANGEMENTS

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:

18. SHARE BASED PAYMENTS

The Company operates an employee share option plan. Full details of the plan are disclosed in the Annual Report of the Group.

Details of the movements in the share options in the period are noted below.

The Group recognised total expenses of $74,000 related to equity settled share based payment transactions for the six months ended June 2016. (Six months ended 30 June 2015: $574,000, Full Year 2015: $812,000).

19. BANK LOANS GREATER THAN 1 YEAR

Under the terms of the RBL on-loan facility the Company applied part of the first drawdown of $10 million towards the payment of legal fees associated with the facility. The effective interest rate of the loan facility is calculated on an ongoing basis after each drawdown and is 18% per annum for the period to 30 June 2016. The calculation is based on future cash flows for the interest and commitment fees that are due on a quarterly basis and the administration fee that is due on a yearly basis.

20. BORROWINGS

The reserves based facility with Standard Chartered Bank ("SCB"), which Westport Oil Limited (the Group's finance vehicle) entered into on 31 December 2014 ("the RBL") is available to the Group to fund, amongst other things, capital expenditure obligations in respect of Elcrest's participating interest in OML 40 and for the Group's working capital purposes up to $5 million.

The RBL, to which SCB has committed an initial $35 million, has a maturity of four and a half years from 31 December 2014 and is repayable within that timeframe. Interest is payable on amounts outstanding on a quarterly basis at a rate equivalent to USD LIBOR plus a margin of 7.75%.The amount available under the RBL is subject to a cap determined by the lower of the borrowing base amount and the committed facility amount. The borrowing base amount is calculated on OML 40 production and remained unchanged as at end June 2016 at $25.4 million. It is re-determined every six months in accordance with the terms of the RBL and there may be an interim review before the end of the year to reflect the resumption of the Forcados terminal and production performance of Opuama-3.

The RBL is secured over the Company's shares in Elcrest, and by way of a debenture which creates a charge over certain assets of the Group, including its bank accounts. 

21. DIVIDENDS

No interim dividend is proposed and no dividend has been paid in the period to 30 June 2016 (Full Year 2015: $nil).