Kansas pipeline update & appointment of Nomad

31 October 2012

Sefton Resources, Inc.

("Sefton" or the "Company")

Kansas pipeline update & appointment of Nomad

Sefton Resources (AIM: SER), the independent oil and gas exploitation and production company with interests in California and Kansas, is pleased to announce an update on its transmission facilities in Kansas, and the appointment of a new Nomad.

Highlights

·; Southern Star-LAGGS interconnect is now physically completed and we are now waiting for certification to "flow gas" from Southern Star.

·; Transmission revenue will commence once sufficient equity gas and third party gas production has been accumulated to provide for economic operations.

·; Oil production can become more consistent as the associated gas can be put into the pipeline that is certified to transport gas.

·; Allenby Capital has been appointed the Company's Nomad.

Jim Ellerton, Chairman of the Board said:

"The Southern Star-LAGGS interconnect becoming operational represents a key milestone in the process of unlocking the value that the Company has created in Kansas. This move will hopefully fuel future growth in revenue, cash flow and profitability. Now the interconnect is going live, subject to final certification, it will allow a revenue stream from the development of conventional oil and gas production and also transmission revenues from flowing gas to the interstate market. These two new earnings streams are in addition to our existing heavy oil earnings stream from California.

Moving ahead we anticipate a healthy news flow from developments both in Kansas and California. Sefton is creating three long term recurring revenue streams that are expected to provide scope for substantial earnings growth in the years to come."

For further information please visit www.seftonresources.com or contact:

LAGGS/Southern Star Interconnect

The construction of the Southern Star Interconnect with the LAGGSs pipeline system is now largely complete. Under the scope of work outlined by Southern Star, TEG Transmission ("Transmission"), a wholly owned subsidiary of Sefton, is actually ahead of schedule and only some minor electrical work and calibration of instrumentation is needed to have the job fully signed off by Southern Star's engineering personnel. We are working closely with the engineer assigned to this project and it is anticipated that Transmission will be Operationally Certified to flow gas during early November.

This represents a major milestone for the Sefton. Once the pipeline is operationally certified, TEG MidContinent ("MidContinent") will initially begin workovers and recompletions of acquired oil wells (in proximity to the LAGGS pipeline) that have associated gas that needs to be separated and put into a pipeline for future sale.

Once Transmission's Vanguard pipeline is joined to the LAGGS system, MidContinent will undertake workovers/recompletions of acquired gas wells (in proximity to both lines) in addition to transporting third party gas. It is anticipated that the Vanguard pipeline system will be refurbished and joined to the LAGGS system sometime in Q1 2013.

The Directors will provide further updates on these developments at each milestone. 

Potential revenue from access to the interstate pipeline system

The interconnect to the Southern Star interstate pipeline system will allow Transmission to flow gas from a minimum start up requirement of 360 mcfgpd (Thousand Cubic Feet of Gas Per Day) up to a maximum of 10,000 mcfgd under the current physical configuration. Gas will be purchased by third parties at the interstate interconnect sales point in transactions negotiated by Willis Bennett, our Gas Marketing Agent. Prices at the delivery point will be related to Nymex spot and longer term contract prices, although it is too early to provide a clearer indication of exact prices. Transmission has a minimum of one year to begin producing minimum volumes of 360 mcfgd, which can be extended if necessary without incurring any penalties. This will allow the transportation of third party and equity gas (gas produced by MidContinent) to build towards economically viable quantities.

Transmission has been in discussions for several months with possible sources of third party gas, but to date no agreements have been signed. Initial third party gas volumes are currently estimated to be in the 2,000 mcfgpd range with initial estimates of MidContinent's equity gas likely being in 1,000-2,000 mcfgpd range subsequently building towards the maximum flow rate over the medium term.

At present the proportion of the pipeline capacity that will be dedicated to third party gas is under review to ensure maximum returns to the Company. The incremental cost of operating the pipeline system is not expected to be high, as personnel and infrastructure will be shared with MidContinent, while equipment is minimal and has already been purchased. Transmission will gain a return on its investment of acquiring, refurbishing and becoming operationally certified by charging third parties an additional access fee together with the normal transportation fees.

Although it is too early to make estimates of the potential of this new business, the Directors believe it will provide a valuable and growing contribution to Sefton's financial performance in the years to come. 

Change of Nominated Adviser

Allenby Capital Limited has been appointed the Company's nominated adviser with immediate effect. Dowgate Capital Stockbrokers Limited remains the Company's broker, a position they will now solely hold. Edison Investment Research Limited and Hardman & Co. will continue to provide independent research on the Company's shares.

ENDS

About Sefton

Sefton Resources is an oil and gas exploration and production company with significant scope to grow its three projects in onshore United States that are 100%-owned and operated. The business strategy is to acquire long life, controlling interests, partially developed reserves and then to seek maximize shareholder value through asset development using the Company's own funds initially and then involve third party capital, farm-out or merger.

Currently Sefton has a market capitalisation of approximately £10 million and was valued by independent experts to have a PV(10) of $278 million (approximately £173 million) based on its assets as at the end of December 2011. The three key operations focus on developing opportunities in California and Kansas.

Enhanced Oil Recovery (EOR) projects in California

Sefton owns 100% of two oil fields In East Ventura County - Tapia Canyon (heavy gravity oil) and Eureka Canyon (medium gravity oil). Estimated 2011 year-end proved reserves stood at 3.8 million barrels. The current operational focus is to fully develop Tapia Canyon with an active well drilling and work-over programme being undertaken and initially the use of cyclic steam recovery to boost production and reserves leading to the ultimate goal of a full field steam flood development programme. As part of this final phase, Sefton has engaged Dr Farouq Ali, a recognised expert to undertake a study on a full steam flood development of the Tapia field and his report is expected shortly. Tapia is the most advanced of Sefton's operations and generates revenues.

Exploration and Production in Kansas

In East Kansas, Sefton has over 45,000 acres (Leavenworth and Anderson Counties) in the Forest City Basin, where conventional oil and gas deposits as well as Coal Bed Methane (CBM) have been identified. The current operational focus is in Leavenworth County where a workover and recompletion programme is planned that will see oil, gas and CBM wells brought back into production with first revenues from oil whilst additional gas assets are being assembled for the future development as the pipelines become operational. At the same time Sefton is accelerating its leasing plans with the aim to double its current acreage in Kansas in the near future.

Natural gas transmission in Kansas

Three gas pipelines have been acquired by Sefton. The LAGGS pipeline in Leavenworth County has been fully refurbished and is now connected to the Southern Star Interstate Pipeline system which allows sales nationally. This means Sefton is able to transport its own gas as well as third party gas to market and generate additional revenues. Plans are to join the Vanguard pipeline to the LAGGS pipeline in Leavenworth County which will increase the scale of this gathering system. A third pipeline in Anderson County is currently being tested and certified - once complete this will also be connected to an interstate pipeline system to provide additional opportunities for redevelopment of oil, equity and third party gas.

Sefton Resources is an oil and gas exploration and production company with significant scope to grow its three projects in onshore United States that are 100%-owned and operated. The business strategy is to acquire long life, controlling interests, partially developed reserves and then to seek maximize shareholder value through asset development using the Company's own funds initially and then involve third party capital, farm-out or merger.