Aurelian Oil & Gas PLC - sanleonenergy.com September 2012 Aurelian Oil & Gas PLC (“Aurelian” or...

28 September 2012

Aurelian Oil & Gas PLC

(“Aurelian” or “the Company”)

Interim results, Strategic Options Review and Operational Updates Aurelian, the European focussed E&P Company, today announces its Interim Results for the six months ended 30 June 2012.

Financial Highlights

o Cash Balance at 30 June 2012 €51,386,000 (31 December 2011: €63,413,000). The Company is fully funded to meet work commitments through 2013; exploration expenditure programme in H2 2012 will be limited to minimal commitment items due to the Company’s current focus on the Strategic Options Review.

o Loss for 1H of €4,530,000 (30 June 2011: €2,463,000);

Strategic Options Review Update

o Since the initiation of this review, significant time and resource have been invested in assessing and developing the options available to the Company with the focus on shareholder value maximisation.

o The Board is pleased to report that several options for the future of the group emerged from the review and expects to be able to announce its recommendation during Q4 2012.

Operational Highlights

o Farm-out process for Siekierki is progressing; discussions ongoing with a number of interested parties;

o Siekierki appraisal plan progressing well, feasibility study for the Early Production Facility completed ahead of schedule;

o Seismic work on Brodina now completed; well expected to be planned in 2013;

o 2D seismic on West Karpaty looks promising; planned completion of work in Q4 2012 to start preparations for a drilling programme in 2013;

o The first East Karpaty well is now expected in 2013 to allow for the farm-out of 40% of this licence;

o Acquisition of 445km of 2D seismic data in the Provadia concession.

Rowen Bainbridge, Chief Executive, commented;

“The interim results indicate that we are well-capitalised for the future programme. We continue to make good progress on our Siekierki appraisal plan, and maturating the prospectivity within our portfolio; we are also taking steps to control costs and are pleased that all our 2012 operational activities have been achieved within budget. Progress on the strategic options review has been encouraging, and we intend to announce our recommendation before the end of the year.”

Enquiries: Aurelian

Rowen Bainbridge, CEO John Smallwood

020 7245 4999

Greenhill & Co. LLP RFC Ambrian Limited

Financial Adviser Mark Bentley Nominated Adviser Richard Morrison Jen Boorer

020 7198 7400 020 3440 6800

Oriel Securities Joint Broker

David Arch Ashton Clanfield

020 7710 7600

Macquarie Capital (Europe) Limited

Joint Broker John Dwyer

020 3037 2000

College Hill Public Relations Adviser Matthew Tyler Nick Elwes Catherine Wickman

020 7457 2020

The technical information and opinions contained in this announcement have been reviewed by Dr. John Smallwood BA (Cantab), MA, PhD (Cantab), FGS, C. Geol, Aurelian’s Exploration Director who has 18 years of post-graduate experience in geoscience research, oil exploration and production. He has reviewed and consented to the inclusion herein of such technical information and opinions.

Notes

Interests in the Siekierki Project are held through Energia Zachod Sp. z o.o. (Operator) whose shareholders are Energia Zachod Holdings Sp. z o.o. (89.5%), AOG Finance Limited (0.5%) (both members of the Aurelian Group) and Avobone Poland B.V. (10%).

Interests in Cybinka and Torzym are Energia Cybinka Sp. z o.o. and Energia Torzym Sp. z o.o. (45%) (both members of the Aurelian Group, Operators), S.N.G.N. Romgaz S.A. (30%), and Sceptre Oil and Gas Limited (25%).

Interests in the Karpaty West concessions (Cieszyn, Bestwina, Bielsko-Biala and Budzow) are Energia Karpaty Zachodnie Sp. z o.o. (a member of the Aurelian Group) (60%) (Operator) and Polskie Gornictwo Naftowe i Gazownictwo (40%).

Interests in the Karpaty East concessions are Energia Karpaty Wschodnie Sp. z o. o. (80%) (Operator) (a member of the Aurelian Group), Polskie Gornictwo Naftowe i Gazownictwo (20%).

Interests in the Bieszczady Project are held through Energia Bieszczady Sp. z o.o. (a member of the Aurelian Group) (25%), Polskie Gornictwo Naftowe i Gazownictwo (51%) (Operator) and Eurogas Polska sp. z o.o. (24%).

Interests in the Svidnik, Medzilaborce and Snina concessions are Aurelian Oil & Gas Slovakia s.r.o. (50%) (Operator), S.N.G.N. Romgaz S.A. (25%), and JKX Oil & Gas PLC (25%). Interest in the Wetlina concession is Aurelian Oil & Gas Poland Sp. z o.o. (100%) (Operator). Interests in the non-Bilca Gas Project Area, which is part of the EIII-1 Brodina Concession Area, are Aurelian Petroleum s.r.l. (50%) (Operator) and S.N.G.N. Romgaz S.A. (50%).

Before the relinquishment of EIII-3 Cuejdiu Concession Area, interests were as follows: Aurelian Petroleum s.r.l. (45%) (Operator), S.N.G.N. Romgaz S.A. (37.5%) and Europa Oil & Gas s.r.l. (17.5%).

Interests in Provadia are Balkan Explorers (Bulgaria) Limited (a member of the Aurelian Group) (18%), Overgas (64%) (Operator), JKX Bulgaria Limited (18%).

OPERATIONAL REVIEW

Poland, Poznan East concession. Siekierki Appraisal Plan and Farm-out

o As previously announced, Moyes & Co has been appointed to advise on farm-in partners for Siekierki. This is progressing with discussions ongoing with a number of companies. Further announcements will be made in due course;

o In May 2012 RPS Competent Persons Report (“CPR”) confirmed 380 bcf of

Contingent Resources. The key milestones for testing of Trzek-3 and the water

disposal trial are on track, while the feasibility study for the Early Production

Facility, to commercialise discovered gas, has been completed.

o Significant progress has been made on the petroleum engineering work

programme. This has resulted in the identification of an artificial lift solution that is

less complex and cheaper than the jet pumps previously envisaged, and will result

in significant cost savings for the full field development;

o A number of water disposal options have been identified with potential for further

development cost savings and these are being further defined as part of the

ongoing work programme;

o Seismic reprocessing of Poznan East 3D is being completed by Geofizyka Torun

(“GT”) and interpretation has commenced. GT's extensive knowledge of the Polish

Permian basin has improved the quality of the seismic data potentially enabling

better definition of intra-Rotliegendes reservoir features. The aim is to investigate

whether it is possible to detect high porosity zones directly using the new seismic.

Poland, Torzym concession. Sosna-1 update

o The Sosna-1 well was completed, as previously reported, and the rig was released

on 4 July 2012.

o Post-well analysis continues both for the potential of the Zechstein Main Dolomite

reservoir at the well location and the impact of the well on the prospectivity of the

Cybinka and Torzym concessions. Further announcements in due course.

Romania licence activity

o The Year 3 licence work programme on Brodina has now been completed. The

Magneto-Telluric survey with Prospectiuni SA (“Prospectiuni”) is complete. 13 lines

totalling 125 line-km were recorded. Inversion results confirm the presence of sub-

thrust structures in the target area, which is encouraging;

o The seismic survey of 168 line-km shooting with Prospectiuni and a semi 3D

swath has been completed and is now being interpreted;

o The “Gore® Surveys - Amplified Geochemical ImagingSM” sampling modules are

now recovered from the field and undergoing laboratory analysis to investigate the

distribution and character of natural hydrocarbon seepage across the survey area;

o It is anticipated that the insights from the 2012 field data acquisition will lead to a

well on Brodina being planned in 2013;

o The NAMR (Romanian Regulator) has confirmed the final relinquishment of the

Cuejdiu exploration licence.

Poland, West Karpaty seismic acquisition completed

o The Company has started the processing of the 136 km of full fold 2D seismic

acquired in June and July 2012 across the four concessions making up the West

Karpaty JV area;

o Interim processing results look promising, such that it may be possible to conduct

further analysis based on Direct Hydrocarbon Indicator (“DHI”) techniques. A

similar methodology has been employed successfully elsewhere in shallow

Miocene traps in Carpathian Foredeep;

o It is planned to complete the interpretation and integration of all seismic and well

data in Q4 2012, to start preparations for a 2013 drilling programme.

Slovakia/Poland full tensor gravity gradiometry acquisition

o Bell Geospace have completed the acquisition of 12,549 line-km survey of full

tensor gravity gradiometry and magnetics in a cross-border operation over the

Slovakian blocks Svidnik, Medzilaborce and Snina and into Poland;

o The operations lasted for a duration of 55 days under a fixed cost contract and

were completed without incident and;

o The data will now be processed by Bell Geospace and subsequently integrated

with seismic, surface and well data to provide a dense spatial dataset that will

allow a refinement to the geological interpretation and an update of the

prospectivity of the area;

o It is also planned to use the data to identify potential low density anomalies

consistent with viable reservoir zones within the mapped structures and will be

calibrated via subsurface density measurements and comparison with the

responses of known fields;

o This acquisition represents the first application of the technology in Slovakia and

Poland and will lead to a drilling decision for Cierne-1 in Q1 2013.

Poland, Karpaty East seismic interpretation

o The processing of the 2012 seismic data acquired in Karpaty East has been

completed and the interpretation and integration with newly acquired historical well

data is partially completed;

o Pre-drill preparation and permitting has commenced on the two prospects on

Jordanow and Mszana Dolna;

o The timing of drilling has been slipped into 2013 to allow the Company time to

farm out up to 40% of this licence. These are high risk, high impact opportunities

and the company considers it best to drill them with a lower level of working

interest.

Poland, Bieszczady licence area

o The completion (work-over, perforation and re-perforation) for further testing of

well Niebieszczany-1 is being planned by operator PGNiG and is now likely to be

postponed until 2013 due to operational timing constraints;

o Tendering is underway for processing and reprocessing of two of the seismic

surveys that the partnership has acquired in the last few years with a view to

selecting the location for the final commitment well in 2013 with a number of leads

already identified in this prospective block.

Bulgaria, Provadia seismic acquisition completed

o The operator Overgas has completed the acquisition of 445 km of 2D seismic data

in the Provadia concession with contractor Prospectiuni. The Company has a

carried interest in this licence through to 22 February 2013.

FINANCIAL RESULTS

At 30 June the Company had a cash balance of €51,386,000, down from €63,413,000 at 31 December 2011.

The €12,027,000 reduction in cash in the half year principally related to operating cash outflows of €2,320,000 and payments in relation to capital expenditure of €10,036,000, less €296,000 bank interest received.

During the first 6 months of 2012 the Company generated a Loss from Continuing Operations of €4,530,000 (H1 2011: €2,463,000). The increase of €2,067,000 related mainly to the €1,401,000 costs incurred in relation to the Strategic Options Review (H1 2011: nil) and the increase in Exploration Expense to €982,000 (H1 2011: €113,000) reflecting the cost of the Competent Persons Report, write-offs related to the relinquished Cuejdiu and Golitza blocks, pre-licence costs and sundry non project related G&G costs.

Other Administrative Expenses in the half year reduced to €2,310,000 (H1 2011: €2,592,000), the difference relating principally to recruitment expenses of €427,000 incurred in H1 2011 due to the expansion of the Company’s internal capability in that period.

Finance Income remained steady at €463,000 (H1 2012: €467,000) with reduced bank deposit interest income of €377,000 due to lower cash balances (H1 2012: €407,800) being compensated for by exchange gains on finance deposits.

Capitalised exploration costs at 30 June 2012 have risen to €106,195,000 from €95,732,000 at 2011 year end. The increase of €10,463,000 comprised expenditure of €7,560,000, €3,088,000 foreign exchange movement on opening balances less €186,000 impairments (H1 2011: increase of €20,539,000, expenditure of €20,732,000 less foreign exchange movements of €120,000 and impairments of €73,000). The capital costs incurred in H1 2012 related principally to: - Siekierki subsurface review & Krzesinki test €1,918,000 - Torzym Sosna-1 well €2,572,000 - Karpaty E & W seismic and G&G €1,620,000 - Brodina seismic, magneto telluric and geochemical analysis €878,000 - Bieszczady seismic and G&G €291,000 - Slovakia aerogravity €292,000

The Company is fully funded to meet work commitments through 2013. Exploration expenditure program in H2 2012 will be limited to minimal commitment items due to the Company’s current focus on the Strategic Options Review.


Consolidated income statement

Unaudited Unaudited Audited

6 month period to 6 month period to Year to

30 June 2012 30 June 2011 31 December 2011

€'000 €'000 €'000

Other administrative expenses (2,310) (2,592) (5,377)

Strategic options review related costs (1,401) - -

Exchange gain/(loss) 54 (69) (109)

Share based payment costs (349) (145) (422)

Exploration expense (982) (113) (3,847)

Total administrative expenses (4,988) (2,919) (9,755)

Other operating income - 1 1

Operating loss (4,988) (2,918) (9,754)

Finance income 463 467 1,119

Finance expense (5) (12) (11)

Loss before tax (4,530) (2,463) (8,646)

Taxation - - -

Loss from continuing operations (4,530) (2,463) (8,646)

Loss from discontinued operations - (1,287) (1,427)

Loss for the period attributable to owners of the parent (4,530) (3,750) (10,073)




€ cents € cents € cents

Basic and diluted loss per 5p ordinary share on continuing operations (0.92)c (0.50)c (1.76)c

Basic and diluted loss per 5p ordinary share on discontinued operations - (0.26)c (0.29)c

Total basic and diluted loss per 5p ordinary share (0.92)c (0.76)c (2.05)c

Shares Shares Shares Calculated on the basis of the weighted average number of shares in issue during the period, being: 491,384,193 490,187,044 490,780,949


Consolidated statement of comprehensive income


6 month period to 6 month period

to Year to


€'000 €'000 €'000

Loss after taxation (4,530) (3,750) (10,073)

Other comprehensive income/(expense):

Foreign currency exchange gain/(loss) 3,060 (392) (9,002) Recycling of exchange losses previously recognised in equity - 577 577

Other comprehensive income/(expense) for the period 3,060 185 (8,425)

Total comprehensive expense attributable to owners of the parent (1,470) (3,565) (18,498)


Consolidated statement of financial position



€'000 €'000 €'000

Non-current assets

Oil and gas costs pending determination 106,195 77,050 95,732

Other intangible assets 57 43 42

Property, plant and equipment 731 2,976 779

106,983 80,069 96,553

Current assets

Inventory 2,162 - 1,168

Trade and other receivables 6,024 10,147 7,311

Cash and cash equivalents 51,386 95,283 63,413

59,572 105,430 71,892

Total assets 166,555 185,499 168,445

Current liabilities

Trade and other payables (8,640) (11,859) (9,405)

Loans and borrowings (8) (7) (8)

(8,648) (11,866) (9,413)

Non-current liabilities

Loans and borrowings (6) (14) (10)

Net assets 157,901 173,618 159,022

Capital and reserves

Share capital 30,719 30,714 30,719

Share premium 185,229 185,174 185,229

Share based payment reserve 3,066 2,440 2,717

EBT Reserve (167) (167) (167)

Exchange translation reserve (13,678) (8,128) (16,738)

Other reserves 3 3 3

Retained deficit (47,271) (36,418) (42,741)

Total shareholders equity 157,901 173,618 159,022


Consolidated statement of changes in shareholders' equity (Unaudited)

Share

capital Share

premium

Share based

payment reserve

EBT reserve

Exchange translation

reserve Other

reserves Retained

deficit Total

equity

€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000

Balance at 31 December 2010 30,350 183,406 2,295 - (8,313) 3 (32,668) 175,073

Loss for the period - - - - - - (3,750) (3,750) Foreign currency translation loss - - - - (392) - - (392) Other comprehensive income - - - - 577 - - 577

Share capital issued 364 1,768 - (167) - - - 1,965 Share based payment charge - - 145 - - - - 145

Balance at 30 June 2011 30,714 185,174 2,440 (167) (8,128) 3 (36,418) 173,618

Loss for the period - - - - - - (6,323) (6,323) Foreign currency translation loss - - - - (8,610) - - (8,610)

Share capital issued 5 55 - - - - - 60 Share based payment charge - - 277 - - - - 277

Balance at 31 December 2011 30,719 185,229 2,717 (167) (16,738) 3 (42,741) 159,022

Loss for the period - - - - - - (4,530) (4,530) Foreign currency translation gain - - - - 3,060 - - 3,060 Share based payment charge - - 349 - - - - 349

Balance at 30 June 2012 30,719 185,229 3,066 (167) (13,678) 3 (47,271) 157,901

Aurelian Oil & Gas PLC Consolidated statement of cash flows Unaudited Unaudited Audited



€'000 €'000 €'000 Cash flows from operating activities Cash used in operations (2,320) (3,623) (6,270) Interest paid - (48) (47)

Net cash used in operating activities (2,320) (3,671) (6,317)

Cash flows from investing activities Purchase of property, plant and equipment (56) (650) (811) Purchase of intangible non-current assets (9,980) (23,286) (53,598) Proceeds from sale of Romanian subsidiary - 5,300 5,300 Interest received 296 224 808

Net cash used in investing activities (9,740) (18,412) (48,301)

Cash flows from financing activities Proceeds from issue of ordinary shares - 2,469 2,192 Repayment of Gemini Loan - (1,241) (1,241) Finance arrangement costs (4) (7) (9)

Net cash flow from financing activities (4) 1,221 942

Increase in cash and cash equivalents in the period (12,064) (20,862) (53,676) Cash and cash equivalents at start of period 63,413 116,391 116,391 Foreign exchange translation difference 37 (246) 698

Cash and cash equivalents at end of period 51,386 95,283 63,413

Note to the consolidated statement of cash flows


6 month period to 6 month period to Year to 30 June 2012 30 June 2011 31 December 2011 €'000 €'000 €'000 Reconciliation of loss after tax to net cash flows from operating activities

Loss after tax for the period (4,530) (3,750) (10,073) Adjustments for: Finance income (463) (467) (1,119) Finance expense 5 12 11 Other operating income - (1) (1) Share based payments 349 145 422 Exploration costs impaired 188 113 3,847 Provision on measurement of assets held for sale to fair value less costs to sell - 174 289 Depreciation, depletion and amortisation 116 90 216 Exchange differences 50 632 (412) Increase in inventory (994) - (1,164) Decrease in trade and other receivables 1,566 400 3,402 Increase/(decrease) in trade and other payables 1,393 (971) (1.688)

Cash used in operations (2,320) (3,623) (6,270)


Notes to the accounts

1. Accounting policies The consolidated unaudited interim financial information set out in this report is based on the consolidated financial statements of Aurelian Oil & Gas PLC and its subsidiary companies (together referred to as the ‘Group’). The financial statements of the Group for the 6 months ended 30 June 2012 were approved and authorised for issue by the Board on 27 September 2012. These financial statements have been prepared in accordance with the accounting policies that are expected to be applied in the Financial Statements of Aurelian Oil & Gas PLC for the year ending 31 December 2012 and are consistent with International Financial Reporting Standards adopted for use in the European Union.

Basis of preparation The financial information for the six months ended 30 June 2012 has been reviewed but is unaudited, the financial information for the period ended 30 June 2011 is unreviewed and unaudited. Neither constitutes the Group’s statutory financial statements for those periods. The comparative financial information for the full year ended 31 December 2011 does not constitute statutory accounts as defined in section 435 of the Companies Act 2006, but has been extracted from the statutory financial statements for that period. The statutory accounts for the year ended the 31 December 2011 have been filed with the Registrar of Companies. The auditors’ report on those accounts was unqualified and did not include any references to any matters to which the auditors drew attention by way of emphasis and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

The financial statements are presented in Euros and all values are rounded to the nearest thousand Euros (€’000) except where otherwise indicated.

The financial statements have been prepared under the historical cost convention, except for financial assets, which are carried at fair value.

The Company has certain contractual agreements with other participants to engage in joint activities that do not create an entity carrying on a trade or business of its own. The Company includes its share of assets, liabilities and cash flows in joint arrangements, measured in accordance with the terms of each arrangement.

2. Loss per share

There is no difference between diluted loss per share and the basic loss per share as the Group reported a loss for the period. After adjusting for the impact of foreign exchange items the loss after tax for the period reduces from €4,530,000 to €4,390,000 (2011: loss reduces from €3,750,000 to €3,100,000).

3. Going concern

The Company has sufficient cash resources for its working capital needs and its committed capital expenditure programme at least for the next 12 months. As a consequence, the Directors believe the Company is well placed to manage its business risks. The Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the results for the six months ended 30 June 2012.

4. Interim statement

Copies of this Interim report for the six months ended 30 June 2012 will be available on the Company’s website

www.aurelianoil.com.

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