News and Press Releases

Interim Results for the six months to 30 June 2008

September 3, 2008

Highlights

  • Revenue doubled to $2.6m from $1.3m
  • Profits increased five fold to $904k from $179k
  • Banking facility increased to $15m
  • New Nominated Advisor and Broker appointed


Chairman, Jeremy Delmar-Morgan pointed out that 'the Group's financial position continues to improve, bringing Sefton closer to its stated goal of "building a strong platform of assets, generating sufficient cash flow to operate and grow the business". While we will continue to grow our California assets, we will now embark of the development of our Kansas assets, utilizing the improved banking facility and growing cash flow. The appointment of a new nominated Nomad and Broker will, we believe, assist us in enhancing the Group's profile to the benefit of all shareholders.

Chairman's statement

In my last annual statement I was able to forecast that Sefton was now ready to take the next step in its development programme. I am please to report that the results of the past hard work are starting to show in our financial results.

During the first half of 2008 oil and gas revenue more than doubled to $2,594,873 from $1,276,127 for the comparative period in 2007 and $2,977,691 for the whole of 2007. The increased activity meant that costs and expenses increased to $1,690,510 from $1,096,993, but profit improved five fold to $904,363 from $179,134 at this time last year and $204,652 during all of 2007.

The encouraging increase in oil and gas revenue and net income was a result of spending $2,889,028 on our oil and gas assets, compared to $488,380 for the same period in 2007 - a function primarily of utilizing some cash flow and some of the available bank facility.

Total assets increased by over $5m to $13,488,405 from the comparative period in 2007, and while liabilities increased by almost $4m, to $5,300,258 - the majority of which is attributable to the use of $3.3m draw from the bank facility - the total shareholder equity increased from $6,831,299 to $8,128,147.

Our steaming and drilling programmes at Tapia are on schedule. The results have been extremely encouraging, but the differences in reservoir and drainage conditions can result in variances between the wells response. All show an improvement and we are extremely excited about applying the cyclic-steam stimulation to both old and new wells field-wide.

We will be working on the two gas wells Yule#8 and Snow#1 in the coming weeks. If the mechanical issues in either of these wells can be solved, such that gas can be supplied from them to the steam generator at the appropriate rate and pressure, the systematic steaming of other wells in the field will begin accordingly.

We have also budgeted funds for the drilling of three new wells on the Yule Lease during the fourth quarter of 2008. One of the new wells may be used to provide a new gas supply well. The other two will be oil producers. In addition we have initiated permitting of five new wells on the other Tapia leases, which should be completed in the coming months for drilling to start during 2009.

At our Eureka Canyon field we successfully carried out the clean-out and pump replacement operation during June. Monthly production has improved from an average of 230 BOPM to 410 BOPM during July. Work with W.L Gore, Inc is continuing on the geochemical survey and field work for the follow-up which is scheduled for this month - September. We are now in the process of refining our sampling grid identified in the initial survey.

An updated engineering report by Reed W. Ferrill and Associates was prepared for the first half period, which reflected an improvement in the Group's proved developed reserves to the year end 31 December 2007 resulting from the expenditures on the Group's assets. This does not reflect the encouraging results that we have achieved from the current cyclic steaming pilot programme, which will be reflected in the 2008 report. The present day value is approximately $165,000,000 (constant costs/prices, discounted 10%).

I am pleased to be able to report that as a result of improved reserves, production, revenue and net income, the line of credit facility with the Bank of the West has been increased to $15m.on extremely competitive terms.

The revised line of credit will also enable Sefton to buy back the Group's stock from surplus funds if we consider this appropriate. This revised agreement adds flexibility to the Group's financing options in developing and growing.

Finally, the Board has decided to engage the firms of Blomfield Corporate Finance Ltd as Nomad and Religare Hichens, Harrison plc as Broker, both effective from October 1, 2008. Management believes that the profile in the marketplace of Sefton will be enhanced by this move. With the improvement in financials, banking facilities and the new Nomad/Broker we have greater flexibility in our growth path.

Jeremy Delmar-Morgan
Chairman
September 3, 2008 


Enquiries:
Jim Ellerton, CEO                                               00 1 303 759 2700
Jeremy Delmar-Morgan, Chairman                         077 8900 4874
David Millham, Investor Relations                          07850 949324
Jonathan Wright/Nicola Marrin, Seymour Pierce    020 7107 8000

 


June 30,
June 30,
December 31




2008
2007
2007




(unaudited)
(unaudited)
(audited)









CURRENT ASSETS:






Cash and cash equivalents $ 86,953
$135,410
$ 5,789

Accounts receivable
665,671
192,735
414,801

Other receivables - related party 135,380
108,185
159,692

Prepaid expenses and other assets 26,975
1,975
6,769


Total current assets 914,979
438,305
587,051


















OILAndGASPROPERTIESFULLCOSTMETHOD, net 12,540,749
7,861,600
9,789,223









EQUIPMENTANDVEHICLES, net 32,677
43,410
30,871




















TOTAL ASSETS $ 13,488,405
$ 8,343,315
$ 10,407,145









LIABILITIESANDSTOCKHOLDERS' EQUITY













CURRENT LIABILITIES:






Accounts payable
$ 731,799
$ 406,391
$ 810,942

Accrued expenses
24,034
47,991
162,666

Accrued expenses - related parties 117,000
77,884
179,549

Notes payable, current portion 349,775
163,825
385,059


Total current liabilities 1,222,608
696,091
1,538,216









NOTES PAYABLE:






Note payable
273,554
681,485
338,335

Note payable - bank
3,300,000
0
911,317




3,573,554
681,485
1,249,652


















ASSET RETIREMENT OBLIGATION 504,096
134,440
504,096











Total liabilities 5,300,258 1,512,016
3,291,964


















STOCKHOLDERS EQUITY:





Common stock, no par value, 200,000,000 shares




authorized, 116,387,779 shares issued and
outstanding		 13,217,831
12,790,863
13,049,227

Stock subscription receivable -30,047
-30,047
(30,047)

Treasury stock
-58,602
-58,602
(58,602)

Accumulated (deficit)
-4,941,035
-5,870,915
(5,845,397)


Total stockholders' equity 8,188,147
6,831,299
7,115,181









TOTAL LIABILITIESANDSTOCKHOLDERS EQUITY $ 13,488,405
$ 8,343,315
$ 10,407,145


 
Six Monthsary info">


Six Months
Six Months
Year Ended


EndedJune 30, 2008
EndedJune 30, 2007
December 31, 2007


(unaudited)
(unaudited)
(audited)
REVENUES:





Oil and gas sales $ 2,594,873
$ 1,276,127
$ 2,977,691







COSTSANDEXPENSES:





Oil and gas production 406,387
274,967
672,845

Depletion and depreciation 148,500
149,000
304,965

General and administrative 934,126
644,434
1,519,848

Share based compensation 126,179
0
197,220


1,615,192
1,068,401
2,694,878







INCOME (LOSS) FROM OPERATIONS 979,681
207,726
282,813







OTHER INCOME (EXPENSE):





Interest income -
66
417

Interest expense (75,318)
-28,658
(78,578)


(75,318)
(28,592)
(78,161)







NETINCOME (LOSS) $ 904,363
$ 79,134
$ 204,652





















Basic and diluted gain (loss) per common share 0.0078
0.0007
0.0018







Basic and Diluted Weighted average



shares outstanding 116,214,067
115,109,527
115,409,587







Six Months Ended
Six Months Ended
Year Ended




June 30, 2008
June 30, 2007
December 31, 2007




(unaudited)
(unaudited)
(audited)
CASHFLOWS FROM OPERATING ACTIVITIES:



Net income (loss) $ 904,363
$ 179,134
$ 204,652

Adjustments to reconcile net income (loss) to net cash from

(used in) operating activities:





Depletion and depreciation 148,500
149,000
304,965


Compensation expense related to stock options 126,179


197,220


Changes in operating assets and liabilities:






Accounts receivable (250,870)
161,832
(42,627)



Prepaid expenses and other (20,206)
17,875
13,080



Other receivables - related party 24,312
-
(69,115)



Accounts payable (79,143)
(78,052)
326,499



Accrued expenses - related party (62,549)
52,884
154,549



Accrued expenses and other (138,632)
12,410
126,985



Net cash provided by (used in) operating activities 651,954
495,083
1,216,208









CASHFLOWS FROM INVESTING ACTIVITIES:



Purchase of oil and gas properties (2,889,028)
(488,380)
(2,184,816)

Purchase of property and equipment (12,806)
-
(4,857)

Proceeds from disposal of subsidiary -
-
-

Net cash transferred with subsidiary -
-
-



Net cash (used) by investing activities (2,901,834)
(488,380)
(2,189,673)


















CASHFLOWS FROM FINANCING ACTIVITIES:



Proceeds from notes payable 2,288,618
11,442
948,318

Payments on notes payable -
-
-147,473

Proceeds from sale of common stock 42,425
48,342
109,486












Net cash provided by financing activities 2,331,043
59,784
910,331









EFFECT OF EXCHANGERATECHANGES ONCASH -
-
-









NETINCREASE (DECREASE) INCASHANDCASHEQUIVALENTS 81,163
66,487
(63,134)









CASHANDCASHEQUIVALENTS , BEGINNING OF YEAR 5,789
68,923
68,923









CASHANDCASHEQUIVALENTS, END OF PERIOD 86,952
135,410
$ 5,789