THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt about the

contents of this document or as to what action you should take, you should consult a person authorised for the
purposes of the Financial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and
other securities.
If you have sold or transferred all of your Ordinary Shares, please send this document and the accompanying form
of to the purchaser or transferee or to the stockbroker or other agent through whom the sale or transfer was
effected for onward transmission to the purchaser or transferee.
THE WHOLE OF THE TEXT OF THIS DOCUMENT SHOULD BE READ AND, IN PARTICULAR, YOUR ATTENTION IS DRAWN
TO THE SECTION ENTITLED RISK FACTORS SET OUT IN PART 2 OF THIS DOCUMENT.
Sirius Petroleum PLC (Company), the Directors and Proposed Directors, whose names appear on page 10 of this
document, accept responsibility, individually and collectively, for the information contained in this document and its
compliance with the AIM Rules for Companies. To the best of the knowledge and belief of the Company, the Directors
and Proposed Directors (who have taken all reasonable care to ensure that such is the case), the information
contained in this document is in accordance with the facts and does not omit anything likely to affect the import of
such information.
No person has been authorised to give any information or make any representations other than those contained in
this document and, if given or made, such information or representations must not be relied upon as having been
so authorised. Neither the delivery of this document nor any placing made pursuant to it will, under any
circumstances, create any implication that there has been any change in the affairs of the Company since the date
of this document or that the information in it is correct at any time subsequent to its date.
This document does not comprise a prospectus and has not been filed with the Financial Services Authority, but
comprises an AIM admission document and has been prepared in accordance with the AIM Rules for Companies.
Application will be made in accordance with the AIM Rules for Companies for the Ordinary Shares of the Company,
already in issue and to be issued, to be admitted to trading on AIM. It is expected that such application to AIM will
become effective and that dealings will commence on 3 November 2010.
AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to
be attached than to larger or more established companies. AIM securities are not admitted to the Official List. A
prospective investor should be aware of the risks of investing in such companies and should make the decision to
invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. Each
AIM company is required pursuant to the AIM Rules for Companies to have a nominated adviser. The nominated
adviser is required to make a declaration to the London Stock Exchange on admission in the form set out in Schedule
Two of the AIM Rules for nominated advisers. The London Stock Exchange has not itself examined or approved the
contents of this document.

SIRIUS PETROLEUM PLC

(incorporated in England and Wales with registered number 05181462)

PROPOSED ACQUISITION OF A 40 PER CENT INTEREST IN THE KE FIELD

PLACING OF 313,860,327 ORDINARY SHARES AT 5 PENCE PER SHARE
APPLICATION FOR READMISSION TO TRADING ON AIM
NOTICE OF GENERAL MEETING
Nominated Adviser

STRAND HANSON LIMITED

Sole Bookrunner

RENAISSANCE CAPITAL LIMITED

Strand Hanson Limited (Strand Hanson), which is authorised and regulated in the United Kingdom by the Financial
Services Authority and a member of the London Stock Exchange, is acting as nominated adviser to the Company in
connection with the proposed admission of the Enlarged Share Capital to trading on AIM. Its responsibilities as the
Companys nominated adviser under the AIM Rules are owed solely to the London Stock Exchange and are not owed
to the Company or to any Director or to any other person, in respect of his decision to acquire shares in the Company
in reliance on any part of this document. Strand Hanson is not acting for anyone else and will not be responsible to
anyone other than the Company for providing the protections afforded to its clients or for providing advice in
relation to the contents of this document or the Admission of the Share Capital to trading on AIM. No representation
or warranty, express or implied, is made by Strand Hanson as to the contents of this document, without limiting the
statutory rights of any person to whom this document is issued. Strand Hanson will not be offering advice, and it
will not otherwise be responsible for providing customer protections to recipients of this document or for advising
them on the contents of this document or any other matter.

Renaissance Capital Limited (Renaissance), which is authorised and regulated in the United Kingdom by the
Financial Services Authority and a member of the London Stock Exchange, is acting as bookrunner and broker to the
Company in connection with the proposed admission of the Enlarged Share Capital to trading on AIM. Its
responsibilities as the Companys bookrunner are owed to the Company and not to any other person, in respect of
his decision to acquire shares in the Company in reliance on any part of this document. Renaissance is not acting for
anyone else and will not be responsible to anyone other than the Company for providing the protections afforded
to its clients or for providing advice in relation to the contents of this document or the Admission of the Share
Capital to trading on AIM. No representation or warranty, express or implied, is made by Renaissance as to the
contents of this document, without limiting the statutory rights of any person to whom this document is issued.
Renaissance will not be offering advice, and it will not otherwise be responsible for providing customer protections
to recipients of this document or for advising them on the contents of this document or any other matter.
The information contained in this document is not intended to inform or be relied upon by any subsequent
purchasers of Ordinary Shares (whether on or off exchange) and accordingly no duty of care is accepted in relation
to them.
No person has been authorised to give any information or make any representations other than those contained in
this document and, if given or made, such information or representations must not be relied upon as having been
so authorised. Neither the delivery of this document nor any subscription made pursuant to it will, under any
circumstances, create any implication that there has been any change in the affairs of the Company since the date
of this document or that the information in it is correct at any time subsequent to its date.
This document does not constitute an offer to sell or issue, or the solicitation of an offer to buy or subscribe for,
Ordinary Shares to any person in any jurisdiction in which such an offer is unlawful. In particular, this document is
not for distribution by any means including electronic transmission in or into the United States or in or to any resident
of Canada, Australia, Republic of Ireland, Republic of South Africa or Japan, their possessions or territories or to any
of their citizens, or to any corporation, partnership or such entity created or organized under their laws. Any such
distribution contrary to the above could result in a violation of the laws of such countries. In addition, the Ordinary
Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the Securities
Act), or under any state securities laws and may only be offered or sold in offshore transactions as defined in and
in accordance with Regulation S promulgated under the Securities Act. Acquirers of the Ordinary Shares may not
offer to sell, pledge or otherwise transfer the Ordinary Shares in the United States, or to any U.S. Person as defined
in Regulation S under the Securities Act, including resident corporations, or other entities organized under the laws
of the United States, or non-U.S. branches or agencies of such corporations unless such offer, sale, pledge or transfer
is registered under the Securities Act, or an exemption from registration is available. The Company does not currently
plan to register the Ordinary Shares under the Securities Act.
No legal, business, tax or other advice is provided in this document. Prospective investors should consult their
professional advisers as needed on potential consequences of subscribing for, purchasing, holding, converting or
selling Ordinary Shares under the laws of their country and/or state of citizenship, domicile or residence.
This document contains certain forward looking statements that involve risks and uncertainties. All statements other
than statements of historical facts contained in this document, including statements regarding the Groups future
financial position, business strategy and plans, business model and approach and objectives of management for
future operations, are forward-looking statements. Generally, the forward-looking statements in this document use
words like anticipate, believe, could, estimate, expect, future, intend, may, opportunity, plan,
potential, project, seek, will and similar terms. The Groups actual results could differ materially from those
anticipated in the forward looking statements as a result of many factors, including the risks faced by the Group
which are described in this Part 2 and elsewhere in this document. Investors are urged to read this entire document
carefully before making an investment decision. The forward looking statements in this document are based on the
beliefs and assumptions of the Directors and information only as of the date of this document, and the forward
looking events discussed in this document might not occur. Therefore, investors should not place any reliance on any
forward looking statements. Except as required by law, the Directors undertake no obligation to publicly update any
forward looking statements, whether as a result of new information, future earnings, or otherwise.
Notice of a general meeting of Sirius Petroleum PLC to be held at the offices of Fladgate LLP, 16 Great Queen Street,
London WC2B 5DG at 11.00 a.m. on 29 October 2010 is set out in appendix 2 on page 135 of this document. Whether
or not you intend to attend the meeting, it is important that you complete and return the form of proxy
accompanying this document as soon as possible and in any event so as to be received by the Companys registrars,
Capita Registrars, PXS, 34 Beckenham Road, Kent BR3 4TU not later than 11.00 a.m. on 27 October 2010.

CONTENTS
Page
EXPECTED TIMETABLE OF PRINCIPAL EVENTS

PLACING STATISTICS

DEFINITIONS

DIRECTORS, SECRETARY AND ADVISERS

10

PART 1

LETTER FROM THE CHAIRMAN

12

PART 2

RISK FACTORS

28

PART 3

COMPETENT PERSONS REPORT

44

PART 4

SUMMARY OF THE JOINT OPERATING AGREEMENT

82

PART 5

ADDITIONAL INFORMATION

88

APPENDIX 1

UNAUDITED INTERIM FINANCIAL INFORMATION ON THE COMPANY

113

APPENDIX 2

NOTICE OF GENERAL MEETING

135

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Publication of this document

Wednesday 13 October 2010

Latest time and date for receipt of forms of proxy

11.00 a.m. on 27 October 2010

General meeting

11.00 a.m. on 29 October 2010

Completion of the Acquisition, Admission effective and dealings

expected to commence in the Enlarged Share Capital on AIM
Wednesday 3 November 2010
CREST accounts to be credited (as applicable)

3 November 2010

Definitive share certificates for the Placing Shares

expected to be despatched

by 17 November 2010

Expected date of the renewal of Del-Sigmas 100 per cent.

Participating Interest

by 29 October 2010

Expected date of the DPR approving Sirius 40 per cent.

Participating Interest

by 29 October 2010

STATISTICS
Existing issued share capital

520,827,720

Placing Shares

313,860,327

Placing Shares as a percentage of the Enlarged Share Capital

Transaction Shares

30.73 per cent.

186,698,610

Enlarged share capital

1,021,386,657

Outstanding employee and director share options and warrants

Fully diluted share capital

50,000,000
1,196,063,241

Placing Price

5 pence

Market capitalisation at the Placing Price

51,069,333

Notes:
The following exchange rates have been used throughout this document where appropriate:
1.00 = US$1.50
1.00 = N231.197 (Nigerian naira)

DEFINITIONS
The following definitions apply throughout this document, unless the context requires
otherwise:
Acquisition

the conditional acquisition of a 40 per cent.

Participating Interest in the Ke Field as described in the
Joint Operating Agreement.

Admission

the effective admission of the Enlarged Share Capital of

the Company to trading on AIM in accordance with the
AIM Rules.

AIM

the AIM market operated by the London Stock

Exchange.

AIM Note

the AIM Note for Mining, Oil & Gas Companies

published by the London Stock Exchange in June 2009.

AIM Rules

the AIM Rules for Companies and the AIM Rules for
Nominated Advisers published by the London Stock
Exchange from time to time.

AIM Rules for Nominated Advisers

the rules applicable to nominated advisers operating on

AIM, as published by the London Stock Exchange from
time to time.

Articles

the articles of association of the Company from time to

time.

Award

the award by the DPR to Del Sigma of a 100 per cent.

Participating Interest in the Ke Field, dated 25 February
2003.

Board

the board of directors of the Company from time to

time.

Bonny Crude

a high grade of Nigerian crude oil with high gravity (low

specific gravity), produced in the Niger Delta basin and
named after the region around the city of Bonny.

CA 2006

the Companies Act 2006.

CapInvest

Capital Investment Office Limited (registered in England

with number 06967969), the sole adviser to the Capital
Investment Trust.

Capital Investment Trust

Capital Investment Trust acting by its trustees IFG

Investment Trust of 1921 Broad Street, St Helier, Jersey,
Channel Islands, JE1 3PB, the legal and beneficial owner
of EMMEF.

Chevron

Chevron Nigeria Limited, a company incorporated in

Nigeria with registered number RC 6135.

Company or Sirius

Sirius Petroleum plc, a company incorporated and

registered in England and Wales with number
05181462.

Completion

the passing by Shareholders of resolutions 1 and 6 at the

GM to approve the Acquisition and matters ancillary to
it.

Consents

the consent of the DPR to the assignment from Del

Sigma to Sirius of a 40 per cent. Participating Interest in
the Ke Farmout Area and the consents of Chevron and
NNPC to such assignment under the Farmout
Agreement.

Corvus

Corvus Capital Limited, a company incorporated and

registered in the Cayman Islands with number 187766.

Corvus Warrant

the warrant dated 13 October 2010 granted by the

Company to Corvus as described in paragraph 10.13 of
Part 5 of this document.

CPR or Competent Persons Report

the report in Part 3 of this document prepared by

Degeconek Nigeria Limited, the competent person for
the purposes of the AIM Note.

CREST

the system for paperless settlement of trades and the

holding of uncertificated securities administered by
Euroclear UK & Ireland Limited.

Del Sigma

Del Sigma Petroleum Nigeria Limited, a company

incorporated and registered in the Federal Republic of
Nigeria with number 223866, whose registered office is
at Plot 218 Trans Amadi, Industrial Layout, Port
Harcourt, River State, Nigeria.

Directors

the directors of the Company as at the date of this

document whose names are listed on page 10 of this
document.

DNL

Degeconek Nigeria Limited, the author of the CPR.

DPR

the Department of Petroleum Resources of Nigeria.

EMMEF

EMMEF Investments Limited, a company incorporated

and registered in Jersey with number 104920 and wholly
owned by Capital Investment Trust.

EMMEF Facility Agreement

the facility agreement between the Company and

EMMEF dated 13 October 2010, further details of which
are set out in paragraph 12 of Part 1 of this document
and paragraph 10.16 of Part 5 of this document.

Enlarged Share Capital

the Ordinary Share capital of the Company as enlarged

by the issue and allotment of the Placing Shares and the
Transaction Shares.

Existing Ordinary Shares

the 520,827,720 Ordinary Shares currently in issue.

Farmout Agreement

the farmout agreement dated 18 March 2004 between

NNPC, Chevron and Del Sigma, as varied by an
agreement dated on or around 3 November 2004.

GM or General Meeting

the general meeting of the Company, convened for

29 October 2010, notice of which is set out in appendix
2 of this document.

Group

the Company and any subsidiary of the Company from

time to time.

Joint Operating Agreement or JOA

the joint operating agreement dated, 19 February 2010,

and made between Sirius and Del Sigma, details of
which are set out in paragraph 6 of Part 1 of this
document and in Part 4 of this document.

Ke Asset

the Ke Field and associated undrilled prospects.

Ke Farmout Area

the 522 km2 field comprised within Oil Mining Lease 55,
and including the Ke Field and related prospects.

Ke Field

the oil accumulation discovered by the Ke-1 well.

London Stock Exchange

London Stock Exchange plc.

Nigeria

the Federal Republic of Nigeria.

NNPC

Nigerian National Petroleum Corporation, the state oil

company of Nigeria.

Official List

the official list of the United Kingdom Listing Authority.

Offtake Agreement

the crude oil purchase agreement dated 16 February

2009 between Del Sigma and Shell Western Supply and
Trading Limited described in paragraph 8 of Part 1 of
this document.

Ordinary Shares

ordinary shares of 0.25 pence each in the capital of the

Company.

Participating Interest

the percentage interest held by Del Sigma or Sirius as

the case may be in the rights and obligations in and to
all or part of the Ke Farmout Area and as may otherwise
be derived from and under the Farmout Agreement.

Placing

the placing by Renaissance on behalf of the Company

of the Placing Shares pursuant to the Placing
Agreement.

Placing Agreement

the placing agreement dated 13 October 2010 between

the Company, the Directors, Proposed Directors,
Renaissance and Strand Hanson, details of which are set
out in paragraph 10.23 of Part 5 of this document.

Placing Price

5 pence per Placing Share.

Placing Shares

the 313,860,327 new Ordinary Shares to be offered to

Placees pursuant to the Placing.

Proposals

together the Acquisition and Admission, each as

described in the letter from the Chairman in Part 1 of
this document.

Proposed Directors

Jack Pryde and Billi Folahan.

Renaissance

Renaissance Capital Limited, the Companys sole

bookrunner in connection with the Placing, and also the
Companys broker.

Renaissance Warrant

the warrant dated 13 October 2010 granted by the

Company to Renaissance Securities (Cyprus) Limited as
described in paragraph 10.27 of part 5 of this document.

Renewal

the renewal of the Award to Del Sigma by the DPR.

Resolutions

the resolutions to be proposed at the GM as set out in

the notice of GM at the end of this document and
reference to a Resolution is to the relevant resolution
set out in the notice of GM.

Reverse Takeover

a acquisition which would be of a size or nature to be

deemed a reverse takeover under rule 14 of the AIM
Rules.

Share Dealing Code

the code on dealings in the Companys securities

adopted by the Company, and which complies with the
AIM Rules.

Shareholders

shareholders in the Company.

SOGL

Sirius Oil & Gas Limited, a company incorporated in the

British Virgin Islands with number 1480233. Note that
this company is different from the English company of
the same name which is a subsidiary of the Company.

Strand Hanson

Strand Hanson Limited, the Companys nominated

adviser.

Strand Warrant

the warrant dated 13 October 2010 granted by the

Company to Strand Hanson Securities Limited as
described in paragraph 10.24 of Part 5 of this document.

subsidiary and
subsidiary undertaking

have the meanings given to them by CA 2006.

Suspension

the suspension from trading on AIM of the Companys

Ordinary Shares.

Taglient

Taglient Oil Nigeria Limited, a company incorporated

and registered in Nigeria with number RC 600925.

Toumazou Warrant

the warrant dated 13 October 2010 granted by the

Company to Professor Christofer Toumazou as described
in paragraph 10.14 of Part 5 of this document.

Transaction Shares

186,698,610 new Ordinary Shares in aggregate

comprising the 52,000,000 new Ordinary Shares to be
issued to SOGL on Admission, the 61,300,000 new
Ordinary Shares to be issued to Taglient on Admission,
the 65,000,000 new Ordinary Shares to be issued to
EMMEF on Admission, the 6,500,000 new Ordinary
Shares to be issued to Strand Hanson Securities Limited
on Admission and the 1,898,610 new Ordinary Shares to
be issued on Admission pursuant to the agreement
described in paragraph 10.29 of Part 5 of this document.

UK or United Kingdom

the United Kingdom of Great Britain and Northern

Ireland.

United Kingdom Listing Authority

the Financial Services Authority, acting in its capacity as

the competent authority for the purposes of Part VI of
the Financial Services and Markets Act 2000 as
amended.

US or United States

the United States of America, its territories and

possessions, any state of the United States of America
and the district of Columbia and all other areas subject
to its jurisdiction.

US$

US dollars, the lawful currency of the United States.

US person

a citizen or permanent resident of the United States, as

defined in Regulation S promulgated under the
Securities Act 1933.

A glossary of technical terms is set out in the CPR in Part 3 of this document.

DIRECTORS, SECRETARY AND ADVISERS

Directors

Babatunde Olusegun Agboola (Deputy chairman from Admission)

Toby Jonathan Hayward (Chief executive officer from Admission)
Michael Brian Victor Cudworth Hirschfield (Finance director
from Admission)
Graham Langham Porter (Non-executive director)
Olukayode Olufemi Kuti (Executive director from Admission)

Proposed Directors

Jack Pryde (Non-executive chairman)

Billi Ayinde Folahan (Technical director)

Registered office

2nd Floor, Stanmore House

29-30 St Jamess Street
London SW1A 1HB

Company Secretary

Kitwell Consultants Limited

Kitwell House
The Warren
Radlett WD7 7DU

Nominated Adviser

Strand Hanson Limited

26 Mount Row
London
W1K 3SQ

Bookrunner and
Broker

Renaissance Capital Limited

One Angel Court
Copthall Avenue
London EC2R 7HJ

Solicitors to the
Company as to
English law

Fladgate LLP
16 Great Queen Street
London WC2B 5DG

Solicitors to the
Company as to
Nigerian law

G.Elias & Co
NCR Building
6th Floor, 6 Broad Street
Lagos
Nigeria

Solicitors to the
Nominated Adviser
and Bookrunner

Cobbets LLP
70 Grays Inn Road
London
WC1X 8BT

Competent Person

Degeconek Nigeria Limited

(Hydrocarbon Assets Management Consultants)
241A Ikorodu Crescent
Dolphin Estate, Ikoyi
PO Box 71560, Victoria Island
Lagos
Nigeria

10

Auditors and
Reporting
Accountants

Grant Thornton UK LLP

Registered Auditor
Chartered Accountants
Enterprise House
115 Edmund Street
Birmingham B3 2HJ

Registrars

Capita Registrars Limited

Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0GA

Companys website

www.siriuspetroleum.com

ISIN

GB00B03VVN93

AIM symbol

SRSP

11

PART 1
LETTER FROM THE CHAIRMAN

SIRIUS PETROLEUM PLC

Stanmore House, 29-30 St Jamess Street
London SW1A 1HB
(incorporated in England and Wales with registered number 05181462)

Directors:
Babatunde Olusegun Agboola (currently chairman, deputy chairman from Admission)
Toby Jonathan Hayward (Chief executive officer from Admission)
Michael Brian Victor Cudworth Hirschfield (Finance director from Admission)
Graham Langham Porter (Non-executive director)
Olukayode Olufemi Kuti (Executive director from Admission)
Proposed Directors:
Jack Pryde (Non-executive chairman)
Billi Folahan (Technical Director)
13 October 2010
Dear Shareholder,

Proposed Acquisition
Placing of 313,860,327 new Ordinary Shares
Application for re-admission to trading on AIM
Notice of General Meeting
1.

Introduction

On 22 February 2010 the Board announced that the Company had entered into a conditional
agreement, pursuant to which it will acquire a 40 per cent. Participating Interest in the Ke
Field, and the surrounding Ke Farmout Area in Nigeria. The Ke Field is a small oil discovery
located in swamp water in the southern part of the Niger Delta, approximately 5 km from the
Gulf of Guinea. The field was originally discovered in 1965 by Chevron, which retains a small
royalty interest in any production income from the Ke Farmout Area. The Ke Farmout Area,
comprising 12,900 gross acres was originally part of Oil Mining Lease No. 55 (OML 55) and was
awarded to Del Sigma, an indigenous Nigerian company, in the DPRs Marginal Field round of
2003.
In view of the size and nature of the Acquisition and its associated funding commitments, it
is deemed to be a reverse takeover of the Company under the AIM Rules. Accordingly,
completion of the Acquisition and the coming into effect of the Joint Operating Agreement
is conditional on, among other things, receiving the approval of Shareholders, such approval
to be sought at the GM, notice of which is set out at the end of this document.
The purpose of this document is to provide Shareholders with information on the Proposals
and to explain why the Directors and Proposed Directors consider the Proposals to be in the
best interests of the Company and Shareholders as a whole and recommend that Shareholders
vote in favour of the Resolutions to be proposed at the GM, as the Directors have already
irrevocably agreed to do so in respect of their 78,293,241 Ordinary Shares, representing 15.03
per cent. of the Existing Ordinary Shares.
12

Irrevocable undertakings to vote in favour of the Resolutions have been received from all of
the Directors who are Shareholders and certain Shareholders in respect of 268,568,736
Ordinary Shares, representing approximately 51.57 per cent. of the Existing Ordinary Shares.
Whilst Shareholders should read this entire document, particular attention is drawn to this
Part 1 and to Parts 2 to 5 of this document, which contain important information in relation
to the Proposals.

2.

The Suspension and Admission

Suspension occurred on 22 February 2010 pending the publication of this document.

Admission is conditional on, among other things, Shareholder approval and the Renewal
being granted.
If the Acquisition is not approved then the Companys trading facility on AIM will be cancelled
pursuant to rule 41 of the AIM Rules for Companies as (i) the Existing Ordinary Shares will
have been suspended for more than six months (since the announcement made on 22 February
2010) and (ii) the Company would have failed to implement its investing stategy within
18 months of the extraordinary general meeting held on 19 August 2008.
If the Acquisition is approved but at that time the Renewal has not been granted, the
Companys trading facility on AIM will remain suspended until the Renewal is obtained,
provided this is on or before 31 December 2010. If the Renewal has not been obtained on or
before 31 December 2010, the Companys trading facility on AIM will be cancelled.
Shareholders should note that the Proposals are inter-conditional. Subject to the above, it is
expected that Admission will take place and that dealings in the Ordinary Shares will
commence on 3 November 2010.
For the reasons set out in paragraph 6 of this Part 1, Admission is not conditional upon the
Consents.

3.

The Company and its investing strategy

Since April 2007 the Company has had no substantive trading business following the decision
to cease the business of developing and using aggregation software in the gaming industry.
Since that date, the Company has been classified as an investing company under the AIM Rules.
The Companys current strategy is to identify oil and gas opportunities, particularly interests
in marginal fields in Nigeria.
In July 2008 the Company announced that it had entered into services agreements with parties
who agreed to assist the Company in finding acquisition targets, a general meeting was
convened to appoint new directors and a 45,000 placing was completed. Since July 2008, the
Company has entered into various agreements with third parties to seek out opportunities in
the Nigerian oil and gas sector.
In October 2009 the Company announced that it had been granted a licence from the
Department of Petroleum Resources of the Nigerian Ministry of Petroleum Resources to import
refined oil products into Nigeria. The Iicence was granted with effect from 30 September 2009
and permits the Company, through its subsidiary Sirius Taglient Petro Limited, to import up to
10,000 metric tonnes per shipment of petroleum oil product. The licence is renewable on a
quarterly basis for a nominal fee. The purpose of obtaining the import licence was to
commence trading activities with a view to producing revenues and positive cash flows whilst
continuing to review further potential marginal field opportunities. The Company has,
however, concentrated its finite resources on the Acquisition and so will not now commence
trading operations until after Admission. The Directors and the Proposed Directors anticipate
carrying out trading at a modest level to generate a revenue stream whilst focussing the
majority of their resources on proving flow at the Ke 1 well in the Ke Field.
13

4.

Background to and reasons for the Acquisition

The Companys primary objective is the acquisition of marginal oil and gas fields in Nigeria. The
Board believes that the Acquisition represents a suitable investment opportunity to acquire a
project which the Board believes currently has unrealised value, in line with the Companys
investing strategy. Following completion of the Acquisition, the Company will no longer be an
investing company.

5.

The Ke Field

The Ke Field is a small oil discovery located in swamp water in the southern part of the Niger
Delta, approximately 5 km from the Gulf of Guinea (see Figure 1). The discovery well, Ke-1, and
associated un-drilled fault segments are collectively known as the Ke Asset. The field was
originally discovered in 1965 by Chevron, which retains a small royalty interest in any
production income from the Ke Asset. The Ke Farmout Area, comprising 12,900 gross acres,
was originally part of Oil Mining Lease No. 55 (OML 55) and was awarded to Del Sigma, an
indigenous Nigerian company, in the DPRs Marginal Field round of 2003. Under the terms of
the proposed Acquisition, Sirius will acquire a 40 per cent. Participating Interest in the Ke
Farmout Area, including the Ke Field.
Figure 1 Location of the Ke Field and Ke Farmout Area

In 1965, the Ke Field discovery well, Ke-1, encountered light crude oil in two sandstone
reservoirs at depths between 9,300 feet and 10,500 feet, one of which tested 44 API oil at a
rate of 1,145 barrels of oil per day. A step-out well drilled 8 km to the east (Darama-1) was a
dry hole, and no further appraisal of the discovery was conducted. A 3-D seismic survey was
subsequently acquired over the field and surrounding area in 1993, and this has enabled
detailed mapping of a series of fault blocks surrounding the Ke-1 discovery (see Figure 2),

14

where the same reservoir sands are expected to be present and which are thought to be
prospective for oil. These prospects, known as Ke-South, Ke-Northeast and Ke-North, together
represent a significant volumetric upside to the Ke-1 discovery.
Figure 2 Ke Farmout Area C4 Sand Depth Structure

Depth Structure Map of C4 Sand

Ke-North

Fault A
Ke-Northeast

Ke-South
Fault B
Limit oil-bearing reservoir

Scale = 1:50,000

Prospect closing area

An independent resource assessment of the Ke Farmout Area has been conducted by

Degeconek Nigeria Limited (DNL), a Nigerian oil and gas asset management consultant, and
its report on the area is set out in Part 3 of this document in the form of a Competent Persons
Report. DNLs assessment of the potentially recoverable oil volumes associated with the Ke-1
discovery well is shown in Table 1, classifing such oil volumes as Contingent Resources under
the SPE/WPC/AAPG/SPEE 2007 code:
Table 1 Ke Discovery Summary of Contingent Resources
Gross
Oil (mmbls)

Ke Discovery

Risk
Factor(1)

Net Attributable

Low
Estimate

Best
Estimate

High
Estimate

Low
Estimate

Best
Estimate

High
Estimate

2.92

5.65

5.65

1.17

2.26

2.26

75%

Note: (1) Risk Factor represents the Chance of Commerciality, as assessed by DNL

The Board believes that this small oil accumulation, amounting to about 5.6 million barrels of
recoverable oil with some associated natural gas, can be developed via the re-entry and
completion of the existing Ke-1 well and the drilling of a second development well. A peak
production rate of around 3,500 bopd is anticipated from the two wells. Use of the existing
well will help minimise costs, although the economics of the project are robust at current oil
prices and could accommodate the drilling of a Ke-1 replacement well if required. DNL has
15

assigned a 75 per cent. risk factor to this development, representing a 75 per cent. probability
that the project can be successfully completed as envisaged.
In view of the working capital available to the Company at its current stage of development,
the Company has planned to re-enter the Ke-1 well only. Even though a budget has been
approved for the second development well, no drilling commitments are yet in place and plans
are still under review. As a result the potentially recoverable oil volumes associated with the
Ke Field are classified as Contingent Resources. With financing and a work plan in place the
potentially recoverable oil volumes associated with the Ke Field are expected by the Directors
to exceed 25 Mmbo (as announced by the Company on 22 February 2010 although this has not
been verified by DNL).
The favoured method of exporting oil from the field is via a new-build pipeline into Shells
Awoba flowstation, 19km to the north of the field. In the period between the commencement
of production and the construction of the pipeline, it is intended that export will be via road
tanker and water-borne barge. A final decision to construct the pipeline will be taken based
on, among other things, the results of the Ke-1 re-entry well and the availability of funding.
A significant exploration upside exists in the offsetting fault blocks, and, subject to the
availability of funding, the Company intends to drill one or more exploration wells following
a successful re-entry and production testing of the Ke-1 well. DNLs assessment of the
potentially recoverable oil volumes associated with these exploration prospects is shown in
Table 2, classifying the oil volumes as Prospective Resources under the SPE/WPC/AAPG/SPEE
2007 code:
Table 2 Ke Farmout Area Summary of Prospective Resources
Gross

Risk
Factor(1)

Net Attributable

Low
Estimate

Best
Estimate

High
Estimate

Low
Estimate

Best
Estimate

High
Estimate

Ke-South
Ke-Northeast
Ke-North

2.30
1.10

7.55
7.21

14.75
22.19
15.41

0.92
0.44

3.02
2.88

5.90
8.88
6.16

Total (mmbls)

3.40

14.76

52.35

1.36

5.90

20.94

Oil (mmbls)

49%
30%
30%

Note: (1) Risk Factor represents the Chance of (exploration) Success, as assessed by DNL

The Ke-South Prospect, with Best Estimate resource potential of around 7.5 million barrels, is
thought to be the most attractive exploration prospect in the area and is likely to be the target
of the first exploration well in 2012. DNL has assigned an exploration risk factor of 49 per cent.
to this prospect; if successful, a discovery of this size would probably be developed with two
producing wells. In the Boards opinion, exploration drilling of the other features, KeNortheast and Ke-North, would depend on the results of the first wells, but in a success case
could bring the total reserves of the Ke Field area to 20 million barrels or more and peak
production to around 7,500 bopd. The Directors and Proposed Directors stress, however, that
this is a success case scenario which depends upon the uncertain results of exploration drilling.
The Company will require additional funding to carry out this work programme.
Further information on the Ke Farmout Area is set out in the CPR in Part 3 of this document.

6.

The Acquisition and the Joint Operating Agreement

A 100 per cent. Participating Interest in the Ke Farmout Area, containing the Ke Field, was
allocated to Del Sigma by the DPR on 25 February 2003. During 2010 this Award, together
with all other awards of marginal field interests in Nigeria, fell due for Renewal. Del Sigma,
as well as all other holders of marginal field interests in Nigeria, is currently waiting for the DPR
16

to confirm the Renewal which is a condition precedent of Completion and of Admission. The
Board expects to receive the Renewal on or before 29 October 2010. The Company has been
informed in writing by the DPR that it is in the process of renewing the licences of all the
marginal fields awarded in 2003 and that the Nigerian government has no plans to include
these fields in its next bid round. In addition on 21 September 2010 Del Sigma was given
permission to re-enter the Ke-1 well, notwithstanding the Renewal being outstanding. Based
on the DPRs statement that no marginal fields will be included in the next bid round and
upon the permission to re-enter the Ke-1 well, the Board is confident that the Renewal will be
granted to Del Sigma in the near future.
The Award was conditional upon, among other things, Del Sigma entering into an agreement
with NNPC and Chevron (as leaseholders of the Ke Field). Accordingly Del Sigma entered into
the Farmout Agreement with NNPC and Chevron on 18 March 2004 which agreement sets out
the terms and conditions, including financial terms and conditions of the farmout of the Ke
Farmout Area to Del Sigma. Del Sigma is the operator and is currently the owner of all the
rights and interests in the Ke Farmout Area by virtue of the Award and the Farmout
Agreement.
As announced on 22 February 2010, Sirius entered into the Joint Operating Agreement which
is conditional on, among other things, the Renewal and Shareholder approval at the General
Meeting. Under the terms of the Joint Operating Agreement, Sirius is entitled to a 40 per cent.
interest in the Ke Farmout Area, which (subject to the Renewal) is 100 per cent. owned by Del
Sigma, such transaction being subject of the approval of the DPR, Chevron and NNPC.
Until such time as the Consents are received, Sirius beneficial interest will be held on trust by
Del Sigma with all benefits and obligations being subject to the same conditions as set out in
the Joint Operating Agreement. Such beneficial interest is assignable by Sirius in the same
manner, and subject to the same conditions, as its legal interest under the Joint Operating
Agreement would be upon grant of the Consents.
Sirius and Del Sigma have made an application to the DPR for government consent to the
assignment of the 40 per cent. Participating Interest. The DPR will meet with the Company to
ascertain its technical and financial competence and will conduct due diligence on the
Company including by way of a visit to Siriuss office in London. The DPR will prepare a report
from the result of its investigations which is sent to the relevant government minister for
approval. The Company has been advised by the DPR that the minister usually acts on its
recommendation. The government consent is expected by 29 October 2010. Once the
government consent has been obtained, Del Sigma will apply to Chevron and NNPC for consent
to the assignment under the Farmout Agreement. These consents cannot be obtained until the
government has granted its consent.
Under the Joint Operating Agreement Del Sigma is designated as the operator and Sirius as
the financial and technical partner. The Joint Operating Agreement also establishes a joint
management committee (JMC) which is responsible for the overall supervision, control and
direction of the conduct of joint operations. The JMC comprises an equal number of
representatives from Del Sigma and Sirius. If the JMC is deadlocked then disputes are to be
referred for resolution to NNPC and Chevron, as farmors, except in the case of disputes
regarding payments from the joint bank accounts established under the JOA which will be
referred to an internationally recognised firm of chartered accountants.
Sirius will fund 100 per cent. of the development costs of the Ke Field. Upon production of oil,
Sirius will receive a net preferential cash flow of 70 per cent. from the production revenues
until full recovery of its investment following which its cash receipts will revert to 40 per cent.
to match its underlying economic interest in the field pursuant to the Joint Operating
Agreement.

17

There is no farm-in consideration payable in relation to the Acquisition. Del Sigma has incurred
substantial historical sunk costs on the Ke Field and, as part of the Acquisition, Sirius has agreed
to make initial payments to Del Sigma amounting to US$2 million, of which US$500,000 was
paid on the signing of the JOA, US$500,000 will be paid following a satisfactory visit by the DPR
to Siriuss head office and US$1 million will be paid within five days of the DPRs final approval
of the transfer to Sirius of the 40 per cent. interest in the Ke Field. Sirius is entitled to recover
these initial payments as part of the recovery of the funding costs of developing the Ke Field,
referred to above.
Further information on the Joint Operating Agreement is set out in Part 4 of this document.

7.

The Offtake Agreement

On 16 February 2009 Del Sigma entered into the Offtake Agreement with Shell Western Supply
and Trading Limited (Shell), pursuant to which Shell has agreed to purchase all the crude oil
produced from the Ke Field. The agreement will become effective once Del Sigma enters into
a crude handling agreement with Shell Petroleum Development Company of Nigeria Limited
and will continue for an initial term of five years and then be terminable on three months
notice. Del Sigma is, however, unable to terminate the agreement until 2,000,000 barrels of Del
Sigmas production have been taken off by Shell. The price to be paid for each barrel will be,
at Shells option, either the average of the mean Bonny quotations as published in Platts Crude
Oil Marketwire during the applicable pricing period or the average of the mean Brent Dated
quotations as published in Platts Crude Oil Marketwire plus the average of the mean Bonny
differentials to Dated Brent as published in Platts Crude Oil Marketwire under the heading
spread vs fwd DTD Brent during the applicable pricing period. The applicable pricing period
will be the five quotations in Platts Crude Oil Marketwire immediately after the bill of lading.
Shell has the option to elect for earlier or deferred pricing periods.

8.

Information on Del Sigma

Del Sigma is a Nigerian company, incorporated in July 1993, that has contracted and provided
technical services for Shell Petroleum Development Company (a Nigerian subsidiary of Shell),
Total Nigeria, Chevron Nigeria, and for Elf Petroleum Nigeria. The technical services provided
included maintenance services for the entire ELF OML 58 oil & gas production facilities as well
as engineering design services for Nigeria LNG Ltd.
Subject to the Renewal, Del Sigmas sole asset will be a 100 per cent. Participating Interest in
the Ke Field, as described above. The managing director and principal shareholder of Del Sigma
is Dr Sokeiprim Amachree. He graduated with a B.Eng in mechanical engineering from
Ahmadu Bello University, and obtained an M.Sc in industrial engineering and production
management from the Cranfield Institute of Technology (now Cranfield University) and PhD
in engineering economics and planning from Cardiff University. Prior to forming Del Sigma to
work as an independent Nigerian petroleum producer, he worked as a production engineer
for Elf Petroleum Nigeria Limited, where he was production engineer in charge of the Elf
Obagi field, which produced 60,000 barrels of oil per day.

9.

Nigeria and its hydrocarbon industry

The Federal Republic of Nigeria is a constitutional republic comprising of thirty six states and
its federal capital territory, Abuja. The country is located in West Africa and shares land borders
with the Republic of Benin in the west, Chad and Cameroon in the east and Niger in the north.
Nigerias coast lies to the south, on the Gulf of Guinea which is part of the Atlantic Ocean.
Nigeria has a total land area of 923,768Km and, in 2009, had an estimated population of
154,729,000. In terms of religion, Nigeria is split equally between Muslims and Christians with
a very small minority who practice indigenous religions.
Nigeria is the most populous country in Africa and the eighth most populous country in the
world. It is listed among the Next Eleven economies and is a member of the Commonwealth
18

of Nations. The economy of Nigeria is one of the fastest growing in the world, with the
international monetary fund projecting growth of 7.0 per cent. in 2010.
Nigeria has an abundance of natural resources, especially hydrocarbons. It is the tenth largest
oil producer in the world, the third largest in Africa and the most prolific producer in
sub-Saharan Africa. The Nigerian economy is largely dependent on its oil sector and the
upstream oil industry is the single most important sector in the economy.
Nigeria holds the second largest oil reserves and the largest natural gas reserves in Africa.
According to the BP Statistical Review of World Energy (June 2009), Nigeria holds the seventh
largest natural gas reserves in the world. Most of Nigerias 36 billion barrels of proven oil
reserves are located onshore, in over 250 fields of around 50 million barrels each, along the
coast of the Niger Delta region. The country is heavily dependent on its oil industry and oil
revenue accounts for 90-95 per cent. of foreign-exchange earnings and 81 per cent. of
government revenue.
Until 1960, government participation in the oil industry was limited to the regulation and
administration of fiscal policies. In 1971, Nigeria joined OPEC and in line with OPEC resolutions,
the Nigerian National Oil Corporation was established becoming NNPC in 1977.
NNPC was created to regulate Nigerias oil and gas industry. A total of 12 subsidiary companies
of NNPC manage the nations oil assets. The majority of Nigerias major oil and natural gas
projects are funded through joint ventures with NNPC as the principal shareholder. The
remaining funding arrangements are comprised of production sharing contracts which are
mostly confined to Nigerias deep offshore development program.
Nigeria has taken steps to develop the local oil industry. In 1996, the government passed the
Petroleum (Amendment) Decree Act no. 23, under which the owners of oil mining leases are
required to farmout to indigenous Nigerian exploration and production companies those fields
which they have left unproduced for at least 10 years since their discovery. With the major oil
companies increasingly focused on offshore exploration and production, there is, in the Boards
opinion, an opportunity for smaller companies to partner with indigenous Nigerian companies
to exploit marginal field opportunities.
In December 1999, there were an estimated 116 marginal fields with reserves totalling 1.3
billion barrels, all located in the Niger Delta. There is also a lot of potential to add further
reserves in Nigeria. To date, only 26 marginal fields have been advertised and bids invited from
interested indigenous exploration and production companies.
The major foreign producers in Nigeria are Shell, Chevron, ExxonMobil, Total and Eni/Agip. In
2008, these producers had an average daily production of between 193,570 and 456,805
barrels and a total annual production of between 70,846,832 and 167,190,786 barrels. These
major producers are increasingly looking for larger oil fields, leaving behind smaller discoveries
in order to develop deep offshore blocks.
Nigeria is OPECs fifth largest producer. Through its membership of OPEC, Nigeria has agreed
to abide by allotted crude oil production limits that have varied over the years.
The most significant issue facing Nigeria is the continued violence and militant activity in the
Niger Delta region, which has, historically, led to long term shut ins of up to 25 per cent. of the
countrys production capacity. Further details are set out in Part 2 of this document under the
heading Terrorism, crime and corruption.

10. Current trading and prospects for the Group

Following Admission, the Company, together with Del Sigma, intend to re-enter and test the
Ke-1 well in the Ke Field to establish sufficient economic proof of flow of oil. This will involve
re-entering the well using the casing that was put in place when the well was originally drilled.
If the casing is found to be damaged then it will be necessary to either drill a new well or
repair the casing. In either case the process is expected to be complete by 31 March 2011 and

19

will cost an estimated US$14.4 million. The net proceeds of the Placing will be used to meet
this cost.
If the flow testing proves to be satisfactory (which the Directors consider to be a flow of 2000
bopd over a three day period), Sirius will review its options regarding the sale of the oil arising.
One option will be to construct a 19 km pipeline from the Ke Field to Shells flowstation at
Awoba. Other options include the immediate sale of oil produced by using land tankers or
water borne barges to transport the oil. Whilst the Board believes the funding to be made
available under the EMMEF Facility, assuming the necessary conditions of drawdown are
satisfied, will be sufficient to finance the construction of the pipeline, further investigation of
the costs of construction will be undertaken and additional capital may be required.
If the flow testing is deemed unsuccessful the Board will consider drilling another well or wells
on the Ke Field as well as the acquisition of other marginal field interests in Nigeria, in each
case, subject to the availability of funding.
Whilst the Board intends to focus on the re-entry and testing of Ke-1, if technical or
operational reasons dictate (such as a protracted delay in securing the use of a swamp rig), the
Board will consider drilling at Ke-South (which is on dry land).
Following Admission the Company will no longer be categorised as an investing company
under the AIM Rules. The Board will, however, continue to investigate opportunities for
further acquisitions within the oil and gas sector. The Company has entered heads of terms
with a number of indigenous Nigerian companies for possible joint ventures to exploit
marginal field opportunities. These Nigerian companies have farmout agreements for marginal
fields with major oil companies. Summaries of the heads of terms are set out in paragraphs
10.3, 10.7, 10.8 and 10.9 of Part 5 of this document.
The Board is confident of its credentials to work alongside indigenous companies to exploit
marginal field opportunities because of its network of government and other contacts that the
Company has developed over the last 18 months. In particular, the Company has established
and maintained high level contacts with the Lagos state government, the Central Bank of
Nigeria, the Nigerian tax authorities, NNPC and other major oil companies.
In addition, the Company will consider the acquisition of other oil and gas assets and with this
in mind, on 16 February 2010, the Company announced that it had entered into an agreement
with South Africa Hi-Tech Energy Consultancy Inc to procure the services of Dr Vikrom
Koompirochana and Mr Wong Fan Woon to introduce to Sirius a transaction, on or before
31 December 2011, giving Sirius the opportunity to acquire, oil and gas assets with a value of
at least US$0.5 billion. If any such transaction is introduced and completed it is the Boards
current intention to satisfy the consideration payable in Ordinary Shares. To date, no such
transaction has been introduced. Further details of the agreement with South Africa Hi-Tech
Energy Consultancy Inc are set out in paragraph 10.10 of Part 5 of this document. South Africa
Hi-Tech Energy Consultancy Inc is the service company of Dr Vikrom Koompirochana and
Mr Wong Fan Woon. Dr Vikrom Koompirochina is a Thai national and former Thai ambassador
to the United Kingdom, Singapore, Malayasia, New Zealand and Italy, and therefore has
extensive political, governmental and other contacts. Mr Wong Fan Woon is based in Singapore
and has extensive experience of private and public equity markets, mergers and acquisitions,
infrastructure project funding and corporate finance in the South East Asian region.
The Directors and Proposed Directors are optimistic as to the Companys prospects based on
the Companys proposals as described in this Part 1, and the continued development of the
Company.

20

11. Financial information on Sirius

In accordance with Rule 28 of the AIM Rules, this document does not contain historical
financial information on Sirius, which would otherwise be required under Section 20 of Annex
1 of the Prospectus Rules. Audited financial information of Sirius for the three years to 31 July
2009 is available from the Companys website at www.siriuspetroleum.com. Unaudited interim
financial information on Sirius for the six months to 31 January 2010 and for the five months
to 30 June 2010 is set out in Appendix 1 of this document.
The Company announced today that it has extended its current accounting reference period
to 31 December 2010 and that its accounting reference date will be 31 December. Accordingly,
the Companys audited accounts for the 17 months ending 31 December 2010 will be sent to
Shareholders by no later than 31 May 2011.

12. Details of the Placing and other funding arrangements

Placing
The Company is proposing to place 313,860,327 new Ordinary Shares at the Placing Price to
raise 15,693,016 before expenses (approximately 14,184,187 net of expenses). The net
proceeds of the Placing will be used to provide the Group with additional funding for its
working capital requirements, in particular to enable the Company to meet its financial
obligations under the Joint Operating Agreement.
The Placing Shares will represent 30.73 per cent. of the Enlarged Share Capital following
Admission and will rank equally in all respects with the Existing Ordinary Shares. The currency
of the Placing is pounds sterling.
The Company, Renaissance, Strand Hanson, the Directors and Proposed Directors have entered
into the Placing Agreement. Renaissance, acting as Sole Bookrunner, has agreed to use its
reasonable endeavours to place the Placing Shares at the Placing Price. The Placing has not
been underwritten. The Placing is conditional upon, among other things, Renewal, Admission
and the Placing Agreement not being terminated prior to Admission.
Placees not electing to receive new Ordinary Shares pursuant to the Placing in uncertificated
form will receive new Ordinary Shares in certificated form. It is expected that certificates will
be despatched by post within 14 days of Admission.
Further details of the Placing Agreement are set out in paragraph 10.21 of Part 5 of this
document.
EMMEF Facility Agreement
As announced on 26 August 2009, the Company entered into an agreement with CapInvest
under which CapInvest agreed to provide or procure debt funding to the Company of at least
US$80,000,000. As a result of that agreement, the Company has entered into the EMMEF
Facility Agreement pursuant to which it is entitled, subject to satisfaction of certain conditions,
to drawdown an amount not to exceed US$25,000,000 after, amongst other things:
G

the Company has established that the Ke Field has probable and proven reserves of not
less than five million barrels of oil; and

a successful flow test to prove that the well can flow 2,000 or more barrels of oil per day
over a three day period.

This initial drawdown is to be used for the sole purpose of constructing a pipe to link the Ke
Field to Shells flowstation at Awoba, in a manner satisfactory to EMMEF and subject to
EMMEFs approval, not to be unreasonably withheld. Alternatively, at EMMEFs sole discretion,

21

this drawdown can be used for the drilling of the Ke-1 well or wells in the Ke Field or a similar
field in the Niger Delta with similar or better prospects in order to test the economic viability
of such field.
A further amount of up to US$55,000,000 may be available for drawdown but at the lenders
absolute discretion (there is, therefore, no guarantee that this additional amount will be
available to the Company).
All drawdowns are subject to the satisfaction of conditions precedent and additional
conditions which include, among other things that tests show that sales production yields from
the Ke Field in the first year of production will be not less than US$30 million, the spot oil
price remaining above US$50 per barrel in the 30 days prior to the drawdown and there being
no undemocratic change to the Government of Nigeria. The Company will pay on its initial
drawdown under the EMMEF Facility Agreement, a facility fee to EMMEF of US$4,000,000
representing five per cent. of the total facility. Further details of the EMMEF Facility Agreement
are set out in paragraph 10.16 of Part 5 of this document.

13. Additional Ordinary Shares to be issued

Completion will trigger the rights of certain parties to be paid fees which are to be capitalised
and settled by the allotment and issue of new Ordinary Shares on Admission.
Taglient and SOGL entered into service agreements with the Company in July 2008
(summarised in paragraphs 10.1 and 10.2 of Part 5 of this document) under which they are
entitled to be allotted 61,300,000 and 52,000,000 new Ordinary Shares respectively. These
share issues were approved by Shareholders on 19 August 2008.
CapInvest entered into a funding agreement with the Company in August 2009 (summarised
in paragraph 10.4 of Part 5 of this document) under which it was entitled to a fee equivalent
to 65,000,000 new Ordinary Shares. That right is now held by EMMEF.
Strand Hanson has agreed to capitalise 325,000 of its fee (under the agreement summarised
in paragraph 10.20 of Part 5 of this document) at the Placing Price and so will be allotted
6,500,000 new Ordinary Shares on Admission.
On Admission Adelphi Holdings Limited will be allotted 1,898,610 Ordinary Shares in
settlement of indebtedness of US$150,000, pursuant to the agreement described in paragraph
10.29 of Part 5 of this document.
Admission of the Transaction Shares to AIM is expected to take place on 3 November 2010
and they will represent 18.28 per cent. of the Enlarged Share Capital.
In addition to the Transaction Shares, various persons have been granted warrants and options
over Ordinary Shares. These grants are summarised in paragraph 3.6 of Part 5 of this document.

14. Directors, Proposed Directors and senior management

Subject to, and from, Admission the Board will be re-organised in recognition of the fact that
the Group will be an operating, trading business.
Toby Hayward will become chief executive officer, Mike Hirschfield finance director and
Olukayode Kuti will take an executive role with responsibility for the Companys relationships
in Nigeria. Subject to the passing of resolution 3 at the GM, Billi Folahan will join the Board
as technical director.
In addition Jack Pryde will join the Board as non-executive chairman. Jack has a wealth of
experience in the corporate finance sector for resources businesses. Babatunde Agboola will
step down from the role of chairman and become non-executive deputy chairman.

22

Accordingly, from Admission and subject to Shareholder approval at the GM, the Board will
comprise Jack Pryde (non-executive chairman), Babatunde Agboola (non-executive deputy
chairman), Toby Hayward (chief executive), Mike Hirschfield (finance director), Billi Folahan
(technical director), Olukayode Kuti (executive director with responsibility for the Companys
relationships in Nigeria) and Graham Porter (non-executive director).
Further detail concerning the Directors and Proposed Directors is set out below.
Directors
Babatunde Agboola, currently a non-executive chairman (appointed as a director on 19 August
2008; non-executive deputy chairman from Admission), aged 57, obtained a BSc degree in
chemistry from Illinois State University, and a MSc degree in chemical engineering from
Arizona State University. He started his professional career with Mobil Producing Nigeria, a
Nigerian subsidiary of Exxon Mobil, which undertook all of the groups upstream activities,
where he held the position of project manager prior to his retirement. Since then he has taken
up appointments on the boards of several energy services and E&P companies including
Fieldspargroup Limited and Dantose Energy Services Limited. His experience spans over 30
years in the oil and gas industry.
Toby Hayward, currently a non-executive director (appointed as a director on 19 August 2008;
chief executive officer from Admission), aged 52, is a chartered accountant and has been an
investment banker since 1984. He was a director of corporate finance at Singer & Friedlander
Limited and Henry Ansbacher & Co. Limited before working in the oil and gas team at
Canaccord Capital Limited. He joined Jefferies International Limited as a managing director in
2005 with responsibility for the UK Equity Capital Markets and listed clients in the exploration
and production sectors. He also undertook nominated adviser responsibilities. He left Jefferies
in June 2008 to concentrate on a number of private interests and he was appointed nonexecutive chairman of Severfield Rowen Plc in May 2008 and as a non-executive director of
Afren plc in June 2009.
Olukayode Kuti, currently a non-executive director (appointed as a director on 19 August 2008;
an executive director from Admission), aged 25, obtained a BA from Duke University, USA. He
studied Economics & Psychology and also received a Markets and Management Certificate.
Since University he has worked as an investment advisor for a South African investment fund,
Huxton Capital. He was instrumental in the formation and structuring of the Companys
contact base in Nigeria and will have responsibility for maintenance of those relations
following Admission.
Mike Hirschfield BSc (Econ), FCA, currently a non-executive director (appointed as a director
on 28 March 2008; finance director from Admission) aged 47, qualified as a chartered
accountant with Peat Marwick in 1988. He has held senior management positions with a
number of companies including group finance director of Utilitec plc and group finance
executive of Lupus Capital plc. He is currently a director of Tri-Star Resources plc, a company
whose shares are traded on AIM as well as of a number of private companies including Kitwell
Consultants Limited, which acts as company secretary to several listed companies.
Graham Porter, currently a non-executive director (appointed as a director on 28 October
2004), aged 51, has over 31 years experience in the metal exchange markets. Graham worked
as a metal broker in the City for 13 years, spending eight of these years with Billiton Enthoven
Metal Brokers, before leaving the City in 1991 and moving overseas where he has been based
ever since. He has significant experience, with AIM listed companies and with the commodities
markets.
Proposed Directors
Jack Pryde, non-executive chairman, aged 65, is a chartered certified accountant and has held
various senior management positions in the investment banking industry. He is a former

23

director and head of corporate finance at Henry Ansbacher & Co. and a former vice-president
of corporate finance at Canaccord Capital. He left Jefferies International as director of equity
capital markets in May 2010. He has extensive experience of advising companies in the resource
and energy sectors.
Billi Folahan, technical director, aged 63, is a Nigerian national with extensive oil drilling
experience. Mr Folahan began his professional career at Chevron in Nigeria where he worked
for many years as an exploration geologist. His work involved the evaluation of prospect and
leads in Chevrons Eastern and Western exploration districts. He later joined Oando Exploration
and Production Limited, where he helped form its exploration unit, and oversaw the successful
bidding process for the company on two oil prospecting licences and one oil mining licence.
Mr Folahan is a professional member of the Geological Society of America, the Nigeria
Association of Petroleum Explorationists, the Society of Petroleum Engineers, and the
American Association of Petroleum Geologists.
Senior management
Except for the Board, the Group does not employ any other senior managers. The Company
will engage contractors to provide the technical, operational and other assistance it requires
in Nigeria. The contractors have long operational experience with major oil companies in
Nigeria.

15. Corporate governance

The Board is committed to maintaining high standards of corporate governance and, in so far
as is practicable and appropriate given the Companys size and nature, ensuring that the
Company is in compliance with the QCA Corporate Governance Guidelines for AIM Companies.
The Company has adopted a share dealing code that is consistent with the AIM Rules, for the
Directors and future employees and will take steps to ensure compliance by the Board and
any relevant employees with the terms of the share dealing code.
The Directors have implemented such corporate governance procedures and established such
committees of the Board, including audit and remuneration committees, as they believe are
required for the Board to comply with the terms of the QCA Corporate Governance Guidelines
for AIM Companies.
The Companys audit committee will be comprised of Babatunde Agboola (chairman), Jack
Pryde and Graham Porter. The audit committee is to meet at least twice a year to consider the
integrity of the financial statements of the Company, including its annual and interim accounts;
the effectiveness of the Companys internal controls and risk management systems; auditor
reports; and terms of appointment and remuneration of the auditor.
The Companys remuneration committee will be comprised of Graham Porter (chairman)
Babatunde Agboola and Jack Pryde. The remuneration committee is to meet at least twice a
year and has as its remit the determination and review of, amongst others, the remuneration
of executive directors and any share incentive plans adopted, or be adopted, by the Company.
The Board does not consider that, at this stage of the Companys development, a nominations
committee is necessary. The Board will review this position regularly and set up such a
committee if it is deemed appropriate.
The Company has an obligation to comply with the AIM Rules. In particular, rule 31 of such
rules requires the Company to have in place sufficient procedures, resources and controls to
ensure compliance with the rules and to ensure that directors disclose to the Company all
information which the Company is obliged to announce to the AIM Market. In order to ensure
compliance with rule 31 of the AIM Rules, the Board will consider AIM compliance matters at
each Board meeting. The Companys chairman will have primary responsibility for liaison
between the Company and its nominated adviser.

24

The Directors have established financial controls and reporting procedures which are
considered appropriate given the size and structure of the Company and its intended business
operations. It is the intention of the Directors that these controls will be reviewed in light of
future significant acquisitions and adjusted accordingly.
The Directors have also established an anti-corruption policy so as to comply with the UKs
Bribery Act 2010 and have engaged consultants to advise and assist the Group in developing
its written policies and procedures regarding anti-corruption and also to provide training to
the Board, employees, consultants and business partners. Further details of the agreements
with the consultants are set out in paragraph 10.11 of Part 5 of this document.
Through its Nigerian subsidiary, the Company has established a community affairs, safety,
health, environment and security policy. Among other things, this policy sets out the Groups
intention of: operating a local recruitment policy biased in favour of indigenes of host
communities; establishing small scale farming and animal husbandry in the host community;
providing a safe working environment; and, preferring the use of local labour and materials.

16. Lock in and orderly market arrangements

The Directors and Proposed Directors have entered into a lock in and orderly market
agreement with Renaissance, Strand Hanson and the Company. Each of the Directors and
Proposed Directors have undertaken to Renaissance, Strand Hanson and the Company that
they will not, subject to limited exceptions as permitted by the AIM Rules, dispose of any
interest in Ordinary Shares held by them for a period of 12 months from Admission and, for
the 12 months following that period, that they will only dispose of their holdings with the
consent of the Companys nominated adviser from time to time. Such obligation will pass to
the acquirer of the Ordinary Shares.
Corvus, which on Admission will have a beneficial interest in 76,000,000 Ordinary Shares, has
undertaken to Renaissance and Strand Hanson not to dispose of such Ordinary Shares for a
period of 12 months from Admission without the consent of Strand Hanson and Renaissance,
such consent not to be unreasonably withheld. Further, subject to informing Strand Hanson,
Corvus may pledge its Shares as security.
Further details of the lock in and orderly market agreements are set out in paragraphs 10.24
and 10.25 of Part 5 of this document.

17. Dividend policy

The Ordinary Shares rank equally for all dividends and other distributions declared, paid or
made in respect of the ordinary share capital of the Company. The Company has not paid any
dividends since incorporation.
It is the current intention of the Directors to retain any earnings arising from the Groups
activities to fund further investments by the Group and achieve further capital growth.
Accordingly, the Directors do not intend to pay dividends in the near future. The declaration
and payment by the Company of any future dividends and the amount will depend upon,
among other things, the Companys financial condition, future prospects, investment priorities,
profits legally available for distribution and other factors deemed by the Board to be relevant
at that time.

18. Taxation
Information regarding certain taxation considerations in the United Kingdom is set out in
paragraph 7 of Part 5 of this document. These details are, however, intended only as a general
guide to the current position under UK taxation law. If you are in any doubt as to your tax
position you should consult an appropriate professional adviser immediately.

25

19. Dealings
Application will be made for the Share Capital to be admitted to AIM. Subject to approval of
the Resolutions and the Renewal, Admission is expected to take place, and dealings in the
Enlarged Share Capital commence, on 3 November 2010. No application has or will be made
for the Ordinary Shares to be admitted to trading or to be listed on any other stock exchange.
No temporary documents of title will be issued. All documents sent by or to a Placee, or at his
direction, will be sent through the post at the Placees risk. Pending the despatch of definitive
share certificates, instruments of transfer will be certified against the register of members of
the Company. The Ordinary Shares are in registered form. CREST is a computerised paperless
share transfer and settlement system, which allows shares and other securities, to be held in
electronic rather than paper form.

20. General meeting

A notice is set out in appendix 2 of this document convening a general meeting of the
Company to be held at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG
on 29 October 2010 at 11.00 a.m. at which resolutions will be proposed to:
1.

approve the Acquisition. Shareholders approval for the Acquisition is required, under
the AIM Rules because it is deemed a Reverse Takeover;

2 3. appoint Jack Pryde and Billi Folahan as directors of the Company;

4.

remove those provisions of the Companys memorandum of association which by virtue

of CA 2006 are deemed incorporated into the Companys articles of association. Since the
effect of removing these provisions is to remove the limitation on members liability,
and is thus inserted into the Articles; and

5.

dis-apply pre-emption rights.

Under the AIM Rules, if Shareholders approve the Acquisition at the GM and subject to the
Renewal, the Company will be admitted to AIM as a new applicant on the first business day
after the GM. If Shareholder approval is not given, trading in the Ordinary Shares will be
cancelled under the AIM Rules.

21. Irrevocable undertakings

The Company has received irrevocable undertakings from the Directors and certain significant
Shareholders to vote in favour of the Resolutions in respect of, in aggregate, 268,568,736
Ordinary Shares representing approximately 51.57 per cent. of the Companys existing issued
ordinary share capital. Further details of these irrevocable undertakings are set out in
paragraph 10.28 of Part 5 of this document.

22. Action to be taken

A form of proxy is enclosed for use at the General Meeting. Whether or not you intend to be
present at the meeting, you are requested to complete, sign and return the form of proxy to
the Companys Registrars Capita Registrars, PXS, 34 Beckenham Road, Kent BR3 4TU as soon
as possible and in any event so as to arrive not later than 11.00 a.m. on 27 October 2010. The
completion and return of a form of proxy will not preclude you from attending the meeting
and voting in person should you subsequently wish to do so.

23. Further information

Your attention is drawn to the further information set out in:
1.

Part 2 of this document relating to risk factors;

26

2.

Part 3 of this document containing the Competent Persons Report which includes a
glossary of technical terms;

3.

Part 4 of this document summarising the terms of the Joint Operating Agreement;

4.

Part 5 of this document containing statutory and general information on the Company;

5.

Appendix 1 of this document setting out unaudited interim financial information on the
Company for the six months ended 31 January 2010 and for the five months ended
30 June 2010; and

6.

Appendix 2 of this document containing the notice of General Meeting.

24. Recommendation
For the reasons set out in the preceding sections, the Directors believe that the Acquisition
and the Proposals as a whole are in the best interests of the Company and its Shareholders.
Accordingly, the Directors recommend that Shareholders vote in favour of the Resolutions, as
they intend to do in respect of their own beneficial holdings which amount, in aggregate, to
78,293,241 Ordinary Shares representing approximately 15.03 per cent. of the Existing
Ordinary Shares.
Yours faithfully

Babatunde Agboola
Chairman

27

PART 2
RISK FACTORS
Application has been made for the whole of the issued and to be issued ordinary share capital
of the Company to be readmitted to trading on the AIM market. The delivery of this document
shall not, under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date of this document or that the information in this
document is correct as of any time subsequent to the date of this document. Before deciding
whether to invest in Ordinary Shares, prospective investors should carefully consider the risks
described below together with all other information contained in this document.
The risk factors described below are not presented in any order of priority and may not be
exhaustive. Additional risks and uncertainties relating to the Group that are not currently
known to the Directors and Proposed Directors, or that it currently deems immaterial, may
also have an adverse effect on the Groups business. If this occurs the price of the Ordinary
Shares may decline and investors could lose all or part of their investment. Investors should
consider carefully whether an investment in the Ordinary Shares is suitable for them in light
of the information in this document and their personal circumstances. If investors are in any
doubt about any action they should take, they should consult a competent professional
adviser who specialises in advising on the acquisition of listed securities.
The exploration and development of natural resources is a highly speculative activity that
involves a high degree of financial and operational risk. Any one or more of the risks
described below could have a material adverse effect on the value of the Company, and an
investor may lose all or part of his or her investment. Additional risks and uncertainties not
currently known to the Directors and Proposed Directors, or which they currently deem
immaterial, may also have an adverse effect on the Group and the value of the Company.

1.

Risks specific to the Group

The Group
The Group has a limited operating history within the oil and gas sector upon which prospective
investors may base an evaluation of its likely performance.
Dependence on key personnel
The Groups future success is substantially dependent on the continued services and
performance of its Board. The loss of the services of certain key employees or the inability to
recruit personnel of the appropriate calibre, could have a significant adverse effect on the
business of the Group.
Dependence on Del Sigma
Sirius is party to the Joint Operating Agreement with Del Sigma. Breach by Del Sigma of the
JOA or breach by it, Chevron or NNPC of the Farmout Agreement could have a significant
adverse effect on the business of the Group. In addition, Del Sigma is subject to the same risks
as Sirius as are set out in paragraphs 2 and 3 of this part 2.
Del Sigma is party to the Farmout Agreement and to the Offtake Agreement. Breach by it,
Chevron or NNPC of the Farmout Agreement or breach by it or Shell Western Supply and
Trading Limited of the Offtake Agreement could have a significant adverse effect on the
business of the Group.

28

The Award and the Farmout Agreement

Sirius and Del Sigmas rights to the Ke Field are pursuant to the Award and the Farmout
Agreement. The Award fell due for renewal during 2010. Whilst Del Sigma is confident that
the Award will be renewed, there is no guarantee that will happen. If the Renewal has not
been received by 31 December 2010 then (i) the Companys trading facility on AIM will be
cancelled and (ii) the Company may have to instigate legal proceedings against Del Sigma to
recover the US$500,000 paid to Del Sigma on signing of the Joint Operating Agreement.
The Farmout Agreement, in particular, contains numerous obligations on Del Sigma as
operator which, if breached, may lead to the termination of the Farmout Agreement. This
would lead to the automatic termination of the JOA. In the event of termination, the value
of the Companys investments in its projects will decline, which may lead to a fall in the value
of any investment in the Ordinary Shares,
The Consents may not be obtained
Until such time as Nigerias Department of Petroleum Resources, Chevron and NNPC approve
the transfer of the 40 per cent. Participating Interest in the Ke Field from Del Sigma to Sirius
(as described in paragraph 6 of Part 1 of this document), Del Sigma will hold that interest on
trust for Sirius. Whilst the Company has been advised by Nigerian counsel that it will continue
to have all the rights referred to in the JOA, other than a legal interest, whilst it continues to
perform the JOA in accordance with its terms, there is a risk that such interest will be
considered less valuable and harder to enforce than a legal interest. The Company expects,
based on its conversations with the DPR, that the transfer will be approved by 29 October
2010.
The flow test of the Ke-1 well may prove unsuccessful
The Companys intention is to re-enter and test the Ke-1 well on the Ke Field and prove the
flow of oil. If the flow test is unsuccessful then the Company will be unable to drawdown the
US$20,000,000 tranche of the EMMEF Facility which will mean, in the absence of other
funding, the Company would be unable to meet its financial obligations under the JOA. That
in turn might lead to Del Sigma terminating the JOA.
Currency risk
The expenditures made by the Group are subject to exchange rate fluctuations and any
potential income may become subject to exchange control or similar restrictions. The Groups
most significant operations will be conducted in US dollars, which is the Companys reporting
currency. The Group also conducts operations in pounds sterling, and Nigerian naira. If there
is a significant variation in the value of the US dollar against sterling between the date of this
document and Admission, the value to the Company of the net proceeds of the Placing will be
changed since the Companys main operations will be in US dollars. The Group does not
currently use hedging instruments.
Additional requirements for capital
Substantial additional financing will be required if the Group is to be successful in pursuing its
intended strategy. No assurances can be given that the Group will be able to raise the
additional finance that it may require for its anticipated future operations. Oil and gas prices,
environmental rehabilitation or restitution, revenues, taxes, transportation costs, capital
expenditures and operating expenses and geological results are all factors which will have an
impact on the amount of additional capital that may be required. Any additional equity
financing may be dilutive to Shareholders and debt financing, if available, may involve
restrictions on financing and operating activities. There is no assurance that additional
financing will be available on terms acceptable to the Group, or at all. If the Group is unable
to obtain additional financing as needed, it may be required to reduce the scope of its
29

operations or anticipated expansion, forfeit its interest in some or all of its properties and
licences, incur financial penalties and reduce or terminate its operations.
The Groups exploration and production operations are dependent on the Groups compliance
with its obligations under the JOA
The Groups exploration and development operations must be carried out in accordance with
the terms of the JOA and the related annual work programmes and budgets as set out in the
JOA. The relevant legislation provides that fines may be imposed and the underlying licence
may be suspended or terminated if the Group or a party to the contract fails to comply with
its obligations under such licence or agreement, or fails to make timely payments of levies and
taxes for the licensed activity, or fails to provide the required geological information or meet
other reporting requirements.
The authorities in Nigeria can inspect compliance with the lease for the Ke Field and relevant
laws. There can be no assurance that the views of the relevant government agencies regarding
the development of the Groups fields or compliance with the terms of the JOA will coincide
with the Groups views, which might lead to disagreements that cannot be resolved.
The suspension, revocation or termination of the JOA, as well as any delays in the continuous
development of or production at its fields caused by the issues detailed above may have a
material adverse effect on the Groups business, financial condition and results of operations.
The JOA includes a detailed work programmes which must be fulfilled within a specified
timeframe. This includes seismic surveys to be performed, wells to be drilled, production to be
attained, limits to production levels and construction matters. Failure to comply with such
obligations, whether inadvertent or otherwise, may lead to penalties, restrictions and
termination of the JOA with consequent material adverse effects.
Failure to manage the Groups future growth and performance may adversely affect
its operations
The Directors intend that the Group will experience significant growth and development.
Management of that growth requires, among other things, stringent control of financial
systems and operations, the continued development of management controls and the training
of new personnel. Failure to successfully manage the Groups expected growth and
development could have a material adverse effect on the Groups business, results of
operations or financial condition. Further, there can be no guarantee or assurance that such
rapid growth will continue or that future targets or projections will be achieved or fulfilled.
The Group is obliged to comply with health and safety and environmental regulations and
cannot guarantee that it will be able to comply with these regulations
The Groups operations are subject to laws and regulations relating to the protection of human
health and safety and the environment. Failure, whether inadvertent or otherwise, by the
Group to comply with applicable legal or regulatory requirements may give rise to significant
liabilities. The Groups health, safety and environment policy will be to observe local and
national, legal and regulatory requirements and generally to apply best practice where local
legislation does not exist.
The terms of licences or permissions may include more stringent environmental and/or health
and safety requirements. The obtaining of exploration, development or production licences
and permits may become more difficult or be the subject of delay due to governmental,
regional or local environmental consultation, approvals or other considerations or
requirements.
The Directors expect the Group to incur, substantial capital and operating costs in order to
comply with increasingly complex health, safety, environmental laws and regulations. New

30

laws and regulations, the imposition of tougher requirements in licences, increasingly strict
enforcement of, or new interpretations of, existing laws, regulations and licences, or the
discovery of previously unknown contamination may require further expenditures to:
G

modify operations;

install pollution control equipment;

perform site clean-ups;

curtail or cease certain operations; or

pay fees or fines or make other payments for pollution, discharges or other breaches of
environmental requirements.

Although the costs of the measures taken to comply with environmental regulations have not
had a material adverse effect on the Groups financial condition or results of operations to
date, in the future, the costs of such measures and liabilities related to environmental damage
caused by the Group may increase, adversely affecting the Groups operating results and
financial condition.
These factors may lead to delayed or reduced exploration, development or production activity
as well as to increased costs.
The Group may have to finance and construct a pipeline in order to sell its product.
In order to sell product to Shell Western Trading & Supply Co. Ltd under the Offtake
Agreement, Sirius and Del Sigma may choose to construct a 19 km pipeline from the Ke Field
to Shells Awoba flowstation. Whilst under the EMMEF Facility Agreement the Company has
secured US$20,000,000 of loan finance to meet construction costs, drawdown of such funds is
subject to the satisfaction of certain conditions. The Directors and Proposed Directors believe
that such conditions can be met but circumstances could arise, outside the Groups control,
which mean that the conditions cannot be satisfied. In that event, the Group would need to
seek alternative finance which may or may not be available or only available on terms which
are not acceptable to the Board. The Board believes that the US$20,000,000 available under
the EMMEF Facility should satisfy the construction costs of the pipeline based on current
estimates of anticipated costs. If these costs were to increase materially, the Company may
need to seek alternative sources of finance, which may or may not be available, in order to
meet construction costs. Construction and operation of the pipeline will be subject to
development and operational risks as described below.

2.

Risks common to the oil and gas industry

General exploration and extraction risks

The Ke Field is at an early stage of development. The exploration for and development of oil
and gas deposits involves significant uncertainties and the Groups operations will be subject
to all of the hazards and risks normally encountered in such activities. These hazards and risks
include unusual and unexpected geological formations, rock falls, storms and other climatic
conditions, any one of which could result in damage to, or destruction of, the Groups facilities,
damage to life or property, environmental damage or pollution and legal liability which could
have a material adverse impact on the business, operations and financial performance of the
Group. Although precautions to minimise risk will be taken, even a combination of careful
evaluation, experience and knowledge may not eliminate all of the hazards and risks. As is
common with all exploratory operations, there is also uncertainty and therefore risk associated
with the Groups operating parameters and costs. These can be difficult to predict and are
often affected by factors outside the Groups control.

31

Few properties which are explored are ultimately developed into producing assets. There can
be no guarantee that the estimates of quantities and grades of resources disclosed will be
available to extract or able to be extracted commercially. With all natural resources operations
there is uncertainty and, therefore, risk associated with operating parameters and costs
resulting from the scaling up of extraction methods tested in pilot conditions. Natural
resources exploration is speculative in nature and there can be no assurance that any potential
deposits discovered will result in an increase in the Groups reserve base.
Legal and regulatory environment
The exploration and extraction activities of the Group are subject to various laws governing
prospecting, development, production taxes, labour standards and occupational health, site
safety, toxic substances and other matters. Although the Directors believe that the Groups
exploration, production and development activities are currently carried out in accordance
with all applicable rules and regulations, no assurance can be given that new rules and
regulations will not be enacted or that existing rules and regulations will not be applied in a
manner which could limit or curtail exploration, production or development. Amendments to
current laws and regulations governing operations and activities of exploration and extraction,
or more stringent implementation hereof, could have a material adverse impact on the
business, operations and financial performance of the Group. In addition, the ability to
continue, expand or alter current operations or commence new operations may depend on
obtaining new governmental approvals or consents, which may be delayed or refused, which
may in turn have an adverse affect on the Groups operations and its share price.
Environmental issues
The Groups exploration and extraction activities will be subject to various laws and regulations
relating to the protection of the environment. Whilst the Group intends to operate in
accordance with such laws and regulations, no assurance can be given that new rules and
regulations will not be enacted or that existing rules and regulations will not be applied in a
manner which could limit or curtail exploration, production or development. Amendments to
current laws and regulations governing the protection of the environment, or more stringent
implementation of them, could have a material adverse impact on the business, operations and
financial performance of the Group.
Resource estimates
The reserves and resources set out in this document represent estimates only and are based on
the CPR. In general, estimates of economically recoverable oil reserves and the future net cash
flow therefrom are based on a number of factors and assumptions made as of the date on
which the reserves estimates were determined, such as geological and engineering estimates
(which have inherent uncertainties), historical production, the assumed effects of regulation
by governmental agencies and estimates of future commodity prices and operating costs, all
of which may vary considerably from actual results.
If the assumptions upon which the estimates of the Groups oil and gas reserves and resources
have been based prove to be incorrect, the Group may be unable to recover and produce the
estimated levels or quality of oil set out in this document and the Groups business, prospects
and financial results could be materially and adversely affected.
Estimation of underground accumulations of oil and gas is a subjective process aimed at
understanding the statistical probabilities of recovery. Estimates of the quantity of
economically recoverable oil and gas reserves, rates of production, net present value of future
cash flows and the timing of development expenditures depend upon several variables and
assumptions, including the following:
G

production history compared with production from other comparable producing areas;

interpretation of geological and geophysical data;

32

effects of regulations adopted by governmental agencies;

future percentages of international sales;

future oil prices;

capital expenditure; and

future operating costs, tax on the extraction of commercial minerals, development costs
and workover and remedial costs.

As all reserve estimates are subjective, each of the following items may differ materially from
those assumed in estimating reserves:
G

the quantities and qualities that are ultimately recovered;

the production and operating costs incurred;

the amount and timing of additional exploration and future development expenditures;
and

future oil sales prices.

Many of the factors in respect of which assumptions are made when estimating reserves are
beyond the Groups control and therefore these assumptions may prove to be incorrect over
time. Evaluations of reserves necessarily involve multiple uncertainties. The accuracy of any
reserves or resources evaluation depends on the quality of available information and
petroleum engineering and geological interpretation. Exploration drilling, interpretation,
testing and production after the date of the estimates may require substantial upward or
downward revisions in the Groups reserves or resources data. Moreover, different reservoir
engineers may make different estimates of reserves and cash flows based on the same available
data. Actual production, revenues and expenditures with respect to reserves and resources
will vary from estimates, and the variances may be material.
Special uncertainties exist with respect to the estimation of resources in addition to those set
forth above that apply to reserves. The probability that prospective resources will be
discovered, or be economically recoverable, is considerably lower than for proven, probable
and possible reserves. Volumes and values associated with prospective resources should be
considered highly speculative.
Operational considerations
The Groups operational targets are subject to the completion of planned operational goals on
time and according to budget, and are dependent on the effective support of the Groups
personnel, systems, procedures and controls. Any failure of these may result in delays in the
achievement of operational targets with a consequent material adverse impact on the
business, operations and financial performance of the Group. Unscheduled interruptions in
the Groups operations due to mechanical or other failures or industrial relations related issues
or problems or issues with the supply of goods or services could have a serious impact on the
financial performance of those operations.
Project development risks
The Group faces drilling, exploration and production risks and hazards that may affect the
Groups ability to produce crude oil and natural gas at expected levels, quality and costs.
The Groups oil and gas production operations will be subject to all the risks common to its
industry, including premature decline of reservoirs and invasion of water into producing
formations, encountering unexpected formations or pressures, blowouts, oil spills, explosions,
fires, equipment damage or failure, natural disasters, geological uncertainties, unusual or
33

unexpected rock formations and abnormal geological pressures, uncontrollable flows of oil,
natural gas or well fluids, adverse weather conditions, pollution and other environmental risks.
If any of these occur, environmental damage, injury to persons and loss of life, failure to
produce oil in commercial quantities or an inability to fully produce discovered reserves could
result. They can also put at risk some or all of the Groups licences or agreements which enable
it to explore and/or produce, and result in the Group incurring fines or penalties as well as
criminal sanctions potentially being enforced against the Group and/or its officers. Consequent
production delays and declines from normal field operating conditions may result in revenue
and cash flow levels being adversely affected.
The Groups drilling activities may be unsuccessful and the actual costs incurred in respect of
drilling, operating wells and completing well workovers may exceed budget. The Group may
be required to curtail, delay or cancel any drilling operations because of a variety of factors,
including unexpected drilling conditions, pressure or irregularities in geological formations,
equipment failures or accidents, adverse weather conditions, compliance with governmental
requirements and shortages or delays in the availability of drilling rigs and the delivery of
equipment. The occurrence of any of these events could have a material adverse effect on the
Groups business, prospects, financial condition and results of operations.
The marketability and price of oil and natural gas which may be acquired or discovered by the
Group will be affected by numerous factors beyond the control of the Group. The ability of the
Group to market any natural gas discovered may depend upon its ability to acquire capacity
in pipelines which deliver natural gas to commercial markets.
Labour
Certain of the Groups operations may be carried out under potentially hazardous conditions.
Whilst the Group intends to operate in accordance with relevant health and safety regulations
and requirements, the Group remains susceptible to the possibility that liabilities might arise
as a result of accidents or other workforce-related misfortunes, some of which may be beyond
the Groups control.
Volatility of prices of oil and gas
Oil and gas prices are based on world supply and demand and are subject to large fluctuations
in response to relatively minor changes to the demand for oil, whether the result of
uncertainty or a variety of additional factors beyond the control of the Group. The Groups
operating results and financial condition will depend substantially upon prevailing oil and gas
prices. Historically, prices for oil and gas have fluctuated widely for many reasons, including:
G

global and regional supply and demand, and expectations regarding future supply and
demand, for crude oil and petroleum products;

geopolitical uncertainty;

weather conditions and natural disasters;

access to pipelines, railways and other means of transporting crude oil;

prices and availability of alternative fuels;

prices and availability of new technologies;

the ability of the members of OPEC, and other crude oil producing nations, to set and
maintain specified levels of production and prices;

political, economic and military developments in oil producing regions generally and
particularly in Nigeria and the Middle East;

global and regional economic conditions; and

34

market uncertainty and speculative activities by those who buy and sell oil and gas on
the world markets.

Over recent years, oil and gas prices both worldwide and in the domestic markets in Africa
have both increased and decreased. A decline in international prices for crude oil will adversely
affect the amount of revenue generated by the Groups sales of crude oil and other petroleum
products.
Historically, crude oil prices have been highly volatile. For example, such volatility was
particularly pronounced over the course of the 2008, as prices fluctuated widely before
declining significantly. Crude oil prices fell significantly in the second half of 2008. The average
monthly price for Brent crude oil as at 17 August 2010 was approximately US$77.38/bbl, a
decrease of about 46.86 per cent. from a peak of approximately US$145.61/bbl witnessed in
the first week of July 2008. The average spot price of Brent crude during 2008 was
US$96.94/bbl and in 2009 was US$61.74/bbl (Sources: Bloomberg and US Energy Information
Administration). The Group can give no assurance as to the level of oil prices that will be
achievable in the future.
Lower oil and gas prices may adversely impact on the economic exploitation of the Groups
assets, reducing revenues or net income, impairing the Groups ability to achieve its business
objectives and may materially and adversely affect the Groups financial results. No assurance
can be given that oil and gas prices will be sustained at levels which will enable the Group to
operate profitably.
The Group operates in a highly competitive industry
The oil and gas industry is highly competitive worldwide and in Nigeria. The key areas in
respect of which the Group faces competition are:
G

acquisition of exploration and production licences at auctions or sales run by

governmental authorities;

acquisition of other companies that may already own licences or existing hydrocarbon
producing assets;

engagement of third party service providers whose capacity to provide key services may
be limited;

purchase of capital equipment that may be scarce; and

employment of the best qualified and most experienced skilled management and oil
professionals.

The Group competes with oil and gas companies that possess greater technical, physical and
financial resources. Many of these competitors not only explore for and produce oil and
natural gas, but also carry on refining operations and market petroleum and other products
on an international basis.
The effects of this may include higher than anticipated prices for the acquisition of licences or
assets, the poaching of key management or operatives, restriction on availability of equipment
or services as well as potentially unfair practices including unconscionable pressure on the
Group directly or indirectly or the dissemination of false or misleading information or rumours
by competitors or third parties. If the Group is unsuccessful in competing against other
companies, its business, results of operations or financial condition would be materially
adversely affected.

35

Payment obligations
Under various permits, convertible bonds and other contractual arrangements that the
Company either has or may in future enter into, the Company is or may become subject to
payment or other obligations. If such obligations are not complied with when due, in addition
to other remedies that may be available to other parties, this could result in the forfeiture or
forced sale of the Companys assets. The Company may not have or be able to obtain financing
for all such obligations as they arise.
Failure to obtain necessary equipment and transportation systems could materially and
adversely affect production
Oil and natural gas development and exploration activities are dependent upon the availability
of drilling and related equipment in the particular areas where such activities will be
conducted. Demand for limited equipment such as drilling rigs or access restrictions may affect
the availability of such equipment to the Group and may delay the Groups development and
exploration activities. In West Africa there is significant demand for drilling rigs and other
related equipment. Failure by the Group to secure necessary equipment could adversely affect
the Groups business, results of operations or financial condition.
The Group or its partners will contract or lease services and capital equipment from third party
providers. Such equipment and services can be scarce and may not be readily available at the
times and places required. In addition, costs of third party services and equipment have
increased significantly over recent years and may continue to rise. Scarcity of equipment and
services and increased prices may in particular result from any significant increase in
exploration and development activities in the region which might be driven by high demand
for oil and gas. In Nigeria there is significant demand for capital equipment and services. The
unavailability and high costs of such services and equipment could result in a delay or
restriction in the Groups projects and adversely affect the feasibility and profitability of such
projects, and therefore have an adverse affect on the Companys business, financial condition,
results of operations and prospects.
The Group will rely upon transportation systems owned and operated by third parties which
may become unavailable. The Group may be unable to access these or alternative
transportation systems could be subject to increased tariffs imposed by such third parties for
transportation of its oil and gas.
The Group may face unanticipated increased or incremental costs
The crude oil and gas business is a capital-intensive industry. To implement its business strategy,
the Group has invested, and continues to invest, in drilling and exploration activities and
infrastructure. The Groups current and planned expenditures on such projects may be subject
to unexpected problems, costs and delays, and the economic results and the actual costs of
these projects may differ significantly from the Groups current estimates.
The Group relies on oil field suppliers and contractors to provide materials and services in
conducting the exploration and production activities of the Group. Any competitive pressures
on the oil field suppliers and contractors, or substantial increases in the worldwide prices of
certain commodities, such as steel, could result in a material increase of costs for the materials
and services required by the Group to conduct its business. For example, due to high global
demand and a limited number of suppliers, the cost of oil field services and goods has
increased significantly in recent years and could continue to increase. Future increases could
have a material adverse effect on the Groups operating income, cash flows and borrowing
capacity and may require a reduction in the carrying value of the Groups properties, its
planned level of spending for exploration and development and the level of its reserves. Prices
for the materials and services the Group depends on to conduct its business may not be
sustained at levels that enable the Group to operate profitability.

36

The Group may also need to incur various unanticipated costs, such as those associated with
personnel, transportation and government taxes. Personnel costs, including salaries, are
increasing as the standard of living rises in Nigeria and as demand for suitably qualified
personnel for the oil and gas industry increases. Industrial action, and the increased costs
associated with such action, could occur.
With respect to decommissioning, licensees are invariably obliged under the terms of relevant
licences or local law, to dismantle and remove equipment, to cap or seal wells and generally
make good production sites.
An increase in any of these decommissioning costs or the other costs detailed above could
materially and adversely affect the Groups business, prospects, financial condition and results
of operations.
Litigation
Legal proceedings may arise from time to time in the course of the Groups business. There
have been a number of cases where the rights and privileges of extraction and exploration
companies have been the subject of litigation. The Directors cannot preclude that such
litigation may be brought against the Group in future from time to time or that it may be
subject to any other form of litigation.
Uninsured risks
The Group, as a participant in extraction and exploration activities, may become subject to
liability for hazards that cannot be insured against or against which it may elect not to be so
insured because of high premium costs. Furthermore, the Group may incur a liability to third
parties (in excess of any insurance cover) arising from negative environmental impact or other
damage or injury.
Market perception
Market perception of small extraction and exploration companies may change, potentially
affecting the value of investors holdings and the ability of the Group to raise further funds
by the issue of further Ordinary Shares or otherwise.

3.

Risks specific to Nigeria

Risks associated with emerging and developing markets

The disruptions recently experienced in the international and domestic capital markets have
led to reduced liquidity and increased credit risk premiums for certain market participants and
have resulted in a reduction of available financing. Companies located in countries in the
emerging markets such as Nigeria may be particularly susceptible to these disruptions and
reductions in the availability of credit or increases in financing costs, which could result in
them experiencing financial difficulty. In addition, the availability of credit to entities
operating within the emerging and developing markets is significantly influenced by levels of
investor confidence in such markets as a whole and as such any factors that impact market
confidence (for example, a decrease in credit ratings, state or central bank intervention in one
market or terrorist activity and conflict) could affect the price or availability of funding for
entities within any of these markets.
Since the advent of the global economic crisis in 2007, certain emerging market economies
have been, and may continue to be, adversely affected by market downturns and economic
slowdowns elsewhere in the world. As has happened in the past, financial problems outside
countries with emerging or developing economies or an increase in the perceived risks
associated with investing in such economies could dampen foreign investment in and adversely
affect the economies of these countries.

37

In addition, ongoing terrorist activity and armed conflicts in the Middle East and elsewhere
have also had a significant effect on international finance and commodity markets. Any future
national or international acts of terrorism or armed conflicts could have an adverse effect on
the financial and commodities markets in Nigeria and the wider global economy. Any acts of
terrorism or armed conflicts causing disruptions of oil and gas exports in Nigeria could
adversely affect the Groups business, financial condition, results of operations or prospects.
Investors in emerging markets such as Nigeria should therefore be aware that these markets
are subject to greater risk than more developed markets, including in some cases significant
legal, fiscal, economic and political risks. Accordingly, investors should exercise particular care
in evaluating the risks involved in an investment in the Company and must decide for
themselves whether, in the light of those risks, their investment is appropriate. Generally,
investment in emerging and developing markets is suitable only for sophisticated investors
who fully appreciate the significance of the risks involved. Investors are urged to consult with
their own legal and financial advisers before making an investment in the Ordinary Shares.
Political situation
The political situation across Africa and, in particular, in Nigeria may introduce a degree of
risk with respect to the Groups activities. Risks may include, among other things, labour
disputes, delays or invalidation of governmental orders and permits, corruption, uncertain
political and economic environments, civil disturbances and terrorist actions, arbitrary changes
in laws or policies, foreign taxation and exchange controls, opposition to drilling and pipeline
operations from environmental or other non-governmental organisations, limitations on
foreign ownership, limitations on the repatriation of earnings, infrastructure limitations and
increased financing costs.
In Nigeria the government exercises control over exploration and licensing, permitting,
exporting and taxation. It is currently proposed that the Group will conduct its exploration
operations entirely in Nigeria. The Board believes that the Government of Nigeria supports the
development of natural resources. There is, however, no assurance that future political and
economic conditions in Nigeria will not result in the government of Nigeria changing its
political attitude towards resources and adopting different policies respecting the exploration,
development and ownership of hydrocarbon resources. Any such changes in policy may result
in changes in laws affecting ownership of assets, land tenure and mineral licences, taxation,
royalties, rates of exchange, environmental protection, labour relations, repatriation of income
and return of capital, which may affect the Groups ability to undertake exploration and future
operations in the properties in respect of which it has obtained exploration rights and may
adversely effect the Groups ability to carry out its activities.
Exploration and development activities may require protracted negotiations with the host
government, national oil companies and third parties and may be subject to economic and
political considerations such as the risks of war, actions by terrorist or insurgent groups,
community disturbances, expropriation, nationalisation, renegotiation, forced change or
nullification of existing contracts or royalty rates, unenforceability of contractual rights,
changing taxation policies or interpretations, adverse changes to laws (whether of general
application or otherwise) or the interpretation thereof, foreign exchange restrictions, inflation,
changing political conditions, the death or incapacitation of political leaders, local currency
devaluation, currency controls, and governmental regulations that favour or require the
awarding of contracts to local contractors or require foreign contractors to employ citizens of,
or purchase supplies from, the local jurisdiction. Any of these factors detailed above or similar
factors could have a material adverse effect on the Groups business, results of operations or
financial condition. If a dispute arises in connection with operations, in developing countries,
the Group may be subject to the exclusive jurisdiction of foreign courts or foreign arbitration
tribunals or may not be successful in subjecting foreign persons, especially foreign oil ministries
and national oil companies, to the jurisdiction of England and Wales.

38

Terrorism, crime and corruption

There is a high threat from terrorism in Nigeria. Attacks could be indiscriminate, including in
places frequented by expatriates and foreign travellers and/or targeted against foreign owned
assets. Violent crime is also prevalent in the south of the country, including Port Harcourt.
On 19 July 2009, the Government of Nigeria announced an amnesty for militants in the Niger
Delta. On 12 July 2009, the Movement for the Emancipation of the Niger Delta (MEND)
attacked an oil facility in the Atlas Cove Jetty area of Lagos. The attack was reported in the
Nigerian press as having killed up to nine Nigerian nationals. It is possible that armed groups
may still be planning attacks on oil and gas industry targets in the Delta, and on other nonoil and gas industry targets and individuals throughout the country.
Instability in the Niger Delta, involving attacks and kidnapping by militants targeting the oil
industry has severely disrupted production across a broad geographical area. Militant groups
in the Niger Delta region frequently detain expatriates, particularly those employed in the oil
sector. Most oil operators in the region have reduced operations substantially because of
persistent community unrest and the direct threat of abduction, extortion and robbery. The
security environment in the region is likely to remain volatile in the absence of a coherent
government strategy to resolve insecurity. If the Group or its employees are the subject of any
attacks, kidnappings or other security threats, this could have a material adverse effect on the
Groups operations and production of oil in the Niger Delta.
The Nigerian government is conducting investigations into corruption in the oil industry in
Nigeria. The Directors and Proposed Directors are not aware of any current or threatened
investigations relating to the Group or any existing adverse findings against it, its directors,
officers, employees or joint venture partners, but if any such investigations are made and
substantiated in the future against the Group, its directors, officers or employees, or such
persons are found to be involved in corruption or other illegal activity, this could result in
criminal or civil penalties, including substantial monetary fines, against the Group, its directors,
officers or employees. Any such findings in the future could damage the Groups reputation
and its ability to do business. Furthermore, alleged or actual involvement in corrupt practices
or other illegal activities by the joint venture partners of the Group, or others with whom the
Group conducts business, could also damage the Groups reputation and business and
adversely affect the Groups financial condition and results of operations.
Underdeveloped infrastructure could have an adverse effect on the Groups business, financial
condition and results of operations
Underdeveloped infrastructure and inadequate management of such infrastructure has led
to regular electricity outages and water cuts in Nigeria. Inadequate and unreliable electricity
supply has hindered investment in the country, resulting in underperformance in various
important sectors. For example, the Nigerian government announced in June 2008 that Nigeria
would not be able to generate enough power to meet domestic energy needs by 2015. Many
businesses rely on alternative electricity and water supplies, adding to overall business costs.
The unstable pricing, and possible scarcity, of fuel for power generation also increases the
operational challenges businesses face, adding to the potential fluctuation of overheads.
Although rail and road networks are poor and limit land based transport, the Nigeria
government is gradually investing in road repair and construction. Telecommunications
networks (fixed-line and mobile) have become more numerous and increasingly efficient.
Bureaucracy presents a significant operational obstacle, and though anti corruption reforms
by the Nigerian government have led to some improvement in this respect, progress may
remain patchy.

39

Uncertainties in the interpretation and application of laws and regulations may affect the
Groups ability to comply with such laws and regulations which may increase the risks with
respect to the Groups operations
The courts in Nigeria may offer less certainty as to the judicial outcome or a more protracted
judicial process than is the case in more established economies. Businesses can become involved
in lengthy court cases over simple issues when rulings are not clearly defined, and the poor
drafting of laws and excessive delays in the legal process for resolving issues or disputes
compound such problems. Accordingly, the Group could face risks such as: (i) effective legal
redress in the courts being more difficult to obtain, whether in respect of a breach of law or
regulation, or, in an ownership dispute, being more difficult to obtain, (ii) a higher degree of
discretion on the part of governmental authorities and therefore less certainty, (iii) the lack of
judicial or administrative guidance on interpreting applicable rules and regulations, (iv)
inconsistencies or conflicts between and within various laws, regulations, decrees, orders and
resolutions, or (v) relative inexperience of the judiciary and courts in such matters.
Enforcement of laws in Nigeria operates may depend on and be subject to the interpretation
placed upon such laws by the relevant local authority, and such authority may adopt an
interpretation of an aspect of local law which differs from the advice that has been given to
the Group by local lawyers or even previously by the relevant local authority itself. There can
be no assurance that contracts, joint ventures, licences, licence applications or other legal
arrangements will not be adversely affected by the actions of government authorities and the
effectiveness of and enforcement of such arrangements in the jurisdiction. The commitment
of local businesses, government officials and agencies and the judicial system to abide by legal
requirements and negotiated agreements may be more uncertain and may be susceptible to
revision or cancellation, and legal redress may be uncertain or delayed.
In Nigeria the state generally retains ownership of minerals and consequently retains control
of (and in many cases, participates in) the exploration and production of hydrocarbon reserves.
Accordingly, the Groups operations may be materially affected by the host government
through royalty payments, export taxes and regulations, surcharges, value added taxes,
production bonuses and other charges to a greater extent than would be the case if its
operations were largely in countries where mineral resources are not predominantly state
owned. In addition, transfers of interests typically require government approval, which may
delay or otherwise impede such transfers, and the government may impose obligations on the
Group to complete minimum work within specified timeframes either generally or as a
condition to approving such transfers. In the future, the Group may extend its interests in
operations to other countries where similar circumstances may exist.
Licensing and other regulatory requirements in the countries in Nigeria may be subject to
amendment or reform which could make compliance more challenging
The Groups current operations are, and future operations will be, subject to licences,
regulations and approvals of governmental authorities for exploration, development,
construction, operation, production, marketing, pricing, transportation and storage of oil,
taxation and environmental and health and safety matters. The Group cannot guarantee that
such licences applied for will be granted or, if granted, will not be subject to possibly onerous
conditions. Any changes to exploration, exploration and production, or production licences,
regulations and approvals, or their availability to the Group may adversely affect the Groups
assets, plans, targets and projections.
The Group is subject to extensive government laws and regulations governing prices, taxes,
royalties, allowable production, waste disposal, pollution control and similar environmental
laws, the export of oil and many other aspects of the oil business. Although the Group believes
it has good relations with the current government of Nigeria, there can be no assurance that
the actions of present or future governments in Nigeria, or of governments of other countries

40

in which the Group may operate in the future, will not materially adversely affect the business
or financial condition of the Group.
Furthermore, the oil and gas sector in Nigeria, is still developing, and there have been a
number of changes in policy affecting the sector. Nigeria is pursuing a number of new policy
directions with the aim of restructuring its upstream and deregulating its downstream sectors,
but the adoption of new regulations and the implementation of suggested reforms may be
subject to political and economic influences, which could create uncertainty in relevant sectors.
In August 2007, the Federal Government of Nigeria announced the overhaul of the oil sector
and stated that it would be implementing reforms to deal with the deregulation and
privatisation of the NNPC. These reforms were first suggested by the Oil and Gas Reform
Committee set up in 2000 and another committee set up by the National Council on
Privatisation, but the mooted plans were rejected by former president Olusegun Obasanjo. In
2009 the new Petroleum Industry Bill was submitted to the General Assembly and is yet to be
passed as a law in order to be binding. The Petroleum Industry Bill seeks to bring together the
provisions of many laws regulating the petroleum industry, but there is still uncertainty with
respect to its effect on the industry.
The reforms were launched almost two years ago, and meaningful changes may only be made
once the new Petroleum Industry Bill becomes law. In the meantime, there is uncertainty with
respect to the level of implementation of the reforms, the timing of their completion and
their possible impacts on the oil and gas industry in Nigeria.
The Group is exposed to the risk of adverse sovereign action
The oil and gas industry is central to the economy and future prospects for development in
Nigeria, and therefore the industry can be expected to be the focus of continuing attention
and debate. In certain developing countries, petroleum companies have faced the risks of
expropriation or renationalisation, breach or abrogation of project agreements, application to
such companies of laws and regulations from which they were intended to be exempt, denials
of required permits and approvals, increases in royalty rates and taxes that were intended to
be stable, application of exchange or capital controls, and other risks.
As with many countries, possible future changes in the government, major policy shifts or
increased security arrangements could have to varying degrees an adverse effect on the value
of investments. These factors could materially adversely affect the Groups business, prospects
or financial results.

4.

Risks relating to AIM and the Ordinary Shares

AIM and liquidity of the Ordinary Shares

It is intended that application will be made for the Share Capital of the Company to be
readmitted to trading on AIM. AIM is not the Official List. The Ordinary Shares will not be
listed on the Official List. Admission should not be taken as implying that there will be a liquid
market for the Ordinary Shares. Any investment in the Ordinary Shares may thus be difficult
to realise. Investors should be aware that the value of the Ordinary Shares may be volatile and
may go down as well as up. Investors may, on disposing of Ordinary Shares, realise less than
their original investment or may lose their entire investment. The Ordinary Shares may,
therefore, not be suitable as a short-term investment. In addition, the market price of the
Ordinary Shares may not reflect the underlying value of the Groups net assets. The price at
which the Ordinary Shares will be traded and the price at which investors may realise their
Ordinary Shares will be influenced by a large number of factors, some specific to the Group and
its proposed operations, and some which may affect the business sectors in which the Group
operates. Such factors could also include the performance of the Groups operations, large

41

purchases or sales of the Ordinary Shares, liquidity or the absence of liquidity in the Ordinary
Shares, legislative or regulatory changes relating to the business of the Group and general
economic conditions.
Further share issues could have an adverse effect on the market price of the Ordinary Shares
as a whole or a dilutive effect on shareholders
Although the Company has sufficient working capital to fund its operations for the next 12
months to prove levels of oil flows at the Ke-1 well on the Ke Field, it is possible that the
Company may decide to offer additional new Ordinary Shares in the future to fund
opportunities that are not currently envisaged and that the Board considers creates value for
shareholders. Any additional offering by the Company, whether or not on a pre-emptive basis,
could have an adverse effect on the market price of the Ordinary Shares as a whole. If
additional funds are raised through the issue of equity or equity linked instruments,
shareholders may experience a dilution in their percentage holdings in the Ordinary Shares if
such issue is not made on a pre-emptive basis.
Possible volatility of the price of the Ordinary Shares
The market price of the Ordinary Shares could be subject to significant fluctuations due to
various factors and events, including any regulatory or economic changes affecting the Groups
operations, variations in the Groups operating results, the price of oil and gas, developments
in the Groups business or its competitors, or to changes in market sentiment towards the
Ordinary Shares. The Groups operating results and prospects from time to time may be below
the expectations of market analysts and investors. In addition, stock markets from time to time
suffer significant price and volume fluctuations that affect the market prices for securities and
which may be unrelated to the Groups operating performance. Any of these events could
result in a decline in the market price of the Ordinary Shares.
Taxation Framework
It should be noted that the information contained in paragraph 7 Part 5 of this document
relating to taxation may be subject to legislative change.
Forward looking statements
This document contains certain forward looking statements that involve risks and
uncertainties. All statements other than statements of historical facts contained in this
document, including statements regarding the Groups future financial position, business
strategy and plans, business model and approach and objectives of management for future
operations, are forward-looking statements. Generally, the forward-looking statements in this
document use words like anticipate, believe, could, estimate, expect, future,
intend, may, opportunity, plan, potential, project, seek, will and similar
terms. The Groups actual results could differ materially from those anticipated in the forward
looking statements as a result of many factors, including the risks faced by the Group which
are described in this Part 2 and elsewhere in this document. Investors are urged to read this
entire document carefully before making an investment decision. The forward looking
statements in this document are based on the beliefs and assumptions of the Directors and
information only as of the date of this document, and the forward looking events discussed
in this document might not occur. Therefore, investors should not place any reliance on any
forward looking statements. Except as required by law, the Directors undertake no obligation
to publicly update any forward looking statements, whether as a result of new information,
future earnings, or otherwise.
The risk factors listed above are not intended to be exhaustive and do not necessarily
comprise all of the risks to which the Group is exposed or all those associated with an
investment in the Company. In particular, the Groups performance is likely to be affected by

42

changes in the market and/or economic conditions and in legal, accounting, regulatory and
tax requirements. There may be additional risks that the Directors and Proposed Directors do
not currently consider to be material or of which they are currently unaware.
If any of the risks referred to in this Part 2 crystallise, the Groups business, financial condition,
results or future operations could be materially adversely affected. In such case, the price of
its shares could decline and investors may lose all or part of their investment.

43

PART 3
COMPETENT PERSONS REPORT

Degeconek Nigeria Limited

(Hydrocarbon Assets Management Consultants)
241A Ikorodu Crescent, Dolphin Estate, Ikoyi
P.O. Box 71560, Victoria Island,
Lagos, Nigeria
To:
The Directors
Sirius Petroleum plc
2nd floor, 29-30 St. Jamess Street
London
SW1A 1HB
The Directors
Strand Hanson Limited
26 Mount Row
London
W1K 3SQ
The Directors
Renaissance Capital Limited
One Angel Court
Copthall Avenue
London EC2R 7HJ
13 October 2010
Dear Sirs,

Competent Persons Report on the Nigerian assets of Sirius Petroleum PLC

In accordance with your request, and the terms of our Engagement Letter, please find herein
the estimates of the contingent and prospective resources in the Ke Asset, onshore Nigeria,
located in OML 55, as of July 21st, 2010. We have given indicative volumes and values for the
proposed interest of Sirius Petroleum (Sirius) in the Ke field. On completion of the proposed
acquisition, details of which are set out in the admission document dated 13 October 2010,
Sirius will have a 40% economic interest in the Ke Asset, covering 12,900 acres, which is located
5km from the coastline in the Nigerian Basin.
Sirius engaged the services of Degeconek Nigeria Limited (DNL) to carry out an evaluation of
the Ke field area in OML 55. The field was awarded to Del-Sigma in the 2002/2003 Marginal
Field Bidding Round. The evaluation covers 260km2 of 3D seismic dataset and two wells Ke1 and Darama-1. The main objectives of the evaluation are to identify all hydrocarbon-bearing
reservoirs, their structural architecture and fluid types. Others include the calculation of
minimum, most likely and maximum resource volumes, highlight uncertainties and determine
upsides.
The seismic interpretation was carried out using workstations running on Landmark Integrated
Interpretation suite of applications while the Petrophysical interpretation was done using
Petcoms PowerLog software. The entire project was performed in DNLs office in Lagos and the
44

personnel involved in the project were all Nigerians with cognate knowledge and experience
of the Niger Delta geology, geophysics and petrophysics.
The data set included geological, geophysical and engineering data together with reports,
presentations and financial information pertaining to the contractual and fiscal terms
applicable to the asset. In carrying out this review DNL has relied solely upon this information.
Whilst DNL confirms that such estimates have been properly extracted from the underlying
reports and presentations, it does not warrant their accuracy.
The guidelines laid out in the 2007 SPE/WPC/AAPG publication have been adopted for our
classification of the discovered and potential hydrocarbon accumulations within the Ke Asset.
DNLs calculations of recoverable hydrocarbon volumes for Contingent Resources and
Prospective Resources have been performed in a deterministic manner with Low, Best, and
High Resource estimates equating to the Minimum, Most likely and Maximum volumes.
This report relates specifically and solely to the subject asset, the Ke field and related prospects,
and is conditional upon various assumptions which are described in the report. This report
must, therefore be read in its entirety. The report represents the best professional judgement
of DNL and should not be considered as a guarantee of results.
A glossary of all the technical abbreviations used in this report is included as Appendix A.
Yours faithfully,
For: Degeconek Nigeria Limited
Abiodun Adesanya
Managing Consultant

45

COMPETENT PERSONS REPORT

ON THE NIGERIAN ASSETS PROPOSED TO BE ACQUIRED BY
SIRIUS PETROLEUM PLC

KE FIELD
(OML 55)
July 2010

Prepared By

46

This report relates specifically and solely to the subject asset(s) and is conditional upon various
assumptions which are described herein. All interpretations and conclusions presented herein
are opinions based on inferences from geological, geophysical, engineering or other data. The
report represents the best professional judgment of Degeconek Nigeria Limited (DNL) and
should not be considered a guarantee or prediction of results. DNL shall not be liable or
responsible for any loss, costs, damages, or expenses incurred or sustained by anyone as a
result of any interpretation or recommendation made by any of its officers, agents or
employees.
This report has been prepared for the use of Strand Hanson Limited, the Nominated Adviser
(Nomad), Renaissance Capital Limited (Bookrunner) and Sirius Petroleum plc (Sirius),
who will be the technical partner to Del-Sigma in the Ke field Joint Venture. It may not be
reproduced or redistributed, in whole or in part, to any other person or published, in whole
or in part, for any purpose, without express permission from DNL.

47

Contents
1.

Executive Summary

50

Figure 1 Location of the Ke field farmout area

50

Table 1 Summary of Assets for Sirius Petroleum Plc

51

1.1 Summary of Reserves and Resources for Ke Field

Table 2 Summary of Contingent Resources in Ke-1 discovery

51

Table 3 Summary of Prospective Resources in Ke-South, Ke-North,

and Ke-Northeast prospects

51

Figure 2: South-North Seismic Section over Ke Field

52

Figure 3: West-East Seismic Section over Ke Field

53

1.2 Database

53

Table 4: Summary of Well Log Information for Ke-1 and Darama-1 wells
1.3 Key Conclusions

2.

51

54
54

Table 5 Summary of Best Estimate Contingent Resource and associated economic

value for the Ke-1 field (assuming a 10 per cent. discount rate)

55

Table 6 Summary of the Best Estimate Prospective Resources and associated

economic value for the Ke-South and Ke-Northeast prospects
(assuming a 10 per cent. discount rate)

55

Resource Classifications and Risk Assessment

55

2.1 Classification Standard Used

55

2.2 Risk Assessment

57

3.

58

Regional Geological Setting and Ke Field History

3.1 Exploration History

58

Figure 4 Location of the Ke field farmout area

58

Table 7 Statistics for wells drilled in the Ke farmout area

59

3.2 Geological Setting

59

Figure 5: Dip Seismic Section over Ke Field

59

Figure 6: Schematic Stratigraphic Column, Niger Delta (Reference to Ke field area)

60

Table 8: Summary of Well Information for Ke-1 and Darama-1 wells

60

Figure 7: North-South Geological Cross Section over Ke Field

61

3.3 Petrophysics

61

Figure 8: Ke-1 well B4 Reservoir Petrophysical Analysis

63

Figure 9: Ke-1 well C4 Reservoir Petrophysical Analysis

63

3.4 Well Test Results

63

Table 9 Well Test Results of the B4 and C4 sands

48

64

4.

Description of the Ke Asset

64

4.1 Ke-1 Discovery

64

Table 10 Breakdown of Ke-1 volumetrics at different levels

4.2 Ke-South Prospect

65

Figure 10: Depth Structure Map over B4 sand

65

Figure 11: Depth Structure Map over C4 Sand

66

4.3 Ke-Northeast and Ke-North

5.

65

66

Table 11 Breakdown of Ke-South volumetrics at different levels

67

Table 12 Breakdown of Ke-Northeast volumetrics at different level

67

Table 13 Breakdown of Ke-North volumetrics at different level

68

Economic Analysis

68

5.1 Capital Costs

68

5.2 Field Development Ke-1 Re-entry

68

5.3 Drilling

68

5.4 Fiscal Terms

69

5.4.1. Royalty

69

5.4.2. Taxation

69

5.5 Value of the Ke Asset

69

5.5.1 Scenario 1 Ke Field Development

69

Table 14 Ke Field Development

70

Table 15 -Ke Field Development Sensitivity to oil price

70

5.5.2 Scenario 2 Full Area Development Ke-1 + Ke-South + Ke-North East

70

Table 16 Ke Field Full area development (Ke-1, Ke-South, Ke-North-East)

71

Table 17 -Full area development (Ke-1 + Ke-South + Ke-North East) Sensitivity

to oil price

71

6.

Summary

71

7.

Professional Qualifications

71

8.

Basis of Opinion

72

Appendix A: Glossary of technical terms

73

49

1.

Executive Summary

The Ke Field is a small oil discovery located in swamp water in the southern part of the Niger
Delta, approximately 5km from the Gulf of Guinea. The discovery well, Ke-1, and associated
un-drilled fault segments are collectively known as the Ke Asset. The field was originally
discovered in 1965 by Chevron Nigeria, which retains a small royalty interest in any production
income from the Ke Asset. The Ke Asset, originally formed part of OML 55, and was awarded
to Del Sigma, an indigenous Nigerian company, in the DPRs Marginal Field round of 2003.
There are analogous fields throughout the basin, with production by Shell from similar fields
in the adjacent OML 24, about 20 km to the northeast of the Ke Asset. Figure 1 shows the
location of the Ke field.
Sirius Petroleum signed a Joint Operating Agreement (JOA) with Del Sigma Petroleum
(Del Sigma) in 2010, under which the Company is entitled to a direct 40 per cent interest in
the Ke Asset. Sirius will jointly operate the Ke Asset with Del Sigma, and will fund 100 per
cent of the development costs. Upon production of oil, Sirius will receive a net preferential cash
flow of 78 per cent from the production revenues until full recovery of its investment,
following which its cash receipts will revert to 40 per cent to match its underlying economic
interest in the field pursuant to the JOA. There is no farm-in consideration payable in relation
to the farm-in.
Figure 1 Location of the Ke field farmout area

50

Table 1 Summary of Assets for Sirius Petroleum Plc

Asset

Operator

WI

Status

License expiry

License area Comments

Nigeria, OML 55, Del Sigma 40% Development Waiting on

52.2 km2
onshore
license renewal
from DPR

1.1

Drilling campaign
performed by
Chevron in 1965
in which oil was
discovered.

Summary of Reserves and Resources for Ke Field

A summary of the Gross Contingent Resources and Prospective Resources, and Net Working
Interest Contingent Resources and Prospective Resources attributable to the Ke Field and the
Ke prospects are given in Tables 2 and 3. The classification of resources is according to SPEE
(2007) guidelines.
Table 2 Summary of Contingent Resources in Ke-1 discovery
Gross

Risk
Factor

Net Attributable

Operator

Low
Estimate

Best
Estimate

High
Estimate

Low
Estimate

Best
Estimate

High
Estimate

Ke-1

2.92

5.65

5.65

1.17

2.26

2.26

75% Del Sigma

Total for Oil

(mmbls)

2.92

5.65

5.65

1.17

2.26

2.26

75% Del Sigma

Oil (mmbls)

Table 3 Summary of Prospective Resources in Ke-South, Ke-North, and Ke-Northeast prospects

Gross

Risk
Factor

Net Attributable

Operator

Low
Estimate

Best
Estimate

High
Estimate

Low
Estimate

Best
Estimate

High
Estimate

Ke-South
Ke-Northeast
Ke-North

2.30
1.10
-

7.55
7.21
-

14.75
22.19
15.41

0.92
0.44
-

3.02
2.88
-

5.90
8.88
6.16

49% Del Sigma

30% Del Sigma
30% Del Sigma

Total for Oil

(mmbls)

3.40

14.76

52.35

1.36

5.90

20.94

Del Sigma

Oil (mmbls)

51

Figure 2: South-North Seismic Section over Ke Field

DIP LINE THROUGH KE-1 WELL

Fault A

Fault B

52

Figure 3: West-East Seismic Section over Ke Field

STRIKE LINE THROUGH KE-1 WELL

DNL understands that Sirius, being the technical partner to Del Sigma, wants to use this
evaluation to determine the best and most practical short to medium-term work program to
execute towards the development of the Ke field. The evaluation is also intended to review
and rank, in greater detail, the prospectivity of other fault blocks identified and mapped
within the farmout area.
1.2

Database

In order to arrive at our views, we have utilized relevant information already existing in our
workstation. The following data were made available for this evaluation:G

One 8mm tape cartridge containing approximately 200 km2 of 16-bit 3D Migrated
seismic data in SEG Y format.

Paper copies of composite logs for Ke-1 and Darama-1.

Mud, Sonic and Micro log for Ke-1

Details of available log curve data are shown in Table 4 below

53

Table 4: Summary of Well Log Information for Ke-1 and Darama-1 wells
KE-1
CURVES

GR
CALI
NPHI
DT
ILD
LLD

Start (ft)

DARAMA-1
End (ft)

150
2500

11900
11900

2520

11900

200

11900

Start (ft)

End (ft)

300

10700

3502

10400

300
200

10400
10700

Reports:
1)

Mud and Daily Drilling Reports for Ke-1.

2)

1988 Ke Field Summary Report

3)

Geological Completion Summary for Darama-1

4)

Production Test Sheet for Ke-1 C4 Reservoir

5)

Site visit report with pictures to the Ke-1 wellhead location.

Critical Required Data:

The following critical data, which would have been very helpful in reducing the uncertainties
in this evaluation, were missing:1)

Density and Neutron logs for Ke-1 (not acquired at all)

2)

Geological Completion Summary for Ke-1

1.3

Key Conclusions

The results of the re-evaluation revealed the following:1)

The Ke-1 well was drilled very near the crestal positions of the B4 and C4 structures,
thereby eliminating possible upsides associated with any up dip volumes.

2)

The estimates for the Gross Contingent Resource for the Ke-1 accumulation in the B4
and C4 sands are Low Estimate total of 2.92 MMBO and Best Estimate total of 5.65
MMBO. Since there is no up dip potential identified in the Ke-1 location, the Best
Estimate is therefore assumed to be the High Estimate for the resource at least as regards
GRV.

3)

Two identified prospects, Ke South and Ke Northeast, have a best estimate prospective
resource of 7.55 MMBO and 7.21 MMBO respectively. The estimated potential of a third
prospect, Ke North, for which a maximum of 15.40 MMB is assessed, is de-emphasized in
this report.

54

Table 5 Summary of Best Estimate Contingent Resource and associated economic value for
the Ke-1 field (assuming a 10 per cent. discount rate)

Field

Licenses/
Farm-out Area

Gross
Net (WI)
Gross Contingent Contingent
WI STOOIP
Resource
Resource
(%) (Mmboe)
(Mmboe)
(Mmboe)

Ke-1

OML 55

40

18.82

5.65

2.26

NPV
($MM)

NPV (WI)
($MM)

39.57

15.83

Table 6 Summary of the Best Estimate Prospective Resources and associated economic value
for the Ke-South and Ke-Northeast prospects (assuming a 10 per cent. discount rate)

Prospect/Lead

Ke-South
Ke-Northeast
Total field +
prospects

Licenses/
Farm-out Area

Gross
Net (WI)
Gross Prospective Prospective
WI STOOIP
Resources
Resources
(%) (Mmboe)
(Mmboe)
(Mmboe)

OML 55
OML 55

40
40

25.16
24.06

7.55
7.21

3.02
2.88

OML 55

40

68.04

20.41

8.16

NPV
($MM)

215.49

NPV (WI)
($MM)

86.19

In conclusion, DNLs opinion of the Ke Asset is that development is attractive based on the
straightforward, two well development of the Ke-1 discovery which, we estimate, would yield
a NPV(10) of $15.83MM net to Sirius.
On a success case basis, the Prospective Resources from Ke South and Ke Northeast, plus Ke-1
resources inclusive would yield a NPV(10) of $86.19MM net to Sirius.
The prospectivity of the Ke-South, Ke-Northeast, and Ke-North prospects are supported by the
highly prolific Cawthorne Channel field, where multiple stacked reservoirs occur and are
extremely productive. Another analogous field, Akaso, lies 25km to the north-east of the Ke
Asset, has over 45 stacked reservoirs, and sits against the southern bounding fault of the
Cawthorne Channel collapsed-crest anticlinal structure. The Prospective Resources could
potentially generate very significant upsides for Sirius; however, only the correlated B4 and C4
reservoirs have been used to assess the upside potential. The total Contingent and Prospective
Resources estimated for the Ke field area is 20.41 mmbls.

2.

Resource Classifications and Risk Assessment

2.1

Classification Standard Used

DNL has investigated the potential existence of different categories of reserves and resources,
including contingent and prospective resources in the Ke field area. These volumes and risk
factors are evaluated in accordance with the Committee of European Securities Regulators
recommendations for the consistent implementation of the European Commissions Regulation
on Prospectuses n 809/2004 using the 2007 SPE/WPC/AAPG/SPEE PRMS 2007 Petroleum
Resource Management System (PRMS).
The different categories can be defined as follows:
Reserves:
Reserves are defined as those quantities of petroleum which are anticipated to be
commercially recovered from known accumulations from a given date forward. Reference
should be made to the full PRMS Definitions for the complete definitions and guidelines.

55

Estimated recoverable quantities from known accumulations which do not fulfil the
requirement of commerciality should be classified as Contingent Resources, as defined below.
The definition of commerciality for an accumulation will vary according to local conditions
and circumstances and is left to the discretion of the country or company concerned. However,
reserves must still be categorized according to the specific criteria of the SPE/WPC/AAPG/SPEE
definitions and therefore proved reserves will be limited to those quantities that are
commercial under current economic conditions, while probable and possible reserves may be
based on future economic conditions. In general, quantities should not be classified as reserves
unless there is an expectation that the accumulation will be developed and placed on
production within a reasonable timeframe.
In certain circumstances, reserves may be assigned even though development may not occur
for some time. An example of this would be where fields are dedicated to a long-term supply
contract and will only be developed as and when they are required to satisfy that contract.
The Ke-1 discovery does not currently meet the above conditions for commerciality, although
a successful re-entry and testing of the well should allow Reserves to be assigned.
Contingent Resources:
Contingent Resources are defined as those quantities of petroleum which are estimated, on a
given date, to be potentially recoverable from known accumulations, but which are not
currently considered to be commercially recoverable. It is recognized that some ambiguity may
exist between the definitions of contingent resources and unproved reserves. This is a
reflection of variations in current industry practice. It is recommended that if the degree of
commitment is not such that the accumulation is expected to be developed and placed on
production within a reasonable timeframe, the estimated recoverable volumes for the
accumulation be classified as contingent resources. Contingent Resources may include, for
example, accumulations for which there is currently no viable market, or where commercial
recovery is dependent on the development of new technology, or where evaluation of the
accumulation is still at an early stage.
The Ke-1 discovery falls into this category of resource classification. Even though a budget has
been approved for the development, no drilling commitments are in place yet and plans are
still under review. DNL have assessed a 75 per cent probability that these resources will be
successfully commercialised and upgraded to Reserves.
Prospective Resources:
Prospective Resources are defined as those quantities of petroleum which are estimated, on a
given date, to be potentially recoverable from undiscovered accumulations. In estimating
reserves and resources DNL has used standard petroleum engineering techniques. These
techniques combine geological and production data with detailed information concerning
fluid characteristics and reservoir pressure. DNL has estimated the degree of uncertainty
inherent in the measurements and interpretation of the data and has calculated a range of
recoverable reserves. DNL has assumed that the working interest in each asset advised by Sirius
is correct and DNL has not investigated nor does it make any warranty as to Del Sigmas interest
in these properties.
The evaluation is based on SPE/WPC/AAPG/SPEE Resource Definitions which are summarized
in Appendix B. Hydrocarbon resource and reserve estimates are expressions of judgment based
on knowledge, experience and industry practice and are restricted to the data made available.
They are therefore imprecise and depend to some extent on interpretations, which may prove
to be inaccurate. Estimates that were reasonable when made may change significantly when
new information from additional exploration or appraisal activity becomes available.

56

2.2

Risk Assessment

For all prospects and appraisal assets which DNL has certified resources, this report includes an
estimated Risk Factor, representing Chance of Success.
Prospective Resources:
For exploration prospects, the estimated Risk Factor is the probability of exploration success
(PoS or Exploration Risk), defined as the probability of discovering a significant (ie nontrivial) hydrocarbon accumulation.
Contingent Resources:
The chance of success in this context means the estimated chance, or probability, that the
volumes will be commercially extracted. A Contingent Resource includes both proved
hydrocarbon accumulations for which there is currently no development plan or sales contract
and proved hydrocarbon accumulations that are too small or are in reservoirs that are of
insufficient quality to allow commercial development at current prices. As a result the
estimation of the chance that the volumes will be commercially extracted may have to address
both commercial (i.e. contractual or oil price considerations) and technical (i.e. technology to
address low deliverability reservoirs) issues.
Uncertainty Estimation:
The estimation of expected hydrocarbon volumes is an integral part of the evaluation process.
It is normal practice to assign a range to the volume estimates because of the uncertainty over
exactly how large the discovery or prospect will be. Estimating the range can be done in a
probabilistic way (i.e. using Monte Carlo simulation), using a range for each input parameter
to derive a range for the output volumes. It can also be done using a deterministic approach
where, as is the case here, the reservoirs are quite restricted and likelihood of experiencing
wide variations is low. Key contributing factors to the overall uncertainty are data,
interpretation bias and model uncertainty. Volumetric input parameters, Gross Rock Volume
(GRV), porosity, net:gross ratio (N:G), water saturation (Sw), fluid expansion factor (Bo or Bg)
and recovery factor, are considered separately.
DNL has internal guidelines on the best practice in characterizing appropriate input
distributions for these parameters. Systematic bias in volumetric assessment is a wellestablished phenomenon. There is a tendency to estimate parameters to a greater degree of
precision than is warranted and to bias pre-drill estimates to the high side. DNL uses
benchmarked ratios and known field-size distributions to check reasonableness of estimated
volumes.

57

3.

Regional Geological Setting and Ke Field History

3.1

Exploration History

Figure 4 Location of the Ke field farmout area

The OML 55 license block was originally held by Gulf Oil Company, later becoming Chevron
Nigeria, and presently is held under a joint venture partnership with the Nigerian National
Petroleum Corporation (NNPC) having 60% and Chevron having 40%. The current OML license
was renewed in 1997 and is scheduled to expire in June 2027. The Ke field area (the Ke Asset)
was awarded to Del Sigma by competitive bid in the 2003 Marginal Fields Licensing Round.
Several vintages of 2D seismic data have been acquired over the area; the last conducted
around the Ke Darama area was in 1986. 3D seismic data was acquired by Chevron in OML
55 (Ke-Darama 3D) in 1993, out of which about 260 km2 covering the Ke field was made
available for the evaluation. The 3D seismic data was acquired and processed by Western
Geophysical.
Only one well, Ke-1, has been drilled within the farmout area to date. Ke-1 was suspended
having encountered two tested oil-bearing reservoirs (B4 22 feet of pay and C4 64 feet of
pay) with clear oil-water contacts. Two appraisal wells, Ke-B and C, were proposed by Chevron
but were never drilled.
The upper reservoir B4, at -9,280 ft TVDSS, sampled 36 API gravity oil and GOR of 425 scf/stb.
The lower C4 reservoir, at -10,380 ft TVDSS, tested 1,145 bopd of 44 API gravity oil and GOR
of 1,440 scf/stb at 1,600 psi well head formation pressure, flowing from 5 ft of perforations
between 10,494 and 10,498 ft on a 20/64 choke size. Another well, Darama-1, was drilled as
a vertical well about 7.75km east of Ke-1 and 1.50km outside the eastern boundary of the
58

farmout area. All the sands encountered in the well were wet. The well statistics are tabulated
below in Table 7. Nearby producing fields with processing facilities are Awoba, Krakrama and
Akaso all operated by Shell and located between 15 and 20km NW to NE of Ke field.
Table 7 Statistics for wells drilled in the Ke farmout area
S/N

1
2
3.2

Well

Type

Ke-1
Darama-1

Vertical
Vertical

TD (ftMD)

11,300
9,878

Remarks

Suspended
Dry, P&A

Geological Setting

Structures:
The Ke field is situated on the crest of a collapsed anticlinal structure on which the Ke-1 well
was drilled. The structure is bounded by a basin-ward fault (Fault A) and a major antithetic
fault (Fault B) both trending E-W from the western side of the farmout area up to the Ke
accumulation before changing trend to NE-SW towards Darama. Other constituent faults are
parallel to this trend within and outside these bounding faults. That portion of OML 55 is
situated within the Coastal Swamp Depo-belt of the Niger Delta Basin.
Figure 5: Dip Seismic Section over Ke Field
S

Proposed Ke-South
well trajectory

Ke - 1 Well [projected onto seismic

line]

2000
Possible flat spot

B4
Reservoir
2500
Fault B

C4 Reservoir

Fault A

750M

59

Litho-stratigraphy:
The well sections penetrated in Ke field are multiple condensed paralic lithofacies sequence
of the Agbada Formation. It consists of well-developed amplified sand bodies annotated
downhole as Level A to C. The sands are capped by competent shale breaks of high sealing
capabilities.
Figure 6: Schematic Stratigraphic Column, Niger Delta (Reference to Ke field area)

AGBADA FM.

The Table 8 below shows a summary of the key reservoirs as correlated from Darama-1:Table 8: Summary of Well Information for Ke-1 and Darama-1 wells
Sands

B4
C4

Ke-1 (ft)

-9267
-10383

-9464.5
-10528.5

Darama-1 (ft)

-8837
-9663

60

-8964
-9841

Remarks

Oil in Ke-1, Wet in Darama-1

Oil in Ke-1, Wet in Darama-1

Figure 7: North-South Geological Cross Section over Ke Field

GEOLOGICAL X-SECTION THROUGH KE-1 WELL

683m

Benin Formation:
Characterised by massive continental sands with few intercalating clay materials to ~ 7540 ft
(MD). The relative high resistivity values noticed within the interval are indicative of fresh
water sands. This section did not encounter any hydrocarbon in either of the wells drilled in
the Ke area.
Agbada Formation:
The top shows a transition from the overlying Benin formation while the base (top of Akata
formation) was not reached by the deepest well that tested the oldest series. The interval is
typically made up of alternating sand and shale sequence. The sand/shale ratio generally
decreases with depth. The sands encountered are the usual transgressive (upward fining of
sand), regressive (upwards coarsening) phases and tidal bars.
Migration path and Trapping Mechanism:
The hydrocarbon migration process typically occurs in two stages. The first stage is through the
numerous deep-seated faults acting as conduits from the source rock shales to the relatively
shallower reservoir sandstones. These hydrocarbons, once introduced into the reservoir
sandstone, then migrate by buoyancy through the steeply dipping beds to the crest of the
structure (structural trap) or sand pinch-outs (stratigraphic trap).
The structural traps are fault-dependent and the structures mapped in the area essentially
close against the interpreted faults.
3.3

Petrophysics

Introduction:
The Ke-1 well was evaluated across interval 150ft 11300ft MD. The well encountered 85ft of
hydrocarbon in shaly-sandstone reservoirs. Halliburton acquired the logs used in the evaluation
in February 1965 for Gulf Oil Company of Nigeria.

61

Scanning & Digitization:

All log curves for Ke-1 and Darama-1 were scanned and digitized using NeuraScanner and
NeuraLog software. The digitized log curves were compared with the paper logs for QC.
Depth Shifting/Environmental Corrections/Log Splicing:
Logs were depth matched to the first log taken in the first run (usually resistivity/GR logs). The
GR curves were corrected for borehole size and mud weight. The resisitivity logs were corrected
for borehole effects and invasion. TVD calculation was done. Borehole environmental
corrections were applied to all GR and ILD curves using a Halliburton correction chart
incorporated in PowerLog. The parameters used in the environmental correction are all taken
from the well header.
Evaluation Parameters:
Cementation factor (m) and saturation (n).
Values of m = 1.8 and n = 1.8 were generated using the general Niger Delta correlation.
m = 2.008 0.946
n = 1/ (0.38829 + 0.56062)
Where = porosity in fraction
The average porosity used for the computation is 25.1%
V-Shale:
Shale volume was estimated using Larinov function for tertiary clastics:Vsh = 0.083 (23.7*grl 1)grl
Where grl = GR GRmin
GRmax GRmin
Grain Density:
Rho matrix of 2.65g/cc and fluid densities of 1.0g/cc for water and 0.8g/cc for oil were used for
porosity computations.
Formation Water Resistivity:
The formation water resistivity for the reservoir was determined using the Pickette method.
These were taken from clean wet sand close to the reservoir of interest.
Porosity Evaluation:
Porosities were generated using the Sonic Method (Hunt Raymer). The porosities are generally
very good in Ke-1 averaging has an average of 25.1% for the two reservoirs.
Hydrocarbon Saturation:
The Juhaz saturation equation was employed in generating the water saturations used in this
study due to the absence of Neutron and Density log data as required in other saturation
equations.

62

Figure 8: Ke-1 well B4 Reservoir Petrophysical Analysis

Figure 9: Ke-1 well C4 Reservoir Petrophysical Analysis

3.4

Well Test Results

The two zones that encountered oil in Ke-1 were tested B4 was sampled and C4 had
Completion test run. The results are indicated in Table 9.

63

Table 9 Well Test Results of the B4 and C4 sands

B4 (FIT)

C4 (Completion Test)

Interval (ft MD)

9267 9464.5ft

10383 -10528.5ft

Oil Gravity (API)

36

GOR (scf/stb)

425

1440

Production

6500 cc oil,
16 cuft gas
200 cc mud/water

1,145 bop/d,
1650 mcf/d for 3 hrs.

Choke Size

n/a

5/16

Rate (bo/d; mcf/d)

n/a

1,145 oil, 1,650 gas

Test Pressure (psi)

n/a

1600

Formation Pressure (psi)

4,000

CIP (psi)

1,050

BS & W

n/a

4.

44

0.25%

Description of the Ke Asset

The farmout area lies in a proven hydrocarbon province and prospects are mostly structural
and fault dependent. Therefore the most important risk element associated with hydrocarbon
accumulation will be fault seal. Given the prevalence of higher chances of trapping occurring
in footwall rather than hanging wall closures, we rank the Ke South prospect highest because
it is a consistent footwall closure against a major antithetic fault at all the four levels mapped.
The other prospects of Ke Northeast and Ke North are all either a footwall/hanging wall
combination or hanging wall only.
4.1

Ke-1 Discovery

Ke-1 well was drilled on a collapse crest structure and encountered two major hydrocarbon
bearing reservoirs. The well was drilled vertically to a total depth of 11,300 feet MD, short of
the proposed 13,000 feet Total Depth (TD). The shallower oil-bearing sand (B4) recorded a net
pay thickness of 18 feet, while the lower sand (C4) recorded a net pay of 52 feet. Each of the
sands contains hydrocarbon with possible oil-water contacts. On production testing, the C4
sand flowed at 1,145 BOPD through a choke size of 5/16. API gravity measured 44, with a
Gas/Oil ratio of 1440. The test was for only 3 hours, extrapolated to provide a daily rate. There
are good indications that production could still be optimized. The shallower B4 reservoir sand
was evaluated with a Formation Interval Test (FIT), which recovered 6500cc of 36 API oil and
16 cuft of gas with 200cc mud/water. Further evaluation of acquired and recovered data
resulted in a Best Estimate of Contingent Resources, for both reservoirs, of approximately 5.65
mmbbls which can be put into production from the existing well if the casing integrity test is
successful. A breakdown of the volumetrics for Ke-1 at different levels is shown in Table 10:

64

Table 10 Breakdown of Ke-1 volumetrics at different levels

GRV
Acre-ft

NTG
frac.

frac.

Sw
frac.

OOIP
MMB

Bo/Bg

STOIP
MMB

Low Estimate
B4
7357
C4
2926

0.92
0.80

0.278
0.224

0.297
0.286

10.26
2.90

1.26
1.81

8.14
1.60

Levels

Total

13.17

Best Estimate
B4
7357
C4
16418

0.92
0.80

0.292
0.235

0.282
0.272

Total
4.2

11.01
17.43
28.44

Contingent
RF Resources
Frac.
MMBO

0.30
0.30

9.75
1.24
1.76

8.91
9.91
18.82

2.44
0.48
2.92

0.30
0.30

2.674
2.972
5.65

Ke-South Prospect

A number of prospects were identified within the Ke area the Ke South, Ke North and Ke
North-east. The prospects were defined on the basis of similar sand units to the Ke-1 discovery
i.e. B4 and C4 sands. These two sands are defined below the Uvigerina-8 shale, which is a
known regional seal, also found in the Ke-1 well, and known to exist in the Belema, Awoba,
Otuo, Olobia and other fields in the region. A generic risking was carried out on the prospects,
and a PoS of 49% was calculated for Ke South and 30% for the other two prospects.
The Ke-South prospect is the most important prospect mapped in the area. It lies on the
uplifted footwall of an antithetic fault immediately south of the Ke-1 discovery. A directional
well is planned to test multiple reservoir sands, as seen in Ke-1, within this fault block. Seismic
signatures indicate presence of possible multiple sands with apparent indications of
hydrocarbon, and in particular, two additional prospective sands are anticipated, (B1 and B2),
one of which (B2) contains apparent flat spot on seismic data (see Figure 2). This apparent
hydrocarbon indicator serves to further de-risk the prospect, although no prospective
hydrocarbon volumes are calculated for B2 as no maps are available at this time. These will be
made at the time of prospect drill preparation.
Figure 10: Depth Structure Map over B4 sand

65

Six horizons, A1, A4, B1, B2, B4 and C4 were correlated from the Ke-1 fault block into the Ke
South fault block. The A sands belong, stratigraphically, within the Benin-Agbada transition
zone while the B and C sands are within the Agbada formation. From the regional evaluation
of the 3D data set and the integrated Ke-1 well results, all the elements of the petroleum
systems appear to be in place here and, there is sufficient space for charging, migration and
trapping. Therefore, a deviated well designed to ride behind this antithetic fault system
carries a high probability of geologic success in this prospect. The prospect has been given an
Exploration Risk of 49 per cent (1 in 2).
Figure 11: Depth Structure Map over C4 Sand

Depth Structure Map of C4 Sand

Ke-North

Fault A
Ke-Northeast

Ke-South
Fault B
Limit oil-bearing reservoir

4.3

Scale = 1:50,000

Prospect closing area

Ke-Northeast and Ke-North

The Ke-Northeast and Ke-North prospects are each sandwiched between two parallel faults
and their prospectivity is probably limited to only the B4 and C4 stratigraphic levels.
The shallower levels are upthrown out of prospectivity range stratigraphically, too shallow
and probably in the freshwater regime. Therefore, the main geological risk is fault seal for
trapping of hydrocarbon and room for charging and migration.
A breakdown of the three prospects by reservoir level is given in the Table 11 below:

66

Table 11 Breakdown of Ke-South volumetrics at different levels

Closing
Contour
ft

GRV
Acre-ft

NTG
frac.

frac.

Sw
frac.

OOIP
MMB

Bo/Bg

STOIP
MMB

Low Estimate
B4
-9200
C4
-10200

1445
9372

0.95
0.83

0.292
0.235

0.282
0.272

2.23
10.32

1.24
1.76

1.81
5.81

Levels

Total

12.55

Best Estimate
B4
-9400
C4
-10500

9401
21402

0.95
0.83

0.292
0.235

0.282
0.272

Total

14.53
23.58

20751
37067

0.95
0.83

0.292
0.235

0.282
0.272

Total

32.07
40.84

0.30
0.30

7.62
1.24
1.76

38.11

High Estimate
B4
-9600
C4
-10800

Prospective
RF Resources
Frac.
MMBO

11.76
13.40

2.3
0.30
0.30

25.16
1.24
1.76

72.91

25.96
23.20

0.54
1.76

3.53
4.02
7.55

0.30
0.30

7.79
6.96

49.16

14.75

Prospective
RF Resources
Frac.
MMBO

Table 12 Breakdown of Ke-Northeast volumetrics at different level

Closing
Contour
ft

GRV
Acre-ft

NTG
frac.

frac.

Sw
frac.

OOIP
MMB

Bo/Bg

STOIP
MMB

Low Estimate
B4
C4
-9540

5846

0.83

0.235

0.272

6.44

1.76

3.66

Levels

Total
Best Estimate
B4
-9100
C4
-9600

6.44
6913
24617

0.95
0.83

0.292
0.235

0.282
0.272

Total
High Estimate
B4
-9200
C4
-9700

10.68
27.12

3.66
1.24
1.76

37.80
36494
45225

0.95
0.83

0.292
0.235

0.282
0.272

Total

56.39
49.82
106.22

67

0.30

8.65
15.41

1.10
0.30
0.30

24.06
1.24
1.76

45.66
28.31
73.97

1.10

2.59
4.62
7.21

0.30
0.30

13.70
8.49
22.19

Table 13 Breakdown of Ke-North volumetrics at different level

Closing
Contour
ft

GRV
Acre-ft

NTG
frac.

frac.

Sw
frac.

OOIP
MMB

High Estimate
B4
-7800
C4
-8800

27425
27220

0.95
0.83

0.292
0.235

0.282
0.272

42.38
29.99

Levels

Total

Bo/Bg

STOIP
MMB

Prospective
RF Resources
Frac.
MMBO

1.24
1.76

34.31
17.04

0.30
0.30

72.37

5.

Economic Analysis

5.1

Capital Costs

51.35

10.29
5.11
15.41

Sirius is committed to funding 100 per cent. of the work programme for the Ke Asset
development programme, which is planned to start in the 3rd or 4th quarter of 2010. This
work programme includes the re-entering and testing of Ke-1 well, drilling and completion of
a second development well, the costs of laying a 19km pipeline to Shells nearby Awoba
flowstation (although tankers or water borne barges may be used for transportation instead)
and the drilling of Ke-South and Ke-Northeast prospects for potential development. Gross
Capital Costs for the programme are estimated as follows:
Ke-1 re-entry, testing, completion
2nd development well (Ke-2)
Exploration wells (2 x)
Pipeline

$11.2MM
$16MM
$32MM
$21MM

An Oil Sales Agreement was signed with Shell Western Supply and Trading on the
16th February 2009 and is based on Bonny and/or Brent quotations.
5.2

Field Development Ke-1 Re-entry

The successful completion of a Ke-1 re-entry is considered feasible owing to good oil flow
rates from the C4 zone, and relatively low re-entry cost. The final well construction has the
tested lower C4 zone behind a 7 liner, with the upper B4 zone behind 9-5/8 casing but above
the top of the 7 liner. This configuration allows for a Twin String Dual (TSD) completion,
whereby both zones may be produced simultaneously through separate strings. Completion
type and work-over costs should be based on this option with provision made for gas lift from
the beginning and the inclusion of a down-hole pressure and temperature gauge for reservoir
management.
The condition of the well will allow a relatively cheap re-entry in that the well has been left
with a well head and tree in place and a kill string in the hole. The condition of the well,
although over 40 years old, would not be likely to cause significant difficulties in re-entry but
it would be good to check the casing integrity of the well. This option is also favoured because
there appears to be sufficient space left in the completion to run a scab liner if any integrity
problems are encountered.
5.3

Drilling

A swamp rig and a work-over unit are required for the Ke-1 well. A swamp barge is not
required for the Ke-South as it is located on land, though within the swamp area to the south
of Ke-1.
To fully evaluate the prospects, a land rig will also be used for Ke-Northeast.

68

5.4

Fiscal Terms

5.4.1. Royalty
Government royalty is a function of production rate:
Production rate bopd

Royalty rate

Up to 5,000
5,001 10,000
10,001 15,000
15,001 25,000
Greater than 25,000

2.5%
7.5%
12.5%
18.5%
18.5%

Overriding royalty payable to Chevron (the Farmor) is a function of production rate:

Production bopd

Royalty Rate

Up to 2,000
2,001 5,000
5,001 10,000
Greater than 10,000

2.5%
3.0%
5.5%
7.5%

5.4.2. Taxation
The Petroleum Profits Tax (PPT) is levied on total field revenues, after the deduction of Royalty,
operating costs, Education Tax (2 %), and the Niger Delta Development Community levy (3%),
at a flat rate of 55 per cent.
An investment Tax Allowance of 20% is allowed in each fiscal year to offset Capital
Expenditure. The total tax allowance can be recouped over 5 years, and is 120% of the value
of the Capital Expenditure invested on the field under the Marginal Field Indigenous Fiscal
Regime.
5.5

Value of the Ke Asset

5.5.1 Scenario 1 Ke Field Development

A cash-flow model was generated for the development of the Ke field, for both the Base Case,
a two well development for the field and a Low Case re-completion of the Ke-1 well only. The
assumptions were as follows:
1)

There will be a re-entry of the existing Ke-1 well.

2)

There will be a second well drilled at the cost of $16 million (Base Case only).

3)

The production will start with one well in the first year, and the second well will come
on stream in the second year.

4)

Ultimate resources to be drained are 5.65MMBO (Base Case) or 2.92 MM bbl (Low Case).

5)

Peak production will be in the second year at 3,500 bopd, thereafter declining
exponentially at the rate of 20%/year.

6)

The base case oil price model used was a fixed $70/barrel. Sensitivities were run on a $50
and $80/barrel cases.

7)

Fixed OPEX was escalated at 4% per annum.

69

Table 14 Ke Field Development

Gross Resources
# Wells
Drilling Cost
Other Capex
Gross NPV10
NPV10/bbl
IRR
Risk (Chance of Commerciality)
Net Resources
Net NPV10

MM bbl
$ MM
$ MM
$ MM
$/ bbl

MM bbl
$MM

Low Case

Base Case

2.92
1
11.2
21
10.18
$3.49
19%
75%
1.17
4.06

5.65
2
27.2
21
39.57
$7.00
36%
75%
2.26
15.83

The Base Case cumulative net cash flow of $66.42 million translates to an NPV (10%) value of
$39.57 million ($15.83 million net to Sirius). The economic life of the field is 10 years, after
which cash-flow becomes negative. A low case estimated resource of 2.92MMBO for Ke-1
development alone yielded a value of $10.18million NPV (10%), or $4.06million net to Sirius.
Table 15 shows the sensitivity of the Base Case and Low Case developments of Ke Field to oil
price, with $50/bbl and $80/bbl (flat) chosen as low and high price forecasts.
Table 15 -Ke Field Development Sensitivity to oil price

Ke Field
Base Case
Ke Field
Low Case

NPV 10
IRR %
NPV 10
IRR %

$50/bbl

$70/bbl

$80/bbl

7.07
16%
-10.70
-1%

39.57
36%
7.67
16%

55.55
44%
16.73
23%

This shows the Base Case, 2 well developments to be robust to low oil prices although the
single well development is sub-economic at $50/bbl oil.
5.5.2 Scenario 2 Full Area Development Ke-1 + Ke-South + Ke-North East
A cash-flow model was generated for the full area development of the Ke field, which includes
the Ke-1 discovery, Ke-South, and Ke-North East. The assumptions were as follows:
1)

There will be a re-entry of the existing Ke-1 well.

2)

There will be five new wells drilled each at a cost of $16 MM.

3)

The production will start with one well in the first year, and the second well will come
on stream in the second year. Each of the remaining four wells will come on stream in
succession over the next four years

4)

Ultimate resources to be drained are 20.41MMBO (Base Case)

5)

Peak production will be in the 4th year at 7,500 bopd, thereafter declining exponentially
at the rate of 10% in the 6th year; 15% from the 7th to the 14th year and 20% from the
15th to the 20th year.

6)

The base case oil price model used was a fixed $70/barrel. Sensitivities were run on a $50
and $80/barrel cases.

7)

Fixed OPEX was escalated at 4% per annum

70

In a success case scenario, the prospective resources in the Ke Field area were factored into the
base case economic evaluation of the field. The cumulative net cash flow of $ 434.21 million
translates to an NPV (10%) value of $215.49 million ($86.83 million net to Sirius). The economic
life of the field is 20 years. This evaluation indicates a $3.45/bbl margin incremental economics
over the Ke-1 base case.
Table 16 Ke Field Full area development (Ke-1, Ke-South, Ke-North-East)
Base Case

Gross Resources
# Wells
Drilling Cost
Other Capex
Gross NPV10
NPV10/bbl
IRR
Success Case
Net Resources
Net NPV10

MM bbl
$ MM
$ MM
$ MM
$/ bbl
%
%
MM bbl
$MM

20.41
6
91.6
21
215.49
$10.56
57
15
8.16
86.20

Table 17 -Full area development (Ke-1 + Ke-South + Ke-North East) Sensitivity to oil price

Ke-1 + Ke-south +Ke-North East

Base Case

6.

NPV 10
IRR %

$50/bbl

$70/bbl

$80/bbl

$122.34 MM
39%

$215.49 MM
57%

$261.72 MM
65%

Summary

The Ke field is a marginal field within the Niger Delta with one discovery well, the Ke-1, which
was drilled in 1965, and is subject to marginal field terms. Currently, the lease-holder is Del
Sigma Petroleum, and they are in partnership with Sirius Petroleum.
The field has conceptualized plans for development, but these are yet to be provided to the
authorities or sanctioned by them. On the basis of the current stage of development planning,
the hydrocarbon resources in the discovery well have been assigned to the Contingent
Resources (pending development) category. The field has two known reservoirs with a most
likely gross resource estimate of 5.65 mmbo, calculated for the discovery well Ke-1.
An upside potential for the field exists in a scenario developing Ke-1 discovery plus Ke-South
and Ke-Northeast on an exploration success case basis, yielding a best estimate gross total of
20.41 mmbo (Contingent plus Prospective Resources). A number of economic sensitivities have
also been run over the field, and it is deemed economically viable.

7.

Professional Qualifications

Degeconek Nigeria Limited (DNL) is an independent consultancy, specializing in geology,

geophysics, petroleum engineering and economic analysis. It has particular experience of the
petroleum geology of the Niger Delta, having acted as consultants to several operating, nonoperating and interested investment companies in the Nigerian oil and gas industry since 1994
and having produced a number of non-proprietary technical reports on the region and
evaluated numerous blocks, fields and prospects in the area. Except for the provision of
professional services to Sirius and Del Sigma, it does not currently have any commercial
arrangement with any person or company involved in the interests which are the subject of
this report.
71

I, Abiodun Adesanya, do hereby certify that my professional memberships include the

European Association of Exploration Geoscientists, the Society of Exploration Geophysicists, the
American Association of Petroleum Geologists, the Canadian Society of Exploration Geologist,
and the Nigerian Association of Petroleum Explorationists

8.

Basis of Opinion

The evaluation presented in this report reflects our informed judgment based on accepted
standards of professional investigation, but is subject to generally recognized uncertainties
associated with the interpretation of geological, geophysical and engineering data. The
evaluation has been conducted within our understanding of petroleum legislation, taxation
and other regulations that currently apply to these interests. However, DNL is not in a position
to attest to the property title, financial interest, relationships or encumbrances related to the
property.
Our estimates of reserves, resources and values are based on data provided by Sirius. DNL has
accepted, without independent verification, the accuracy and completeness of these data. The
report represents DNLs best professional judgment and should not be considered a guarantee
or prediction of results. It should be understood that any evaluation, particularly one involving
exploration and future petroleum developments may be subject to significant variations over
short periods of time as new information becomes available. This report relates specifically
and solely to the subject assets and is conditional upon various assumptions that are described
herein and must be read in its entirety. This report was provided for the sole use of Sirius and
its advisors on a fee basis. This report in its entirety may not be reproduced or redistributed to
any other persons. However in instances where excerpts only are to be reproduced or
published, other than in relation to the initial public offering, this cannot be done without the
express permission of DNL. DNL has given and not withdrawn its written consent to the issue
of this document with its name included within it and with inclusion therein of its report and
references thereto. DNL accepts responsibility for the information contained in the DNL Report
set out in this document and to the best knowledge and belief of DNL, having taken all
reasonable care to ensure that such is the case, the information contained in such report is in
accordance with the facts and does not omit anything likely to affect the import of such
information.

72

Appendix A: Glossary of technical terms

3D Seismic

A 3-dimensional record of seismographic surveys using

advanced methods of collection and processing of signals
recorded

Abandoned Well

A well no longer in use, whether dry or no longer

productive but in most cases must be properly plugged

Acre-feet

Unit of volume applied to petroleum reserves; one acre of

producing formation one foot thick.

AAPG

American Association of Petroleum Geologists

API

American Petroleum Institute

Degrees API Gravity

Weight per unit volume of crude oil or other liquid

hydrocarbon as measured by API unit recommendation

Appraisal well

A well drilled following a discovery well to further

delineate the limit or extent of the hydrocarbon pool

Bbls

barrels; a unit of measure for crude oil equal to 42 US

gallons at 60deg Fahrenheit

BHP

Bottom Hole Pressure

bo/d

barrels of oil per day

Boig

Fluid expansion factor

Bo(g)i

Initial formation volume factor

bopd

barrels of oil per day

BS&W

Bottom sediment & water (impurities contained in the raw

fluid produced by an oil well)

Casing

Pipe cemented in the well to seal off formation fluids and

prevent hole cave-in

CALI

Caliper log curve

Choke

A heavy steel nipple inserted into the production tubing

to close off the flow of oil except through an orifice in the
nipple. The choke can be adjusted to various sizes

Christmas Tree/Well Head

Top of the casing, valves and related equipment to control

flow of gas and crude oil from the well.

Commercial Well

A well that produces oil and/or gas in sufficient quantities

such that proceeds from such sales exceed directly related
costs.

Completion

A process to finish a well off at the end of drilling so that

it is ready to produce oil or gas; involves setting casing,
tubing, packers, etc, with flow control valves at the
wellhead.

73

cuft

cubic feet

Decline rate

The rate of change in oil and/or gas production for a

particular well over time

Development Well

A well drilled to a known producing formation in an

existing oil reservoir

Discovery Well

The first oil or gas well drilled in a field, to reveal the

presence of a petroleum-bearing reservoir

DPR

Department of Petroleum Resources in Nigeria

Drilling rig

The equipment used to bore a hole into the earth,

equipped with rotary tools

Dry hole

Any well that fails to discover oil or gas in paying quantities

DT

delta T (sonic log)

Exploratory Well

Any well drilled for the purpose of securing geological or

geophysical information to be used in exploration or
development of oil or gas

Exponential decline

A single decline rate used for the life of a well

Farm-in

An arrangement whereby an operator buys into or

acquires an interest in a lease owned by another operator
on which oil or gas has been discovered or is being
produced

Farm-out

Assignment or partial assignment of an oil and gas lease

from one lessee to another

Flat spot

Geologic expression for a possible hydrocarbon indicator

on seismic data

Footwall closure

The upthrown side of a fault block

Formation pressure

The natural force that drives oil and gas to the borehole of
the drilled wells in the reservoir

Fresh Water

In oil & gas production, fresh water is found at shallower

depths and differentiated from salt water or brine which is
found along with hydrocarbons at greater depths

Ft

Feet

g/cc

grams per cubic centimetres

Gas-Oil Ratio, GOR

Number of cubic feet of gas produced per barrel of oil

GR

gamma ray log curve

GRV

Gross Rock Volume

grl

GR GRmin

Hanging wall closure

The downthrown side of a fault closure

74

Hydrocarbon(s)

An organic chemical compound of hydrogen and carbon

called petroleum. The molecular structure of hydrocarbon
compounds vary from the simplest, methane, to very
complex and heavy

Interest

A right or a claim to a property

ILC

induction log curve (measuring resistivity of formation)

ILD

induction log dual curve (measuring resistivity of

formation)

JOA

Joint Operating Agreement

Km

Kilometres

Lease

The generic name for oil, gas or other lease

LLD

dual laterolog curve (measuring resistivity of formation)

Marginal Field/Well

A low productive field/well typically uneconomic under

prevailing fiscal regime; may become economic with special
incentives as is the case in the Nigerian industry

MD

Measured Depth

mm

millimetres

MMB

Million barrels

Monte Carlo Simulation

The use of Monte Carlo risk analysis techniques to estimate

the most probable outcomes from a model with uncertain
input data and to estimate the validity of the simulated
model.

ms

milliseconds

mcf/d

thousand standard cubic feet per day, a common measure

for volume of gas. Standard conditions are normally set at
60oF and 14.7 psia

N:G

Net: Gross ratio (measure of sand cleanliness devoid of clay

material)

NNPC

Nigerian National Petroleum Corporation

NPHI

reservoir porosity measured based on radioactive neutron

response

OML

Oil Mining Lease

Operating Expense

The costs of operating a well

Overriding Royalty

A royalty in excess of the royalty provided in the Oil Lease

usually added on during an intervening Assignment

P&A

Plugging and abandoning a well. After its productive life

a well is plugged with heavy mud and cement

Perforations

Holes within and through casing and cement into the

production formation

75

Porosity

Percentage of rock volume that can be occupied by oil, gas

or water

Production string

The tubing set just above or through the producing zone

of a well, all the way to surface

psi

pounds per square inch

Reservoir

A porous, permeable sedimentary rock containing oil or

gas

Risk

The chance of some damage or the lack of success in a well,

either technical or commercial

Royalty

Revenue generally received by a mineral owner from the

production of oil or gas, free of costs except taxes

scf

standard cubic feet

stb

standard (stock) tank barrels

SEG

Society of Exploration Geophysicists

SEG Y Format

seismic recording format standardised by SEG

SPE

Society of Petroleum Engineers

SPEE

Society of Petroleum Engineers

S/N

serial number

Sw

See Water Saturation

STOIIP

Standard Tank barrels of oil initially in place

Stratigraphy

Geology that deals with the origin, composition,

distribution and succession of rock strata

Structural trap

An underground fold or break which creates an impervious

trap where oil and gas accumulate. Oil will migrate
through the earth until it is trapped

TSD

Twin String Dual

TVDSS

True Vertical Depth (subsea)

Tubing

The smallest diameter pipe within a well bore which

transmits hydrocarbon production to the surface. Tubing is
located inside the casing

Vsh

Volume of shale

Water Saturation

The extent to which pore space in a formation contains

connate water, relative to hydrocarbon

Well log

Typically a record of downhole formation characteristics

and conditions measured in a well using electrical-based
tools

76

Well site

The physical location on which an oil or gas well is drilled

WI

See Working Interest

Working Interest

Interest in a mineral property

WPC

World Petroleum Congress

Workover

Operations on a producing well to restore or increase

production.

77

Appendix B: SPE/WPC/AAPG RESERVOIR/RESOURCE DEFINITIONS

The following is extracted from the SPE/WPC/AAPG/SPEE PRMS 2007 using the section
numbering and spelling from PRMS.
1.0

Basic Principles and Definitions

The estimation of petroleum resource quantities involves the interpretation of volumes and
values that have an inherent degree of uncertainty. These quantities are associated with
development projects at various stages of design and implementation. Use of a consistent
classification system enhances comparisons between projects, groups of projects, and total
company portfolios according to forecast production profiles and recoveries. Such a system
must consider both technical and commercial factors that impact the projects economic
feasibility, its productive life, and its related cash flows.
1.1

Petroleum Resources Classification Framework

Petroleum is defined as a naturally occurring mixture consisting of hydrocarbons in the

gaseous, liquid, or solid phase. Petroleum may also contain non-hydrocarbons, common
examples of which are carbon dioxide, nitrogen, hydrogen sulfide and sulfur. In rare cases,
non-hydrocarbon content could be greater than 50%.
The term resources as used herein is intended to encompass all quantities of petroleum
naturally occurring on or within the Earths crust, discovered and undiscovered (recoverable
and unrecoverable), plus those quantities already produced. Further, it includes all types of
petroleum whether currently considered conventional or unconventional.
Figure 1-1 is a graphical representation of the SPE/WPC/AAPG/SPEE resources classification
system. The system defines the major recoverable resources classes: Production, Reserves,
Contingent Resources, and Prospective Resources, as well as Unrecoverable petroleum.

Figure 1-1: Resources Classification Framework

78

The Range of Uncertainty reflects a range of estimated quantities potentially recoverable

from an accumulation by a project, while the vertical axis represents the Chance of
Commerciality, that is, the chance that the project that will be developed and reach commercial
producing status. The following definitions apply to the major subdivisions within the
resources classification:
TOTAL PETROLEUM INITIALLY-IN-PLACE is that quantity of petroleum that is estimated to exist
originally in naturally occurring accumulations. It includes that quantity of petroleum that is
estimated, as of a given date, to be contained in known accumulations prior to production plus
those estimated quantities in accumulations yet to be discovered (equivalent to total
resources).
DISCOVERED PETROLEUM INITIALLY-IN-PLACE is that quantity of petroleum that is estimated,
as of a given date, to be contained in known accumulations prior to production.
PRODUCTION is the cumulative quantity of petroleum that has been recovered at a given date.
While all recoverable resources are estimated and production is measured in terms of the sales
product specifications, raw production (sales plus non-sales) quantities are also measured and
required to support engineering analyses based on reservoir voidage.
Multiple development projects may be applied to each known accumulation, and each project
will recover an estimated portion of the initially-in-place quantities. The projects shall be
subdivided into Commercial and Sub-Commercial, with the estimated recoverable quantities
being classified as Reserves and Contingent Resources respectively, as defined below.
RESERVES are those quantities of petroleum anticipated to be commercially recoverable by
application of development projects to known accumulations from a given date forward under
defined conditions. Reserves must further satisfy four criteria: they must be discovered,
recoverable, commercial, and remaining (as of the evaluation date) based on the development
project(s) applied. Reserves are further categorized in accordance with the level of certainty
associated with the estimates and may be sub-classified based on project maturity and/or
characterized by development and production status.
CONTINGENT RESOURCES are those quantities of petroleum estimated, as of a given date, to
be potentially recoverable from known accumulations, but the applied project(s) are not yet
considered mature enough for commercial development due to one or more contingencies.
Contingent Resources may include, for example, projects for which there are currently no
viable markets, or where commercial recovery is dependent on technology under
development, or where evaluation of the accumulation is insufficient to clearly assess
commerciality. Contingent Resources are further categorized in accordance with the level of
certainty associated with the estimates and may be sub-classified based on project maturity
and/or characterized by their economic status.
UNDISCOVERED PETROLEUM INITIALLY-IN-PLACE is that quantity of petroleum estimated, as
of a given date, to be contained within accumulations yet to be discovered.
PROSPECTIVE RESOURCES are those quantities of petroleum estimated, as of a given date, to
be potentially recoverable from undiscovered accumulations by application of future
development projects. Prospective Resources have both an associated chance of discovery and
a chance of development. Prospective Resources are further subdivided in accordance with
the level of certainty associated with recoverable estimates assuming their discovery and
development and may be sub-classified based on project maturity.
UNRECOVERABLE is that portion of Discovered or Undiscovered Petroleum Initially-in-Place
quantities which is estimated, as of a given date, not to be recoverable by future development
projects. A portion of these quantities may become recoverable in the future as commercial
circumstances change or technological developments occur; the remaining portion may never

79

be recovered due to physical/chemical constraints represented by subsurface interaction of

fluids and reservoir rocks.
Estimated Ultimate Recovery (EUR) is not a resources category, but a term that may be applied
to any accumulation or group of accumulations (discovered or undiscovered) to define those
quantities of petroleum estimated, as of a given date, to be potentially recoverable under
defined technical and commercial conditions plus those quantities already produced (total of
recoverable resources).
1.2

Project-Based Resources Evaluations

The resources evaluation process consists of identifying a recovery project, or projects,

associated with a petroleum accumulation(s), estimating the quantities of Petroleum Initiallyin-Place, estimating that portion of those in-place quantities that can be recovered by each
project, and classifying the project(s) based on its maturity status or chance of commerciality.
This concept of a project-based classification system is further clarified by examining the
primary data sources contributing to an evaluation of net recoverable resources (see Figure 12) that may be described as follows:

Figure 1-2: Resources Evaluation Data Sources

The Reservoir (accumulation): Key attributes include the types and quantities of Petroleum
Initially-in-Place and the fluid and rock properties that affect petroleum recovery.
The Project: Each project applied to a specific reservoir development generates a unique
production and cash flow schedule. The time integration of these schedules taken to the
projects technical, economic, or contractual limit defines the estimated recoverable resources
and associated future net cash flow projections for each project. The ratio of EUR to Total
Initially-in-Place quantities defines the ultimate recovery efficiency for the development
project(s). A project may be defined at various levels and stages of maturity; it may include one
or many wells and associated production and processing facilities. One project may develop
many reservoirs, or many projects may be applied to one reservoir.
The Property (lease or license area): Each property may have unique associated contractual
rights and obligations including the fiscal terms. Such information allows definition of each
participants share of produced quantities (entitlement) and share of investments, expenses,
and revenues for each recovery project and the reservoir to which it is applied. One property
may encompass many reservoirs, or one reservoir may span several different properties. A
property may contain both discovered and undiscovered accumulations. In context of this data
relationship, project is the primary element considered in this resources classification, and
net recoverable resources are the incremental quantities derived from each project. Project
represents the link between the petroleum accumulation and the decision-making process. A
project may, for example, constitute the development of a single reservoir or field, or an
incremental development for a producing field, or the integrated development of several
fields and associated facilities with a common ownership. In general, an individual project will
80

represent the level at which a decision is made whether or not to proceed (i.e., spend more
money) and there should be an associated range of estimated recoverable quantities for that
project. An accumulation or potential accumulation of petroleum may be subject to several
separate and distinct projects that are at different stages of exploration or development. Thus,
an accumulation may have recoverable quantities in several resource classes simultaneously. In
order to assign recoverable resources of any class, a development plan needs to be defined
consisting of one or more projects. Even for Prospective Resources, the estimates of recoverable
quantities must be stated in terms of the sales products derived from a development program
assuming successful discovery and commercial development. Given the major uncertainties
involved at this early stage, the development program will not be of the detail expected in
later stages of maturity. In most cases, recovery efficiency may be largely based on analogous
projects. In-place quantities for which a feasible project cannot be defined using current or
reasonably forecast improvements in, technology are classified as Unrecoverable. Not all
technically feasible development plans will be commercial. The commercial viability of a
development project is dependent on a forecast of the conditions that will exist during the
time period encompassed by the projects activities. Conditions include technological,
economic, legal, environmental, social, and governmental factors. While economic factors can
be summarized as forecast costs and product prices, the underlying influences include, but are
not limited to, market conditions, transportation and processing infrastructure, fiscal terms,
and taxes.
The resource quantities being estimated are those volumes producible from a project as
measured according to delivery specifications at the point of sale or custody transfer. The
cumulative production from the evaluation date forward to cessation of production is the
remaining recoverable quantity. The sum of the associated annual net cash flows yields the
estimated future net revenue. When the cash flows are discounted according to a defined
discount rate and time period, the summation of the discounted cash flows is termed net
present value (NPV) of the project.

81

PART 4
SUMMARY OF THE JOINT OPERATING AGREEMENT
Below is a summary of the Joint Operating Agreement or JOA dated 19 February 2010
between Sirius and Del Sigma as amended by a letter agreement, details of which are set out
in paragraph 10.18 of Part 5 of this document.

1.

Participating Interest

By a letter of award dated 25 February 2003, the DPR awarded to Del Sigma a 100 per cent.
Participating Interest in the Ke Field located within Nigerian Oil Mining Lease 55.
Under the JOA, Del Sigma assigns and Sirius accepts the assignment of an undivided 40 per
cent. Participating Interest in the Ke Farmout Area of the Ke Field, subject to the provisions of
the JOA and the Farmout Agreement.
The Participating Interests of Del Sigma and Sirius in respect of the Ke Farmout Area and under
the Farm Out Agreement are Del Sigma 60 per cent. and Sirius 40 per cent.

2.

Representations and Warranties of Del Sigma

Del Sigma represented and warranted to Sirius that, subject only to the consent of the
Government, NNPC and Chevron, it has the unencumbered right to transfer and assign to Sirius
the undivided 40 per cent. Participating Interest.
Sirius represented and warranted to Del Sigma that Sirius has the technical capability,
personnel and resources to fulfil its obligations under the JOA.

3.

Operator and Technical Partner

Del Sigma is appointed as operator in respect of the Ke Field and Sirius is appointed as the
technical partner for the development of the Ke Field.
Sirius will conduct training for designated personnel of Del Sigma as set out in the JOA.

4.

Rights, Duties and Responsibilities of Technical Partner and Operator

The technical partner (Sirius) will:

G

provide all funds required for joint operations, including but not limited to funds for
procurement, installation and commissioning of plants and equipment, or any associated
lease, supply of materials and tools, and engagement of personnel;

provide such other funds that may be required from time to time for the conduct of
joint operations, including but not limited to payments to third parties who perform
services as contractors, consultants or professional advisers;

have the right to ingress to and egress from the Ke Farmout Area; and

have free access to all information pertaining to petroleum operations and to wells
drilled, production won, saved and lifted.

The operator (Del Sigma) will, among other things:

G

commence joint operations;

maintain the Farmout Agreement in good standing;

conduct all joint operations in a diligent, safe, and efficient manner in accordance with
good and prudent oil field practices of the petroleum industry;
82

take all necessary and proper measures for the protection of life, health, the
environment and the property (at the joint expense of the parties);

maintain insurance policies for the joint operations.

The operator is authorised to settle claims in connection with the farm out area up to
N2,000,000 (8,000). Claims made against a party in respect of the Ke Farmout Area or which
may affect the joint operations are to be defended by a party in accordance with the
instructions of the joint management committee and at joint expense.

5.

Limitation on Liability of Operator and Technical Partner

The parties shall, in proportion to their Participating Interests, indemnify the operator and
technical partner from any and all damages, losses, costs, expenses and liabilities incident to
claims which arise out of joint operations, even though caused in whole or in part by a preexisting defect, the negligence or other legal fault of the operator or technical partner.
The operator and the technical partner will have a Participating Interest share in any damage,
loss, cost, expense or liability arising out of or resulting from joint operations.
Notwithstanding the indemnity described above, no party is to bear any damages for
environmental, consequential, punitive or any other similar indirect loss, except to the extent
of its Participating Interest.
Notwithstanding the indemnity described above, no party is to bear any damages for
environmental, consequential, punitive or any other similar indirect loss, except to the extent
of its Participating Interest.

6.

Joint Management Committee

A joint management committee will supervise, control and direct the conduct of the joint
operations, with each party having two representatives.
Del Sigma will provide the chairman of the joint management committee and Sirius will
provide the vice chairman.
The quorum for any meeting of the joint management committee will consist of a minimum
of one representative of Del Sigma and one representative of Sirius. All decisions of the joint
management committee will be made by a simple majority vote of the parties and each
member of the joint management committee is entitled to one vote.
In the event of a deadlock on the joint management committee, the parties will refer the
matter to NNPC and Chevron or to the DPR whose decision will be final and binding on the
parties.
The joint management committee may establish subcommittees and will appoint a chairman
for each subcommittee.

7.

Work Programmes and Budget

Within one month after the effective date of the JOA, the operator working together with the
technical partner will develop and deliver to the chairman of the joint management committee
a proposed work program and budget detailing joint operations to be performed in the Ke
Farmout Area for the remainder of the then current calendar year.
On or before 30 October of each calendar year, the operator working together with the
technical partner will develop and deliver to the chairman of the joint management committee
a work program and budget detailing the joint operations to be performed for the following
calendar year.
83

If a discovery is made of an accumulation of crude oil and natural gas, the operator will deliver
a notice of discovery and will submit to the parties a report containing details concerning the
discovery and the technical partners recommendation as to whether the discovery merits
appraisal. If the joint management committee determines that the discovery merits appraisal,
the operator together with the technical partner within one hundred and twenty (120) days,
will deliver to the parties a proposed work program and budget for the appraisal of the
discovery.
If the joint management committee determines that a discovery may be commercial, the
operator together with the technical partner will deliver to the joint management committee
a development plan. If the development plan is approved, such work will be incorporated into
and form part of the annual work programs and budgets.
On or before 15 November of each calendar year, the operator together with the technical
partner will deliver to the parties a proposed production work program and budget detailing
the joint operations to be performed in the development plan and the projected production
schedule for the following calendar year.

8.

Funding of Joint Operations

Sirius will provide 100 per cent. of the capital costs required for the conduct of the joint
operations, excluding any funds required for the appraisal and development of non-associated
gas.
Sirius will also fund all non-capital and pre-production expenditures/costs incurred up to such
a time that revenues remaining after the deduction of royalties is sufficient to meet operating
costs.
To the extent that revenues remaining after the deduction of royalties is not sufficient to meet
operating costs, then Sirius will fund such operating costs except where they relate to
abandonment as is contemplated under the Joint Operating Agreement.
The joint management committee will estimate the amount that a party must pay into the
joint account in any given month to meet that partys Participating Interest share of the costs
and expenditures.
Sirius is to remit the funding requirements for the development of the Ke Field into the joint
account for joint operations (Sirius will be one of two required signatories to this account). If
Sirius fails to do so after notice and reasonable opportunity to cure, then Sirius will be subject
to default provisions and penalties.
In consideration of the historic sunk costs incurred by Del Sigma, Sirius will pay to Del Sigma
US$2,000,000 (two million dollars). This payment will be made in three instalments:
(a)

the first instalment of US$500,000 (five hundred thousand dollars) was paid by Sirius to
Del Sigma upon the execution of the JOA;

(b)

the second instalment of US$500,000 (five hundred thousand dollars) is to be paid by

Sirius to Del Sigma after a satisfactory visit of DPR officials to Siriuss London office as part
of the pre-qualification exercise for the grant of government approval of the 40 per
cent. Participating Interest to Sirius; and

(c)

the balance of US$1,000,000 (one million dollars) is to be paid five working days after the
DPRs formal approval of the assignment of the 40 per cent. Participating Interest to
Sirius.

The sunk costs are to be audited by a firm of reputable international auditors, to be appointed
by the parties.

84

Except as may otherwise be agreed by the parties, all payments for joint operations will be
made from the joint account and the parties will share all credits to the joint account in
accordance with their proportionate Participating Interests.
The allocation of available crude oil and natural gas will be as follows:
(a)

70 per cent. of the crude oil and natural gas saved from the Ke Farmout Area will be set
aside for payment of royalties in respect of the joint operations each month, rentals due
annually under the Farmout Agreement, tax, operating costs and field abandonment;

(b)

a further ten per cent. will be allocated to Del Sigma for recovery of the up to US$15
million owed to the operator for the development of the Ke Field;

(c)

the balance of 20 per cent. will be shared between the parties in the ratio Sirius 40 per
cent. and Del Sigma 60 per cent; and

(d)

once Sirius and Del Sigma have paid all outstanding costs under (a) and (b) above, the
available crude oil and natural gas will be shared between the parties in the ratio Sirius
40 per cent. and Del Sigma 60 per cent. for the remaining lifetime of the Ke Field.

9.

Title to and Use of Equipment

Sirius will finance the cost of purchasing all equipment to be used in the joint operations in
the Ke Farmout area pursuant to the work programmes and such equipment will belong to
both parties.
All fixed assets, title to all lands purchased or otherwise acquired for the purposes of joint
operations and all moveable property will be the property of the parties. However Del Sigma
will take possession of such land and property if the Joint Operating Agreement is terminated
as a result of any default by Sirius.

10. Tax
Each party is responsible for reporting and discharging its own tax measured by the profit or
income of the party and the satisfaction of such partys share of all contract obligations under
the Farmout Agreement and the Joint Operating Agreement. Each party will protect, defend
and indemnify each other party from any and all loss, cost or liability arising from the
indemnifying partys failure to report and discharge such taxes.

11. Training and Development of Nigerian Personnel

Sirius will assist in providing facilities needed for the training of the operators Nigerian
personnel engaged in joint operations in accordance with a training programme and
conditions approved by the parties.
Costs and expenses incurred in the training of Nigerian personnel will be included in operating
costs.
Sirius will work towards ensuring that, in accordance with the Joint Operating Agreement,
the operator is able to undertake petroleum operations in accordance with generally accepted
principles and practices of the international petroleum industry.

12. Abandonment
Both parties may decide to plug and abandon any well which has been drilled on the Ke
Farmout Area or abandon and decommission facilities of petroleum operations on the Ke
Farmout Area as a result of the termination of the Farmout Agreement. Such abandonment
or decommissioning will be in accordance with the terms of the Farmout Agreement and
applicable laws and regulations.

85

Any well plugged and abandoned under this Joint Operating Agreement will be at the cost,
risk and expense of both parties.
The parties will provide security funds to satisfy the abandonment obligations in accordance
with the terms of the Farm Out Agreement.
Funds provided for abandonment security will be reduced or released as the obligations and
liabilities are reduced or released. Surplus funds, if any, after abandonment, will be shared
equally between the parties.

13. Default
A party is in default under the JOA if it fails to pay in full its share of funding obligations by
the due date. The non-defaulting party or the operator will promptly give notice of the default
and the defaulting party will have 10 days from receipt of this notice to cure or remedy the
default.
The non-defaulting party may, if possible and without obligation, pay the operator the
amount owed by the defaulting party.
The operator will, pending receipt of the default payments from either party, make
arrangements to meet any commitments falling due by borrowing the necessary finance from
outside sources. All costs of such finance will be charged to the defaulting party.
For so long as the default continues, the defaulting party will not be entitled to his rights and
entitlements under the JOA which will instead be assumed by the non-defaulting party. The
defaulting party will not be entitled to be represented in any meetings of the joint
management committee, vote on any matter or have access to data and information until the
default has been remedied. The defaulting party is nevertheless bound by the decisions
adopted by the joint management committee.
The operator or non-defaulting party will be entitled to recover from the defaulting party all
reasonable attorneys fees, interests, penalties and all other costs and expenses occasioned by
such default.
The defaulting party will have the right to remedy the default at any time by paying in full to
the operator or the non-defaulting party, all amounts to which is has become liable to pay
together with interest and other fees, penalties, costs and expenses.
The obligations of the defaulting party and the rights of the non-defaulting party will survive
the surrender of the Farmout Agreement, abandonment of joint operations and termination
of the JOA.

14. Assignment and Transfer

Each party will have the right at any time to transfer, in whole or in part, its Participating
Interest including its rights, title, interest, benefits, duties and obligations under the JOA
provided that:
(a)

no party may assign or transfer all or part of its Participating Interest without the prior
written consent and approval of the other party, such consent and approval not to be
unreasonably withheld;

(b)

any assignee or transferee will be of technical and financial standing sufficient to

perform the duties, obligations and liabilities under the JOA; and

(c)

no assignment or transfer may be made that would result in any non-uniformity of

Participating Interests throughout the entire Ke Farmout Area.

86

If any party has received an offer from a third party which it desires to accept, for the
assignment or transfer of its Participating Interest, it will give the other party prior right and
option in writing to purchase such Participating Interest.
A party transferring all or part of its Participating Interest to an affiliate will, unless the other
party otherwise agrees, remain liable to the other party for all obligations attaching to the
Participating Interests assigned, and such obligations will in addition become the obligations
of the assignee.
A party assigning all or part of its Participating Interest to any third party (not being an affiliate
of the assigning party) will remain liable to the other party for all obligations attaching to the
Participating Interests assigned incurred prior to the effective date of such assignment and
such obligations will in addition become the obligations of the assignee.
A party will in no way whatsoever directly or indirectly encumber or permit or cause to be
encumbered its Participating Interest or its interest in the joint operations without the express
written consent of the other party, such consent not to be unreasonably withheld.

15. Effective Date and Term

It is a condition precedent to the JOA that the parties have the approval of their respective
board of directors and that evidence of such approval is given not later than 15 days after the
effective date (see below). No evidence of the Companys boards approval will be given unless
and until the Acquisition is approved by Shareholders at the General Meeting.
The effective date of the JOA will be the date of Admission and it will continue for as long as
the Farmout Agreement remains in force (which was for an initial period of 60 months, which
will continue thereafter at Del Sigmas option for so long as the DPR consents).
The JOA may be terminated if:
(a)

Sirius commits a material breach of its obligations under the Joint Operating Agreement
and Sirius fails to remedy such breach within one month of notification of such breach;

(b)

Sirius is declared bankrupt or becomes insolvent;

(c)

Sirius fails to perform its duties as technical partner for the joint operations;

(d)

Sirius fails to provide funding for the joint operations as set out in paragraph 8 above;

(e)

Sirius fails to pay the US$2,000,000 (two million dollars) to Del Sigma as set out in
paragraph 8 of this Part 4; or

(f)

Del Sigma commits a material breach of its obligations under the Joint Operating
Agreement and Del Sigma fails to remedy such breach within three months of
notification of such breach.

Subject to the paragraph below, the rights, obligations and entitlements of Sirius under the
JOA will cease on termination of the JOA.
The JOA will be terminated if the DPR does not approve the transfer provided for in the JOA,
in which case Del Sigma will hold Sirius interest in trust, as if the JOA remained in force, for
so long as Sirius is able to meet with its other obligations under the JOA.

87

PART 5
ADDITIONAL INFORMATION
1.

The Company

1.1

The Company was incorporated in England and Wales on 16 July 2004 under the
Companies Act 1985, with registered number 05181462, with the name Fantasy Gaming
plc.

1.2

The Company changed its name to Global Gaming Technologies plc on 8 November
2004 and to Sirius Petroleum plc on 4 September 2008.

1.3

The Companys registered office and principal place of business is at 2nd Floor,
Stanmore House, 29-30 St Jamess, London SW1A 1HB, the telephone number of which
is 020 7451 9800.

1.4

The Company is governed by CA 2006 and the regulations made under that Act.

1.5

The liability of the members is limited to the amount, if any, unpaid on the shares
respectively held by them.

1.6

The business of the Company and its principal activity is that of an investment and
holding company.

1.7

The Company has no administrative, management or supervisory bodies other than the
Board of Directors, the remuneration committee and the audit committee, all of whose
members are Directors.

2.

Subsidiaries and investments

2.1

The Company owns 100 per cent. of the share capital of Sirius Oil & Gas Limited
(formerly Event Data Correlation Limited), a company incorporated in England and
Wales with number 04886636 on 3 September 2003. Sirius Oil & Gas Limited is not
trading and is a different company to the company of the same name referred to as
SOGL in paragraphs 3.6.1 and 10.2 of this part 5.

2.2

The Company owns 100 per cent. of the share capital of Sirius Energy Trading Limited,
a company incorporated in England and Wales with number 06888862 on 27 April 2009.
Sirius Energy Trading Limited is dormant.

2.3

Sirius Oil & Gas Limited owns 50 per cent. of the share capital of Sirius Taglient Petro
Limited, a company incorporated in Nigeria with number 770190 on 1 September 2008.
The Company has the right to acquire the remaining shares in Sirius Taglient Petro
Limited, which are held on trust for it, for 10 and has management and operating
control of that company. Sirius Taglient Petro Limited is a trading company in the oil
and gas sector.

2.4

The Company owns 99.99 per cent. of the share capital of SRS Petroleum Nigeria
Limited, a company incorporated in Nigeria with number 335817 on 24 March 2010.
One share is owned by Babatunde Agboola, a director of the Company, on trust for
the Company. SRS Petroleum Nigeria Limited was formed to hold the Companys 40 per
cent. Participating Interest.

2.5

Except as stated in this paragraph 2, the Company does not have, nor has it taken any
action to acquire, any significant investments.

88

3.

Share capital

3.1

The Company was incorporated with an authorised share capital of 10,000,000 divided
into 4,000,000,000 ordinary shares of 0.25p each, of which two were issued as subscriber
shares. By a resolution dated 19 January 2010 the Company has taken advantage of
the provisions of the Companies Act 2006 to remove from the Companys memorandum
and articles of association the restriction as to the maximum amount of authorised
share capital.

3.2

The Company has issued and allotted 520,827,720 ordinary shares as follows:
Date of
issue

Description

Number of
shares

Issue
price

16 July 2004
10 November 2004
25 November 2004
27 June 2005
27 June 2005
27 June 2005
27 June 2005
01 August 2005
18 January 2007
31 July 2007
11 June 2008
11 June 2008
20 August 2008
20 August 2008
20 August 2008
09 January 2009
09 January 2009
02 December 2009

Subscriber shares on incorporation

2
Placing for cash
24,999,998
Placing for cash
16,875,000
Placing for cash
4,166,667
Acquisition consideration shares
134,166,667
Acquisition commitment shares
5,625,000
Acquisition shares in settlement of fees
225,000
Exercise of options
2,610,967
Exercise of options
596,792
Exercise of options
4,028,292
Capitalisation of debt
79,500,000
Placing for cash
25,000,000
Share issue in settlement of fees
103,700,000
Sign-on fee shares
36,000,000
Placing for cash
18,000,000
Placing for cash
35,000,000
Share issue in settlement of fees
12,000,000
Placing for cash
18,333,335

0.25p
0.25p
3.21p
6.00p
0.25p
11.28p
2.61p
0.25p
0.25p
0.25p
0.25p
0.93p
0.25p
0.25p
0.25p
1.86p
0.25p
6.00p

Existing issued share capital

520,827,720

3.3

As noted in paragraph 3.1 above, the Company no longer has an authorised share
capital. The issued share capital of the Company at the date of this document is
520,827,720 Ordinary Shares all of which are fully paid.

3.4

Pursuant to an ordinary resolution of the Company dated 19 January 2010, the Directors
are authorised to allot Ordinary Shares up to an aggregate nominal amount of
8,697,930.70, such authority expiring on whichever is the earlier of the Companys
next annual general meeting and 18 April 2011.

3.5

Pursuant to an ordinary resolution of the Company dated 19 January 2010, the Directors
are authorised to allot equity securities in the Company without first offering them to
existing shareholders in proportion to their holdings, such authority expiring on the
conclusion of the next annual general meeting of the Company or on 18 April 2011
whichever is earlier. The Directors may also allot equity securities following an offer or
agreement made before the expiry of the authority and provided that the authority is
limited to:
3.5.1

an offer of such securities by way of rights to holders of ordinary shares in the

Company in proportion (as nearly as may be practicable) to their respective
holdings of such shares, but subject to such exclusions or other arrangements as
the Directors may deem necessary or expedient in relation to fractional
entitlements or any legal or practical problems under the laws of any territory,
or the requirements of any regulatory body or stock exchange; and

89

3.6

3.5.2

the allotment of equity securities of an aggregate nominal amount of up to

283,250 (two hundred and eighty three thousand two hundred and fifty
pounds) to capitalise fees payable to Taglient Oil Nigeria Limited and SOGL; and

3.5.3

the allotment of equity securities of an aggregate nominal amount of up to

2,000,000 (two million pounds) in respect of the Second Placing referred to in
the circular to shareholders dated 23 July 2008; and

3.5.4

otherwise than pursuant to paragraphs 3.5.1 to 3.5.3 above up to an aggregate

nominal amount of 251,247.19.

The Company does not have in issue any securities not representing share capital and
there are no outstanding convertible securities issued by the Company except:
3.6.1

the rights of Taglient, SOGL and Strand Hanson to capitalise fees as set out in
paragraphs 3.5.2, 10.1, 10.2 and 10.20 of this Part 5;

3.6.2

the rights of Capital Investment Trust as described in paragraph 10.4 of this

Part 5;

3.6.3

the options over 8,000,000 new Ordinary Shares held by Mr Abba Dasuki as
described in paragraph 10.6 of this Part 5;

3.6.4

the conditional warrant held by South Africa High Tech Energy Inc as described
in paragraph 10.10 of this Part 5;

3.6.5

the Renaissance Warrant, Strand Warrant, the Corvus Warrant and the
Toumazou Warrant;

3.6.6

the options over 50,000,000 new Ordinary Shares in aggregate granted to

Directors and Proposed Directors are set out in paragraph 11.2 of Part 5 of this
document; and

3.6.7

the options over 2,000,000 new Ordinary Shares in aggregate granted to Ian
Burton and John Kelsey-Fry as described in paragraph 10.11 of this Part 5.

3.7

The provisions CA 2006 confer on Shareholders rights of pre-emption in respect of the

allotment of equity securities and apply to the unissued share capital except to the
extent disapplied by the resolution referred to in paragraph 3.5.

3.8

The Ordinary Shares may be held in either uncertificated form under the CREST system
or in certificated form.

3.9

Except as disclosed in this paragraph, during the period covered by the financial
information referred to in paragraph 11 of Part 1 of this document: (i) there has been
no change in the amount of the issued share or loan capital of the Company; and (ii)
no commissions, discounts, brokerages or other special terms have been granted by the
Company in connection with the issue or sale of any share capital of the Company.

3.10

To the best of the Directors and Proposed Directors knowledge, no person directly or
indirectly, acting jointly, exercises or could exercise control over the Company.

3.11

Except as stated elsewhere in this Part 4, no share of the Company or any subsidiary is
under option or has been agreed conditionally or unconditionally to be put under
option. Neither the Company (nor any of its subsidiaries) hold any shares in the
Company.

3.12

On Admission, holders of the Existing Ordinary Shares will suffer a dilution of up to

49.01 in their interests in the Company.

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4.

Memorandum of association

The objects for which the Company was established are set out in clause 3 of its memorandum
of association and are to carry on business as a general commercial company.
5.

Articles of association

The rights attaching to the Ordinary Shares, as set out in the articles of association of the
Company, contain, amongst others, the following provisions:
Votes of members
5.1

Subject to any special terms as to voting or to which any shares may have been issued
or, no shares having been issued subject to any special terms, on a show of hands every
member who being an individual is present in person or, being a corporation is present
by a duly authorised representative, has one vote, and on a poll every member has one
vote for every share of which he is the holder.

5.2

Unless the Directors determine otherwise, a member of the Company is not entitled in
respect of any shares held by him to vote at any general meeting of the Company if any
amounts payable by him in respect of those shares have not been paid or if the member
has a holding of at least 0.25 per cent. of any class of shares of the Company and has
failed to comply with a notice under section 793 CA 2006.

Variation of rights
5.3

The Companys articles do not contain provisions relating to the variation of rights since
these matters are dealt with in section 630 CA 2006. If at any time the capital of the
Company is divided into different classes of shares, the rights attached to any class may
be varied or abrogated with the consent in writing of the holders of at least three
fourths in nominal value of that class or with the sanction of a special resolution passed
at a separate meeting of the holders of that class but not otherwise.

Transfer of shares
5.4

Subject to the provisions of the articles relating to CREST, all transfers of shares will be
effected in any usual form or in such other form as the Board approves and must be
signed by or on behalf of the transferor and, in the case of a partly paid share, by or
on behalf of the transferee. The transferor is deemed to remain the holder of the share
until the name of the transferee is entered in the register of members in respect of it.

5.5

The Directors may, in their absolute discretion and without assigning any reason, refuse
to register the transfer of a share in certificated form if it is not fully paid or if the
Company has a lien on it, or if it is not duly stamped, or if it is by a member who has a
holding of at least 0.25 per cent. of any class of shares of the Company and has failed
to comply with a notice under section 793 CA 2006. In exceptional circumstances
approved by the London Stock Exchange, the Directors may refuse to register any such
transfer, provided that their refusal does not disturb the market.

5.6

The articles of association contain no restrictions on the free transferability of fully paid
ordinary shares provided that the transfers are in favour of not more than four
transferees, the transfers are in respect of only one class of share and the provisions in
the articles of association, if any, relating to registration of transfers have been
complied with.

Payment of dividends
5.7

Subject to the provisions of CA 2006 and to any special rights attaching to any shares,
the Shareholders are to distribute amongst themselves the profits of the Company
according to the amounts paid up on the shares held by them, provided that no
91

dividend will be declared in excess of the amount recommended by the Directors. A

member will not be entitled to receive any dividend if he has a holding of at least 0.25
per cent. of any class of shares of the Company and has failed to comply with a notice
under section 793 CA 2006. Interim dividends may be paid if profits are available for
distribution and if the Directors so resolve.
Unclaimed dividends
5.8

Any dividend unclaimed after a period of 12 years from the date that it is due for
payment will, if the Board so resolves, be forfeited and will revert to the Company.

Untraced Shareholders
5.9

The Company may sell any share if, during a period of 12 years, at least three dividends
in respect of such shares have been paid, no cheque or warrant in respect of any such
dividend has been cashed and no communication has been received by the Company
from the relevant member. The Company must advertise its intention to sell any such
share in both a national daily newspaper and in a newspaper circulating in the area of
the last known address to which cheques or warrants were sent. Notice of the intention
to sell must also be given to the London Stock Exchange.

Return of capital
5.10

On a winding-up of the Company, the balance of the assets available for distribution
will, subject to any sanction required by CA 2006, be divided amongst the members.

Borrowing powers
5.11

Subject to the provisions of CA 2006, the Directors may exercise all the powers of the
Company to borrow money and to mortgage or charge its undertaking, property and
assets, including its uncalled or unpaid capital, and to issue debentures and other
securities and to give guarantees.

Directors
5.12

No shareholding qualification is required by a Director.

5.13

The Directors are entitled to fees (in addition to salaries) at the rate decided by them,
subject to an aggregate limit of 100,000 per annum or such additional sums as the
Company may by ordinary resolution determine. The Company may by ordinary
resolution also vote extra fees to the Directors which, unless otherwise directed by the
resolution by which it is voted, will be divided amongst the Directors as they agree, or
failing agreement, equally. The Directors are also entitled to be repaid all travelling,
hotel and other expenses incurred by them in connection with the business of the
Company.

5.14

At every annual general meeting, one third of the Directors who are subject to
retirement by rotation, or as near to it as may be, will retire from office. A retiring
Director is eligible for reappointment.

5.15

The Directors may from time to time appoint one or more of their body to be the holder
of an executive office on such terms as they think fit.

5.16

Except as provided in paragraphs 5.17 and 5.18 below, a Director may not vote or be
counted in the quorum present on any motion in regard to any contract, transaction,
arrangement or any other proposal in which he has any material interest, which
includes the interest of any person connected with him, otherwise than by virtue of his
interests in shares or debentures or other securities of or otherwise in or through the
Company. Subject to CA 2006, the Company may by ordinary resolution suspend or

92

relax this provision to any extent or ratify any transaction not duly authorised by reason
of a contravention of it.
5.17

In the absence of some other material interest than is indicated below, a Director is
entitled to vote and be counted in the quorum in respect of any resolution concerning
any of the following matters:
5.17.1 the giving of any security, guarantee or indemnity to him in respect of money
lent or obligations incurred by him or by any other person at the request of or
for the benefit of the Company or any of its subsidiaries;
5.17.2 the giving of any security, guarantee or indemnity to a third party in respect of
a debt or obligation of the Company or any of its subsidiaries for which he
himself has assumed responsibility in whole or in part under a guarantee or
indemnity or by the giving of security;
5.17.3 any proposal concerning an offer of shares or debentures or other securities of
or by the Company or any of its subsidiaries for subscription or purchase in
which offer he is or is to be interested as a participant in its underwriting or
sub-underwriting;
5.17.4 any contract, arrangement, transaction or other proposal concerning any other
company in which he is interested, provided that he is not the holder of or
beneficially interested in one per cent. or more of any class of the equity share
capital of such company, or of a third company through which his interest is
derived, or of the voting rights available to members of the relevant company,
any such interest being deemed to be a material interest, as provided in
paragraph 5.16 above, in all circumstances;
5.17.5 any contract, arrangement, transaction or other proposal concerning the
adoption, modification or operation of a superannuation fund or retirement,
death or disability benefits scheme under which he may benefit and which has
been approved by or is subject to and conditional upon approval by HM
Revenue & Customs;
5.17.6 any contract, arrangement, transaction or other proposal concerning the
adoption, modification or operation of an employee share scheme which
includes full time executive Directors of the Company and/or any subsidiary or
any arrangement for the benefit of employees of the Company or any of its
subsidiaries and which does not award to any Director any privilege or
advantage not generally accorded to the employees to whom such a scheme
relates; and
5.17.7 any contract, arrangement, transaction or proposal concerning insurance which
the Company proposed to maintain or purchase for the benefit of Directors or
for the benefit or persons including the Directors.

5.18

If any question arises at any meeting as to the materiality of a Directors interest or as

to the entitlement of any Director to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question must be referred to the
chairman of the meeting and his ruling in relation to any other Director will be final and
conclusive except in a case where the nature or extent of the interest of such Director
has not been fully disclosed.

5.19

The Directors may provide or pay pensions, annuities, gratuities and superannuation or
other allowances or benefits to any Director, ex-Director, employee or ex-employee of
the Company or any of its subsidiaries or any wife, widow, children and other relatives
and dependants of any such Director, ex-Director, employee or ex-employee.

93

CREST
5.20

The Directors may implement such arrangements as they think fit in order for any class
of shares to be held in uncertificated form and for title to those shares to be transferred
by means of a system such as CREST in accordance with the Uncertificated Securities
Regulations 2001 and the Company will not be required to issue a certificate to any
person holding such shares in uncertificated form.

Disclosure notice
5.21

The Company may by notice in writing require a person whom the Company knows or
has reasonable cause to believe to be or, at any time during the three years immediately
preceding the date on which the notice is issued, to have been interested in shares
comprised in the Companys relevant share capital:
5.21.1 to confirm that fact or (as the case may be) to indicate whether or not it is the
case; and
5.21.2 where he holds or has during that time held an interest in shares so comprised,
to give such further information as may be required in the notice.

General meetings
5.22

An annual general meeting must be called by at least 21 days notice. All other general
meetings must be called by at least 14 days notice.

5.23

Notices must be given in the manner stated in the articles to the members, other than
those who under the provisions of the articles or under the rights attached to the shares
held by them are not entitled to receive the notice, and to the auditors.

5.24

No business may be transacted at any general meeting unless a quorum is present which
will be constituted by two persons entitled to vote at the meeting each being a member
or a proxy for a member or a representative of a corporation which is a member. If
within half an hour from the time appointed for the meeting a quorum is not present,
the meeting, if convened on the requisition of, or by, members, will be dissolved.

5.25

At a general meeting a resolution put to the vote will be decided on a show of hands
unless, before or on the declaration of the show of hands, a poll is demanded by the
chairman or by at least five members present in person or by proxy and entitled to vote
or by a member or members entitled to vote and holding or representing by proxy at
least one tenth of the total voting rights of all the members having the right to vote
at the meeting. Unless a poll is demanded as above, a declaration by the chairman that
a resolution has been carried, or carried unanimously or by a particular majority, or
lost, or not carried by a particular majority, and an entry to that effect in the book
containing the minutes of the proceedings of general meetings of the Company is
conclusive evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against such resolution.

5.26

The instrument appointing a proxy must be in writing in any usual or common form,
or such other form as may be approved by the Directors, and will be signed by the
appointor or by his agent duly authorised in writing or if the appointor is a corporation,
must be either under its common seal or signed by an officer or agent so authorised.
The Directors may, but will not be bound to, require evidence of authority of such
officer or agent. An instrument of proxy need not be witnessed.

5.27

The proxy will be deemed to include the right to demand or join in demanding a poll
and generally to act at the meeting for the member giving the proxy.

5.28

The Directors may direct that members or proxies wishing to attend any general
meeting must submit to such searches or other security arrangements or restrictions as
94

the Directors consider appropriate in the circumstances and may, in their absolute
discretion, refuse entry to, or eject from, such general meeting any member or proxy
who fails to submit to such searches or otherwise to comply with such security
arrangements or restrictions.
Disclosure and Transparency Rules
5.29

A Shareholder is required pursuant to Disclosure and Transparency Rule 5 of the

Disclosure and Transparency Rules of the FSA, to notify the Company when he acquires
or disposes of a major proportion of the voting rights of the Company equal to or in
excess of 3 per cent. of the nominal value of that share capital.

6.

Squeeze out rights, sell out rights and the City Code

6.1

Section 979 CA 2006 provides that if, within certain time limits, an offer is made for
the share capital of the Company, the offeror is entitled to acquire compulsorily any
remaining shares if it has, by virtue of acceptances of the offer, acquired or
unconditionally contracted to acquire not less than 90 per cent. in value of the shares
to which the offer relates and in a case where the shares to which the offer relates are
voting shares, not less than 90 per cent. of the voting rights carried by those shares. The
offeror would effect the compulsory acquisition by sending a notice to outstanding
shareholders telling them that it will compulsorily acquire their shares and, six weeks
from the date of the notice, pay the consideration for the shares to the Company to
hold on trust for the outstanding shareholders. The consideration offered to
shareholders whose shares are compulsorily acquired under CA 2006 must, in general,
be the same as the consideration available under the takeover offer.

6.2

Section 983 CA 2006 permits a minority shareholder to require an offeror to acquire its
shares if the offeror has acquired or contracted to acquire shares in the Company which
amount to not less 90 per cent. in value of all the voting shares in the Company and
carry not less than 90 per cent. of voting rights. Certain time limits apply to this
entitlement. If a shareholder exercises its rights under these provisions, the offeror is
bound to acquire those shares on the terms of the offer or on such other terms as may
be agreed.

6.3

The Company is subject to the City Code. Accordingly, the Ordinary Shares are subject
to the rules regarding mandatory takeover offers set out in the City Code. Under Rule
9 of the City Code, when (i) a person acquires shares which, when taken together with
shares already held by him all persons acting in concert with him, carry 30 per cent. or
more of the voting rights of a company subject to the City Code; or (ii) any person who,
together with persons acting in concert with him, holds not less than 30 per cent. but
not more than 50 per cent. of the voting rights of the Company subject to the City Code
and such person, or any person acting in concert with him, acquires additional shares
which increases his percentage of the voting rights then, in either case, that person,
together with the persons acting in concert with him, is normally required to make a
general offer in cash, at the highest price paid by him, or any person acting in concert
with him, for shares in the Company within the preceding 12 months, for all the
remaining equity share capital of the Company.

7.

Taxation

Introduction
7.1

The information in this section is based on the Directors and Proposed Directors
understanding of United Kingdom current tax law and HM Revenue & Customs
published practice. The following should be regarded as a summary and should not be
construed as constituting advice. Prospective shareholders are strongly advised to take

95

their own independent tax advice but certain potential tax benefits are summarised
below in respect of an individual resident in the UK for tax purposes.
On issue, the Ordinary Shares will not be treated as either listed or quoted
securities for tax purposes. Provided that the Company remains one which does not
have any of its shares quoted on a recognised stock exchange (which for these purposes
does not include AIM) and assuming that the Company remains a trading company or
the holding company of a trading group for UK tax purposes, the Ordinary Shares
should continue to be treated as unquoted securities qualifying for certain reliefs from
UK taxation.
The following information is based upon the laws and practice currently in force in
the UK and may not apply to persons who do not hold their Ordinary Shares as
investments.
Capital Gains Tax (CGT)
7.2

Disposals
7.2.1

Changes were made to the rules relating to the holdings of shares from 6 April
1998 so that the pooling of shares (i.e. treating them as one asset) no longer
applies. Therefore, any disposal of shares is treated on a last in, first out basis
for the purposes of calculating gains which are chargeable to tax, subject to
rules dealing with same day purchases or acquisitions within 30 days of a
disposal.

CGT Gift Relief

7.2.2

If shares in an unquoted trading company or the holding company of a trading

group, are transferred, by an individual or by trustees other than at arms
length, the deemed capital gain can be held over (except in circumstances
where the shares are transferred to a trust of which the transferor is a
beneficiary), i.e. the CGT liability is postponed until a subsequent arms length
disposal by the transferee, who effectively inherits the transferors base cost.
The relief must be claimed jointly by both the transferor and the transferee
within five years and ten months of the end of the relevant tax year in which
the gift was made and the transferee must be resident or ordinarily resident in
the UK and remain so for six years. Where the shares have not qualified
throughout the period of ownership as business assets, then the amount of the
gain that can be held over will be restricted. CGT gift relief will not currently
apply since the Company is not a trading company but may apply once the
Acquisition has been completed. CGT gift relief is available in respect of shares
in an AIM company if that company is a trading company or the holding
company of a trading group.

Inheritance Tax (IHT)

7.3

Shares in qualifying trading companies or holding companies of a trading group can

attract 100 per cent. business property relief from IHT provided that the shares are held
for at least two years before a chargeable transfer for IHT purposes. As the Company
does not currently trade, business property relief will not be available but may apply
once the Acquisition has been completed. The shares would only qualify for business
property relief once they had been held for two years from the date the Company
became a trading company or the holding company of a trading group. Business
property relief applies to shares in an AIM company if that company is a trading
company or the holding company of a trading group. To the extent that the value of a
shareholding is attributable to assets owned by the Company, but not utilised for the
purposes of its trade, the value qualifying for business property relief will be restricted.

96

Income Tax
7.4

Taxation of Dividends
7.4.1

Under current UK tax legislation no tax is withheld from dividends paid by the
Company.

7.4.2

UK resident individual shareholders are treated as having received income of an

amount equal to the sum of the dividend and its associated tax credit, currently
10 per cent. of the gross amount of the dividend and the tax credit (i.e. the tax
credit will be one ninth of the dividend). The tax credit will effectively satisfy a
UK resident individual shareholders basic rate (but not higher rate) income tax
liability in respect of the dividend. UK resident individual shareholders who are
subject to tax at the higher rate (currently 40 per cent.) will have to account for
additional tax. The special rate of tax set for higher rate taxpayers who receive
dividends is 32.5 per cent of the gross dividend (including tax credit). After
taking account of the ten per cent. tax credit, such a taxpayer would have to
account for additional tax of 22.5 per cent. This is the equivalent of 25 per cent
of the net dividend received. From 6 April 2010, a taxpayer who is subject to the
new additional income tax rate of 50 per cent. will pay tax in respect of
dividends at the dividend additional rate of 42.5 per cent. After taking account
of the ten per cent. tax credit, such a taxpayer would have to account for
additional tax of 32.5 per cent. This is the equivalent of 36.11 per cent. of the
net dividend received. In determining what tax rates apply to a UK resident
individual shareholder, dividend income is treated as the top slice of income.

7.4.3

A UK resident (for tax purposes) corporate shareholder will generally not be

liable to UK corporation tax on any dividend received and will be entitled for
tax purposes to treat any such dividend as franked investment income.

Loss Relief
7.5

If a loss arises on the disposal of shares in a trading company, such shares being
originally acquired on a subscription for new shares, the loss may be relieved against
income of that year or the previous year (with priority for relief in the current year
where income of both years is utilised). Any loss remaining after claiming relief against
income, may be available for relief against capital gains in either the current or
subsequent years. The Directors and Proposed Directors believe that losses will not be
available for offset against income to holders of existing ordinary share as the Company
does not currently trade.

Stamp Duty and stamp duty reserve tax (SDRT)

7.6

Transfers or sales of Ordinary Shares (other than transfers for no consideration) will be
subject to ad valorem stamp duty (payable by the purchaser and generally at the rate
of 0.5 per cent. rounded up to the nearest 5) and an unconditional agreement to
transfer such shares, if not completed by a duly stamped stock transfer form within two
months of the day on which such agreement is made or becomes unconditional, will be
subject to SDRT (payable by the purchaser and generally at that rate). If, however,
within six years of the date of the agreement an instrument of transfer is executed
pursuant to the agreement and stamp duty is paid on that instrument, any liability to
SDRT will be cancelled or repaid.

8.

Substantial Shareholders

8.1

Except for the interests of the Directors and Proposed Directors, which are set out in
paragraph 9 of this Part 5 and those persons set out in this paragraph, the Directors and
Proposed Directors are not aware, at the date of this document, of any interest which

97

immediately following Admission would amount to three per cent. or more of the
Companys issued share capital:

Name

W B Nominees Limited1
Sirius Oil & Gas Limited (BVI)2
Taglient Oil Nigeria Limited
Cenkos Channel Islands Nominee1
Brewin Nominees (Channel Islands)3
Barclayshare Nominees Limited
Corporate Services (TD Waterhouse)4
1

2
3

Ordinary Shares
as at
13 October
2010

Percentage of
Existing
Ordinary Shares

Percentage of
Enlarged Share
Capital on
Admission

63,360,309
51,409,091
45,700,000
35,900,000
35,705,208
30,740,073
30,441,845

12.17
11.40
8.77
6.89
6.86
5.90
5.84

6.20
5.68
4.47
3.51
3.50
3.01
2.98

WB Nominees Limited and Cenkos Channel Islands Nominee hold 56,000,000 Ordinary Shares
for Corvus.
SOGL holds 10,545,455 Ordinary Shares for Corvus.
Brewin Nominees (Channel Islands) holds these Ordinary Shares for clients of Fulcrum
Administration (Dubai).
Corporate Services (TD Waterhouse) holds these Ordinary Shares for clients of Killik & Co.

8.2

No major holder of Ordinary Shares, either as listed above, or as set out in paragraph
9 of this Part 4, has voting rights different from other holders of Ordinary Shares.

8.3

No person has made a public takeover bid for the Companys issued share capital in the
financial period to 31 July 2009 or in the current financial period.

9.

Directors and Proposed Directors

9.1

The interests of the Directors, Proposed Directors, their immediate families, civil
partners (as defined in the Civil Partnership Act 2004) (if any), and persons connected
with them, within the meaning of sections 324 and 328 CA 1985, in the share capital
of the Company at the date of this document, all of which are beneficial, are:

Name

Babatunde Agboola
Toby Hayward
Billi Folahan
Michael Hirschfield
Olukayode Kuti
Graham Porter
Jack Pryde
1
2

3
4

Ordinary Shares

20,000,000
25,400,0001
Nil
14,300,0002
6,590,9093
12,083,332
22,000,0004

Percentage of
Existing
Ordinary Shares

Percentage of
Enlarged Share
Capital on
Admission

3.84
4.88
Nil
2.75
1.27
2.32
4.22

1.96
2.49
Nil
1.40
0.65
1.18
2.64

Of which 2,900,000 held through Barclayshare Nominees Limited.

Held personally and through W B Nominees Limited, Smith & Williamson Nominees Limited and
Kitwell Consultants Retirement Benefit Scheme.
Held through SOGL.
Held through Barclayshare Nominees Limited and includes 1,050,000 Ordinary Shares held by Jack
Prydes wife. In addition Mr Pryde will subscribe for 5,000,000 of the Placing Shares.

98

9.2

Except as disclosed in paragraphs 9.1 and 11.2, none of the Directors, the Proposed
Directors, nor any member of their respective immediate families including, for this
purpose, civil partners (as defined in the Civil Partnership Act 2004) (if any), nor any
person connected with them within the meaning of section 346 CA 1985, is interested
in the share capital of the Company, or in any related financial products referenced to
the Ordinary Shares.

9.3

There are no outstanding loans granted by any member of the Group to any Director
or Proposed Directors, nor has any guarantee been provided by any member of the
Group for their benefit.

9.4

The Company has entered into the following service agreements and letters of
appointment:
9.4.1

an agreement with Toby Hayward dated 13 October 2010, conditional upon

Admission, pursuant to which Mr Hayward is to be appointed as chief executive
officer of the Company. The Company is to pay Mr Hayward 75,000 per year,
monthly in arrears, payable with retrospective effect from 1 April 2010. The
appointment is terminable on 12 months notice on either side. No
compensation is payable for loss of office and the appointment may be
terminated immediately if, among other things, Mr Hayward is in material
breach of the terms of the appointment. The agreement replaces the letter of
appointment between the Company and Mr Hayward pursuant to which Mr
Hayward was entitled to a fee of 1,000 a month (which was increased to 3,000
a month with effect from January 2009);

9.4.2

an agreement with Mike Hirschfield dated 13 October 2010, conditional upon

Admission, pursuant to which Mr Hirschfield is to be appointed as finance
director of the Company. The Company is to pay Mr Hirschfield 75,000 per year,
monthly in arrears, payable with retrospective effect from 1 April 2010. The
appointment is terminable on 12 months notice on either side. No
compensation is payable for loss of office and the appointment may be
terminated immediately if, among other things, Mr Hirschfield is in material
breach of the terms of the appointment. The agreement replaces the letter of
appointment between the Company and Mr Hirschfield dated 23 July 2008
pursuant to which Mr Hirschfield was paid a fee of 1,000 a month. Mike
Hirschfield owns Kitwell Consultants Limited which, pursuant to a letter
agreement dated 7 November 2007, provides company secretary and other
administrative services to the Company for a fee of 1,000 per month. This
agreement is terminable on three months notice;

9.4.3

an agreement with Olukayode Kuti dated 13 October 2010, conditional upon

Admission, pursuant to which Mr Kuti is to be appointed as an executive
director of the Company responsible for maintenance of the Companys contacts
in Nigeria. The Company is to pay Mr Kuti 50,000 per year, monthly in arrears,
payable with retrospective effect from 1 April 2010. The appointment is
terminable on 12 months notice on either side. No compensation is payable
for loss of office and the appointment may be terminated immediately if,
among other things, Mr Kuti is in material breach of the terms of the
appointment. The agreement replaces the letter of appointment between the
Company and Mr Kuti dated 23 July 2008 pursuant to which Mr Kuti was
entitled to a fee of 1,000 a month (which was increased to 2,000 a month
with effect from October 2008);

9.4.4

an agreement with Billi Folahan dated 13 October 2010, conditional upon

Admission, pursuant to which Mr Folahan is to be appointed as technical
director of the Company. The Company is to pay Mr Folahan US$120,000 per
99

year, monthly in arrears. The appointment is terminable on 12 months notice

on either side. No compensation is payable for loss of office and the
appointment may be terminated immediately if, among other things, Mr
Folahan is in material breach of the terms of the appointment;
9.4.5

a letter of appointment with Graham Porter dated 15 November 2004, pursuant

to which Mr Porter was appointed as a non-executive director of the Company.
The Company pays Mr Porter a fee of 12,000 per year, payable monthly in
arrears. The appointment is terminable on three months notice on either side.
No compensation is payable for loss of office and the appointment may be
terminated immediately if, among other things, Mr Porter is in material breach
of the terms of the appointment;

9.4.6

a letter of appointment with Jack Pryde dated 13 October 2010, conditional

upon Admission, pursuant to which Mr Pryde is to be appointed as nonexecutive chairman of the Company. The Company is to pay Mr Pryde a fee of
30,000 per year, payable monthly in arrears. The appointment is for an initial
fixed term of six months from Admission and thereafter is terminable on three
months notice on either side. No compensation is payable for loss of office and
the appointment may be terminated immediately if, among other things, Mr
Pryde is in material breach of the terms of the appointment; and

9.4.7

a letter of appointment with Babatunde Agboola dated 23 July 2008, pursuant

to which Mr Agboola was appointed as non-executive chairman of the
Company. The Company pays Mr Agboola a fee of 12,000 per year, payable
monthly in arrears. The appointment is terminable on three months notice on
either side. No compensation is payable for loss of office and the appointment
may be terminated immediately if, among other things, Mr Agboola is in
material breach of the terms of the appointment. By a letter agreement dated
13 October 2010 the Company and Mr Agboola have agreed that, conditional
upon Admission, Mr Agboola will assume the role of non-executive deputy
chairman from Admission.

9.5

By an agreement dated 13 October 2010 the Directors and Proposed Directors have
agreed to suspend their salaries and fees if by 30 June 2011 the Company has not
received, from Del Sigma, proof of the flow of oil from the Ke Field.

9.6

The aggregate remuneration paid and benefits in kind granted to the Directors for the
period from 1 August 2008 to 31 July 2009, under the arrangements in force at the
date of this document, amount to 172,258. It is estimated that the aggregate
remuneration payable to the Directors and Proposed Directors from the date of
Admission to 31 December 2010 under arrangements that are in force and that will
come into effect on Completion will amount to 161,000.

9.7

There are no liquidated damages or other compensation payable by the Company upon
early termination of the contracts of the Directors or Proposed Directors. None of the
Directors or Proposed Directors has any commission or profit sharing arrangements
with the Company.

9.8

Except as provided for in paragraph 9.4 above, the total emoluments of the Directors
and Proposed Directors will not be varied as a result of the Proposals.

9.9

Except as disclosed in this paragraph 9, there are no existing or proposed service

contracts between the Company and any of the Directors or Proposed Directors which
are not terminable on less than 12 months notice, nor have any of their letters of
appointment or service contracts been amended in the six months prior to the date of
this document.

100

9.10

In addition to their directorships of the Company and its subsidiaries, the Directors and
Proposed Directors are or have been members of the administrative, management or
supervisory bodies or partners of the following companies or partnerships (which unless
otherwise stated are incorporated in the UK) within the five years prior to the
publication of this document:
Babatunde Agboola
Current
Dantose Energy Services Limited
Bolad Energy Company
RT5 Petroleum Limited
Past
Billi Folahan
Current
Past

Fieldspargroup Limited

Geotechnique International Nigeria Limited

Braf Toria Nigeria Limited
None

Toby Hayward
Current
Afren plc
Severfield-Rowen Plc
THC Consulting Limited
Past

Ecast Limited
International Seafood Products PLC *
Ocean Supplies Limited *
Paradisii Limited *

Michael Hirschfield
Current
Green River Resources Inc (Cayman Islands)
Kitwell Consultants Limited
Tri-Star Resources Plc
Tri-Star Trading Limited
Past

Assael Rankin Properties Limited

BD Nominees Limited
Corone Limited
Corvus Capital Inc (BVI) *
Kitwell Management Limited
Roeford Properties plc
Roeford Real Estate Limited

Olukayode Kuti
Current
SRS Petroleum Nigeria Limited (Nigeria)
Sirius Oil & Gas Limited (BVI)
Past

Huxton Capital Limited (BVI)

Graham Porter
Current
GL Porter Limited
Mentum Inc. (Cayman Islands)

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Past

Corvus Capital Inc (BVI) *

Fedmet Limited
Futuras Limited
Global Structured Finance Inc (Cayman Islands)
GTC Indpendent Brokers Limited
Tambelan Company Limited (BVI)
Toumaz Limited (Cayman Islands)

Jack Pryde
Current

None

Past

Ecast Limited
International Seafood Products Limited *
Paradisii Limited *
Pro-Market Global Limited

* see disclosure in paragraph 9.11 below.

9.11

Toby Hayward was appointed a director of Paradisii Limited on 6 October 1999 and
Jack Pryde was appointed as a director on 10 October 1999. A liquidator was appointed
on 22 February 2006 and the company was dissolved on 2 February 2008. There was a
deficit to creditors of 133,629.
Toby Hayward was appointed a director of International Seafood Products Plc on
29 March 1999 and Jack Pryde was appointed as a director on 13 October 1999. Toby
Hayward was appointed as a director of Ocean Supplies Limited on 13 October 1999 (a
wholly owned subsidiary of International Seafood Products Plc). An administrative
receiver was appointed on 12 July 2000 to both companies. International Seafood
Products Plc was dissolved on 23 November 2004. There was a deficit to creditors of
587. Ocean Supplies Limited was dissolved on 1 May 2007. There was a deficit to
creditors of 1,168,785.
Mike Hirschfield and Graham Porter were directors of Corvus Capital Inc which went
into members voluntary solvent liquidation in December 2008 after distributing the
majority of its assets to its shareholders.

9.12

Except as set out in paragraph 9.11 above, no Director or Proposed Director has:
9.12.1 had any convictions in relation to fraudulent offences or unspent convictions in
relation to indictable offences;
9.12.2 had a bankruptcy order made against him or entered into an individual
voluntary arrangement;
9.12.3 been a director of any company or been a member of the administrative,
management or supervisory body of an issuer or a senior manager of an issuer
which has been placed in receivership, compulsory liquidation, creditors
voluntary liquidation, administration, or company voluntary arrangement or
which entered into any composition or arrangement with its creditors generally
or any class of its creditors whilst he was acting in that capacity for that
company or within the 12 months after he ceased to so act;
9.12.4 been a partner in any partnership placed into compulsory liquidation,
administration or partnership voluntary arrangement where such director was
a partner at the time of or within the 12 months preceding such event;

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9.12.5 been subject to receivership in respect of any asset of such Director or of a

partnership of which the Director was a partner at the time of or within 12
months preceding such event; or
9.12.6 been subject to any official public criticisms by any statutory or regulatory
authority (including designated professional bodies) nor has such Director been
disqualified by a court from acting as a director of a company or from acting as
a member of the administrative, management or supervisory bodies of an issuer
or from acting in the management or conduct of the affairs of any issuer.
9.13

Except as set out in paragraph 9.4.5 of this Part 5, no Director or Proposed Director has
been interested in any transaction with the Company which was unusual in its nature
or conditions or significant to the business of the Company during the current financial
year which remains outstanding or unperformed.

9.14

In the case of those Directors and the Proposed Directors who have roles as directors of
companies which are not a part of the Group, although there are no current conflicts
of interest, it is possible that the fiduciary duties owed by those persons to companies
of which they are directors from time to time may give rise to conflicts of interest with
the duties owed to the Group. Except as mentioned above, there are no potential
conflicts of interest between the duties owed by the Directors and Proposed Directors
to the Company and their private duties or duties to third parties.

9.15

Except for the Directors and Proposed Directors, the Board does not believe that there
are any other senior managers who are relevant in establishing that the Company has
the appropriate expertise and experience for the management of the Companys
business.

9.16

The Company has not employed employees during the financial years ending 31 July
2008 and 31 July 2009. The Company had an average of one employee during the
financial year ending 31 July 2007.

10.

Material contracts

The following contracts have been entered into by the Company in the two years preceding
the date of this document and are or may be material:
Agreements relating to investment and trading
10.1

an agreement dated 23 July 2008 between the Company and Taglient Oil Nigeria
Limited (Taglient) pursuant to which Taglient agreed, among other things, to use all its
reasonable efforts to seek out opportunities for the Company to acquire interests in oil
and gas fields in Nigeria. Taglient agreed to provide its services exclusively to the
Company. Taglient was paid a fee of 114,250 upon the agreement ceasing to be
conditional and a further 153,250 is due upon and subject to the Company completing
an oil and gas transaction which constitutes a reverse takeover under the AIM Rules.
The agreement permits the fee to be capitalised and settled in Ordinary Shares at 0.25p
per share (which at the date the agreement was entered into represented a premium
of 298 per cent. to the then net assets of the Company). This will result in a further
61,300,000 new Ordinary Shares being issued to Taglient on Admission;

10.2

an agreement dated 23 July 2008 between the Company and Sirius Oil & Gas Limited
(SOGL). SOGL is a British Virgin Islands private company in which Corvus Capital Limited
has an 18.2 per cent. shareholding and in which Mr Kuti (a director of the Company)
holds 11.4 per cent. Under this agreement, SOGL agreed, among other things, to use
all its reasonable efforts to seek out opportunities for the Company to acquire interests
in oil and gas fields in Nigeria, to conduct initial due diligence on potential acquisition
targets and to assist in the raising of funds. SOGL was paid a fee of 145,000 upon the
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agreement ceasing to be conditional, leaving a balance of 130,000 due on Admission.

The agreement permits the fee to be capitalised and settled in Ordinary Shares at 0.25p
per share (which at the date the agreement was entered into represented a premium
of 298 per cent. to the then net assets of the Company). This will result in a further
52,000,000 new Ordinary Shares being issued to SOGL on Admission;
10.3

on 5 December 2008, the Company and RT5 Petroleum Limited (RT5) entered into heads
of agreement which outlines the framework of the joint venture partnership
agreement between the two parties. The interest is a marginal field opportunity with
Chevron Nigeria Limited (Chevron). The Company will act as financial partner to the
venture and will provide 100 per cent. of the funding (including Chevrons equity), the
terms of which will be 3.5 per cent. above the UK base rate. The interest rate chargeable
to RT5 will not exceed a maximum of 8.5 per cent. There will be a preferential cash
flow of 80/20 in favour of the Company until the initial capital investment loan is paid
off, after which there will be an allocation based on the ratio of equity. RT5 will act as
technical partner to the venture, providing technical resources, acting as operator of
the field and managing interface and community issues. The equity participation in the
venture will be split 42.86 per cent. (Company) and 57.14 per cent. (RT5). The parties will
set up an operating committee to manage the opportunity and a comprehensive joint
venture agreement will be executed by the parties in due course. The parties will enter
into a technical partnership agreement which will run for an initial term of 12 months
and if satisfactory to both parties will continue for the life of the opportunities;

10.4

a funding agreement dated 25 August 2009 between the Company and CapInvest
under which CapInvest agreed to provide or procure at least US$80 million of debt
funding for the Companys first marginal field opportunity for which CapInvest will
receive a fixed fee of 1.573 million which will be settled through the issue of
65,000,000 new Ordinary Shares (at a price of 2.42p per share, the closing share price
as at 19 August 2009, the latest practical date prior to agreeing the terms of the funding
agreement). By agreements dated 13 October 2010 between the Company and
CapInvest and between EMMEF and the Company which are conditional on the
Resolutions being passed, the funding agreement was replaced by an agreement on
substantially the same terms except that EMMEF will be issued with the fee shares.
EMMEF has agreed to a 12 month lock in of those shares from Admission, such lock in
to fall away on drawdown of the EMMEF Facility Agreement, and to be replaced by an
orderly market restriction for the same period;

10.5

a licence granted by the DPR with effect from 30 September 2009 to permit the import
by the Companys subsidiary Sirius Taglient Petro Limited of refined oil products into
Nigeria. The licence permits the import of up to 10,000 metric tonnes per shipment of
petroleum oil product and is renewed on a quarterly basis for a nominal fee;

10.6

an option agreement between the Company and Abba Dasuki dated 5 October 2009
under which Mr Dasuki was appointed as a consultant to the Company to advise on
the Companys relationships with the government, emirates and caliphates of Nigeria.
In consideration of entering into the agreement, Mr Dasuki was granted options over
(i) 5,000,000 new Ordinary Shares at an exercise price of 5.3p per share (being the
average closing price for an Ordinary Share over the five trading days prior to the grant
of the option) and (ii) 3,000,000 new Ordinary Shares at a price per share equal to the
closing price on the day before the Company announced that it had secured a marginal
field (this price is 9p per share based on the closing price of an Ordinary Share on AIM
on 19 February 2010. The options are exercisable from the date of the Transaction until
the fifth anniversary of that date.

10.7

on 26 November 2008, the Company and Bolad Energy Company (Bolad) entered into
heads of agreement which outlines the framework of the joint venture partnership
agreement between the two parties. The interest is a marginal field opportunity with
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Mobil Producing Nigeria Unlimited (Mobil). The Company will act as financial partner
to the venture and will provide 100 per cent. of the funding (including Mobils equity),
the terms of which will be 3.5 per cent. above the UK base rate. The interest rate
chargeable to Bolad will not exceed a maximum of 8.5 per cent. There will be a
preferential cash flow of 80/20 in favour of the Company until the initial capital
investment loan is paid off, after which there will be an allocation based on the ratio
of equity. Bolad will act as technical partner to the venture, providing technical
resources, acting as operator of the field and managing interface and community issues.
The equity participation in the venture will be split 42.86 per cent. (Company) and 57.14
per cent. (Bolad). The parties will set up an operating committee to manage the
opportunity and a comprehensive joint venture agreement will be executed by the
parties in due course. The parties will enter into a technical partnership agreement
which will run for an initial term of 12 months and if satisfactory to both parties will
continue for the life of the opportunities;
10.8

on 2 November 2009, the Company and Dajo Oil (Dajo) entered into heads of
agreement which outlines the framework of the joint venture partnership agreement
between the two parties. The interest is a marginal field opportunity with Shell
Petroleum Development Company (Shell). The Company will act as financial partner to
the venture and will provide 100 per cent. of the funding. The maximum interest rate
chargeable to Dajo will be 3.5 per cent. above the London Interbank Offered Rate
(LIBOR) of any invested amount. There will be a preferential cash flow of 80/20 in favour
of the Company until the initial capital investment loan is paid off, after which there
will be an allocation based on the ratio of equity. No farm-in fee is to be paid. Dajo will
act as technical partner to the venture, providing technical resources, acting as operator
of the field and managing interface and community issues. Dajo will also be responsible
for administration and accounting on the venture. In terms of equity participation in
the venture, the Company will have a 40 per cent. legal interest with an economic
interest of 40 per cent. and Dajo will have a 60 per cent. legal interest with an economic
interest of 60 per cent. The parties will set up a joint management committee to
manage the opportunity, the procurement process and operational activities. A
comprehensive joint venture agreement will be executed by the parties in due course;

10.9

on 17 November 2009, the Company and Frontier Oil and Gas (Frontier) entered into
heads of agreement which outlines the framework of the joint venture partnership
agreement between the two parties. The interest is a marginal field opportunity with
Shell Petroleum Development Company (Shell) and other mutually agreed marginal
field opportunities. The heads of agreement excludes the Frontier Oil Limited Uquo
field in OML/13 onshore Nigeria. The Company will act as financial partner to the
venture and will provide 100 per cent. of the funding. The interest charged to the
project will be based on the interest finance cost(s) incurred by the Company subject to
approval by Frontier. There will be a preferential cash flow of 80/20 in favour of the
Company until the initial capital investment loan is paid off, after which there will be
an allocation based on the ratio of the agreed economic interest. Any pre-operational
expenses related to the scope of interest will be paid based on fees, charges or any
other cost levied to or incurred by Frontier in securing the asset(s). No cost(s) will be
borne by Frontier on a sole risk basis. Frontier will act as technical partner to the
venture, providing technical and management resources, acting as operator of the field
and managing interface issues and the approval process. Frontier will also be
responsible for managing community and health security, safety and environmental
issues and administration and accounting on the venture. In terms of equity
participation in the venture, the Company will have a 40 per cent. Participating Interest
with an economic interest of 40 per cent. and Frontier will have a 60 per cent.
Participating Interest with an economic interest of 60 per cent. The parties will set up
a joint management committee to manage the opportunity, the procurement process
and operational activities. A comprehensive joint venture agreement will be executed
by the parties in due course and will supersede the heads of agreement;
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10.10 a consultancy services and warrant agreement dated 16 February 2010 between the
Company, South Africa Hi-Tech Energy Consultancy Inc (SAHT) and Mr Wong Fan Woon
pursuant to which SAHT has agreed to procure the services of Mr Woon and Dr Vikrom
Koompirochana to use all reasonable endeavours to assist the Company in acquiring oil
and gas assets with a valuation of not less than US$500 million. In consideration of
SAHTs services to the Company, SAHT has been issued with a conditional warrant to
subscribe for up to 80,000,000 new Ordinary Shares at 7.125p per share, being the
closing middle market price for an Ordinary Share on AIM on 11 February 2010. It is a
condition of exercise of the warrant that the Company completes the acquisition of an
oil and gas asset with a value of not less than US$500 million by 31 December 2011.
Subject to satisfaction of that condition, the warrant is then exercisable within five
years of date of grant;
10.11 on 13 October 2010 the Company entered into identical consultancy agreements with
each of Ian Burton and John Kelsey-Fry (Consultants), terminating either (i) on not less
than 14 days notice (expiring no earlier than the third anniversary of Admission), or (ii)
on a change of control of the Company. The Consultants will be responsible in assisting
the Group to develop written policies and procedures regarding anti-corruption and,
in particular, a policy consistent with the requirements of the Bribery Act 2010 and any
regulatory changes. This will involve providing training for directors, employees,
consultants and business partners on such policies and procedures. In consideration for
providing their services, each Consultant will be paid a fee of 30,000 per annum plus
VAT (if applicable), payable either on the third anniversary of Admission or on
occurrence of a change of control of the Company. The Consultants will also be
reimbursed all reasonable and proper expenses. The Consultants are responsible for
declaring and paying any tax liability arising out of their performance of services to
the Company. The Consultants may not assign or transfer their obligations to provide
such services to any other party. The Consultants have each been granted options over
1,000,000 Ordinary Shares each at the Placing Price per share, under the share option
scheme described in paragraph 11 of Part 5 of this document;
10.12 a consultancy agreement between the Company and Corvus dated 13 October 2010,
which is conditional on Admission, pursuant to which, Corvus agreed to provide
consultancy services to the Company, in particular in connection with acquisitions and
fundraising. The Company has agreed to pay Corvus a fee of 6,250 per month with
retrospective effect from 1 April 2010, payable monthly in arrears, and to grant the
warrant referred to in the following paragraph. The agreement is terminable on three
months notice on either side;
10.13 on 13 October 2010, conditional on Admission, the Company entered into a warrant
agreement with Corvus pursuant to which the Company issued warrants over
10,000,000 new Ordinary Shares at an exercise price of the Placing Price. The warrants
are exercisable between the third and tenth anniversary of Admission, or earlier on a
change of control of the Company;
10.14 a consultancy agreement dated 13 October 2010, conditional on Admission, between
the Company and Professor Christofer Toumazou under which Professor Toumazou
agrees to provide his consultancy services to the Company. In particular, he is engaged
to provide introductory and liaison services with regards to (a) oil and gas geologists at
Imperial Colleges School of Mines, London and (b) oil and gas investors and industry
contracts in Asia. The Company will pay 1,000 per month for an initial six months term
and thereafter the agreement may be terminated on one months notice on either side.
Professor Toumazou will also be issued warrants under the terms of a warrant
agreement between the Company and Professor Toumazou over 5,000,000 New
Ordinary Shares at an excercise price of the Placing Price and otherwise on the same
terms as the Corvus Warrant;

106

10.15 an agreement dated 13 October 2010, conditional on Admission, between the Company
and CVS Management Limited (CVS) pursuant to which CVS provides registered office
services, meeting rooms, office space, secretarial assistance and management
accounting services to the Company. CVS is paid 14,800 per month for the facilities
and 6,800 per month for the accounting services. The agreement is terminable on one
months notice on either side;
10.16 a facility agreement between the Company and EMMEF dated 13 October 2010
pursuant to which EMMEF has agreed to lend the Company up to US$80,000,000 subject
to the satisfaction of certain conditions. Of this sum, US$25,000,000 will be available for
drawdown after (i) the Company has established that the Ke Field has probable and
proved reserves of not less than five million of barrels of oil and (ii) a successful flow test
to prove that the well can flow 2,000 or more barrels of oil per day over a three day
period. This initial drawdown is to be used in a manner satisfactory to the Lender and
subject to the latters approval, provided that such approval is not to be unreasonably
withheld, for the purposes of (a) constructing a pipe to link the Ke Field to the Shell
Awoba terminal and/or (b) the drilling of the Ke-1 well on the Ke Field, the drilling of
additional wells in the Ke Field or the drilling of a well on another field in a different
block from the Ke Field but within the Niger Delta Field and of similar or better
geological and economic characteristics as the Ke Field and the construction of
infrastructure to export such resources. The balance of the facility, US$55,000,000, will
be available for drawdown in the lenders absolute discretion. All drawdowns are
subject to the satisfaction of conditions precedent including, among other things, the
delivery of a legal opinion from a Nigerian lawyer concerning the Companys interest
in the Ke Field and the granting of security by both the Company and SRS Petroleum
Nigeria Limited. Such security comprises a debenture over the assets and undertaking
of the Company, a charge over the Companys shares in SRS Petroleum Nigeria Limited,
a charge over the receivables account of the Company and an assignment of the
Companys interest in the JOA and other project agreements. The initial drawdown is
also subject to additional conditions which are that (a) the anticipated first year net
annual US$ dollar yield from sales production from the Ke Field based on a 320 day
linear projection of a three day flow test is not less than US$30,000,000 (thirty million
Dollars), (b) that the spot oil price (as determined by the CBOE as shown on Bloomberg)
is above US$50 (fifty Dollars) per barrel in the period of 30 days before the proposed
drawdown date, (c) the Ke Field generating revenue for the Borrower, (d) the Dow
Jones Industrial Average is above 7,500 in the period between the signing of the
EMMEF Facility Agreement and the proposed drawdown date and (e) there being no
undemocratic change of Government in Nigeria. The proceeds of the 55,000,000
drawdown, if provided may only be used for the drilling of additional wells in the Ke
Field and/or the drilling of a well on another field in a different block from the Ke Field
but within the Niger Delta Field and of similar or better geological characteristics,
potential reserves and expected economic returns as the Ke Field and in order to prove
that the field has economically recoverable hydrocarbon resources and the construction
of such infrastructure to export such resources. EMMEF has the right (at its sole
discretion) to waive any one or more of the requirements to a draw down. Interest is
payable quarterly at the rate of ten per cent. per year. Sums borrowed under the
agreement together with rolled up interest are repayable three years after the date of
the initial drawdown. The Company will pay a facility fee to EMMEF of five per cent of
the total facility payable being US$4,000,000 on initial drawdown. The Company has
given warranties and representations typical of a facility agreement of this size and
nature. The agreement is terminable for, among other reasons, insolvency of the
Company, breach by the Company, non-compliance with laws and agreements and
breach of warranty or representation by the Company. Upon default the loan and
accrued interest becomes repayable on demand. The Company has agreed not to grant
other security over its assets subject to certain limited exceptions;

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Agreements relating to the Acquisition

10.17 the Joint Operating Agreement described in Part 4 of this document;
10.18 a letter agreement dated 28 September 2010 between the Company and Del Sigma
confirming that the JOA will not come into effect if the Renewal is not granted and
confirming that if the DPR does not approve the transfer of the 40 per cent.
Participating Interest to the Company, Del Sigma will hold that interest on trust for the
Company on the terms of the JOA, provided that the Company continues to comply
with the terms of the JOA. The agreement also confirms that bank accounts operated
for the purpose of the joint venture will be joint accounts in banks based outside
Nigeria to which representatives from both parties will be signatories and that both
such representatives must authorise payments from the accounts;
Agreements relating to AIM, Admission and the Placing
10.19 on 13 October 2010, the Company and Strand Hanson entered into a nominated adviser
and broker agreement. Under this agreement Strand Hanson receives an annual
retainer 45,000. The Company agreed to comply with its legal obligations and those
of AIM and the London Stock Exchange and to consult and discuss with Strand Hanson
all of its announcements and statements and to provide Strand Hanson with any
information which Strand Hanson believes is necessary to enable it to carry out its
obligations to the Company or the London Stock Exchange as nominated adviser;
10.20 on 16 July 2010, the Company and Strand Hanson entered into an engagement letter
in consideration of its services in connection with Admission, acting as agent for the
Company in the Placing and the transactions contemplated by this document. On
Admission Strand Hanson will receive a fee of 600,000 of which 325,000 will be
capitalised by the allotment and issue of new Ordinary Shares at the Placing Price;
10.21 an engagement letter dated 13 September 2010 between Renaissance and the
Company under which Renaissance agreed to act as manager and bookrunner in
connection with the Placing. On Admission, the Company will pay Renaissance a fee
equal to five per cent. of the gross Placing proceeds raised by Renaissance and grant it
the Renaissance Warrant;
10.22 an engagement letter dated 13 October 2010 between Renaissance and the Company
under which Renaissance agreed to act as the Companys broker for a fee of 50,000 per
year payable in half yearly instalments. The appointment is terminable on 30 days
notice on either side such notice to expire no earlier than the first anniversary of the
agreement;
10.23 on 13 October 2010, the Placing Agreement was entered into between the Company, the
Directors, Proposed Directors, Renaissance and Strand Hanson pursuant to which
Renaissance (as Sole Bookrunner) agreed to use its reasonable endeavours to place the
Placing Shares and Strand Hanson agrees to use reasonable endeavours to procure
Admission. The Placing Agreement provides that, conditional upon Admission,
Renaissance and Strand Hanson will be paid the fees in the engagement letters referred
to in paragraphs 10.20 and 10.21 above. The Company has agreed to pay all other costs
and expenses relating to the Acquisition and the application for Admission. The Placing
Agreement is conditional upon, amongst other things, the Renewal being granted and
Admission having occurred on or before 3 November 2010 or such later as the parties
agree but not later than 31 December 2010. The Placing Agreement contains certain
warranties from the Company, Directors and Proposed Directors and an indemnity by the
Company in favour of Renaissance and Strand Hanson. It also contains provisions
entitling Renaissance and Strand Hanson to terminate the agreement prior to Admission
if, among other things, a breach of any of the warranties occurs or on the occurrence of
an event fundamentally and adversely affecting the position of the Company;
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10.24 on 13 October 2010 each of the Directors and Proposed Directors entered into an
agreement with Renaissance, Strand Hanson and the Company pursuant to which they
agreed not to dispose of any shares in the capital of the Company for a period of 12
months from Admission, other than in the event of an intervening court order or
receipt of a takeover offer relating to the Companys share capital from an unconnected
third party offeror. The Directors and Proposed Directors also agreed that for a further
period of 12 months, they will only dispose of their interest in Ordinary Shares with
the consent of the Companys nominated adviser from time to time;
10.25 on 13 October 2010 Corvus entered into an agreement with Renaissance, Strand Hanson
and the Company pursuant to which it agreed not to dispose of any shares in the capital
of the Company for a period of 12 months from Admission without the consent of the
Companys nominated adviser from time to time, such consent not to be unreasonably
withheld. Further, subject to informing Strand Hanson, Corvus may pledge its shares as
security;
10.26 a warrant agreement dated 13 October 2010, conditional on Admission, between the
Company and Strand Hanson Securities Limited pursuant to which the Company issued
warrants over 8,000,000 Ordinary Shares at an exercise price per share of the Placing
Price. The warrants are exercisable for a period of five years from Admission;
10.27 a warrant agreement dated 13 October 2010, conditional on Admission, between the
Company and Renaissance Securities (Cyprus) Limited pursuant to which the Company
issued warrants over such number of Ordinary Shares as is equal to five per cent. of the
Placing Shares placed by Renaissance, at an exercise price per share of the Placing Price.
The warrants are exercisable for a period of five years from Admission;
10.28 irrevocable undertakings in favour of the Company relating to in aggregate
268,568,736 Ordinary Shares representing 51.57 per cent. of the current issued share
capital of the Company in which certain shareholders have irrevocably undertaken to
vote in favour of all of the resolutions at the General Meeting;
Loan arrangements
10.29 a convertible loan agreement dated 5 October 2010 between the Company as borrower
and Adelphi Holdings Limited as lender pursuant to which the Company borrowed
US$100,000 from the lender. On Admission, the loan and accrued interest of US$50,000
will be converted into Ordinary Shares at the Placing Price. If the loan (together with
the accrued interest) is not converted it will be repayable by 30 June 2011; and
10.30 by a letter agreement dated 7 October 2010 the Company paid US$100,000 to Del
Sigma as an advance of payments due under the JOA.
Related party transactions
10.31 Details of related party transactions (which for these purposes are those set out in the
Standards adopted according to the Regulation (EC) No 1606/2002) entered into by the
Company during the period covered by the historical financial information and up to
the date of this document are contained in notes 20, 11 and 11 to the financial
statements for the years ended 31 July 2007, 2008 and 2009, respectively. The annual
reports and financial statements are available from the Companys website at
www.siriuspetroleum.com.
11.

Share option scheme

11.1

The Company adopted an employee share option scheme on 11 October 2010. For UK
tax purposes the scheme is an unapproved scheme.

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11.2

The Company has granted options under the scheme over 50,000,000 Ordinary Shares
representing 4.90 per cent. of the Enlarged Share Capital of which the following grants
have been made to the Directors and Proposed Directors:

Name

Babatunde Agboola
Billi Folahan
Toby Hayward
Mike Hirschfield
Olukayode Kuti
Graham Porter
Jack Pryde
11.3

Ordinary Shares
under option

Exercise price

5,000,000
2,000,000
15,000,000
10,000,000
3,000,000
10,000,000
5,000,000

5 pence
5 pence
5 pence
5 pence
5 pence
5 pence
5 pence

A summary of the rules of the scheme is set out below.

Grant of options
11.4

Grant of an option may be renounced by the grantee within 30 days. No option can be
transferred, assigned or charged. No amount is payable on grant of an option.

Exercise of options
11.5

Options may be exercised in whole or part in accordance with the rules and any
objective exercise conditions imposed by the Company. Earlier exercise may be
permitted notwithstanding that any performance conditions may not been met in the
event of death of the optionholder (where exercise is permitted by his personal
representatives for 12 months) or earlier if determined by the Company. For persons
who leave the employment of the Group by reason of injury, disability, redundancy
or retirement, options may be exercised up to 90 days after their leaving date to the
extent that they have vested. Options will lapse immediately where their
employment/consultancy terminates for others reasons.

11.6

Where the grantee becomes bankrupt or otherwise deprived of legal or beneficial

ownership of the option, the option will lapse.

Takeovers
11.7

The grantee will be notified of any bid and may exercise any options that have vested
within 42 days of an offer becoming unconditional, after which period the option will
lapse.

Liquidation
11.8

The Board must immediately notify the grantee and options may be exercised to the
extent they have already vested at the time notice is given or would ordinarily be due
to vest in the period between the date on which notice is given and the passing of any
resolution for the winding-up of the Company. The shares will be deemed to have been
issued prior to the passing of such a resolution.

Adjustment of options
11.9

In the event of a reorganisation of the Company, the number of shares subject to option
and the exercise price may be adjusted as the Company may determine and may be
confirmed to be reasonable by the Companys auditors. This may be retrospective if
relevant to an already exercised option.

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Costs
11.10 Costs of administration of the scheme are to be borne by the Company.
Termination
11.11 If the scheme is terminated the existing options will remain in full force. The scheme is
not intended to form any contract of employment and individuals who participate will
not have any rights to damages for any loss, or potential loss of benefit, in the event
of termination of office.
12.

Working capital

Taking into account the net proceeds of the Placing, the Company, the Directors and Proposed
Directors are of the opinion, having made due and careful enquiry, that the Group will have
sufficient working capital for its present requirements, that is, for at least 12 months from the
date of Admission.
13.

Litigation

No Group Company is involved nor has been involved in any governmental, legal or arbitration
proceedings in the previous twelve months which may have or have had in the recent past a
significant effect on any Group Companys financial position or profitability and, so far as the
Directors and Proposed Directors are aware, there are no such proceedings pending or
threatened against any Group Company.
14.

Intellectual property

Except as set out in this document the Group is not dependent on any patents, licences,
industrial, commercial or financial contracts or new manufacturing processes which have a
material effect on the Groups business or profitability.
15.

Premises

15.1

The Company does not own any premises but has permission to use serviced offices and
meeting room space at its registered office address for a monthly fee of 14,800.

15.2

Sirius Taglient Petro Limited leases office premises in Lagos from Chief Chukwuemeka.
The lease is for a three year term from 15 February 2009 to 14 February 2012. Sirius
Taglient Petro Limited paid N17,250,000 (72,333) in advance for the full term.

16.

Significant changes

Except for the execution of the Acquisition there has been no significant change in the
financial or trading position of the Company since 30 June 2010, the date to which the most
recent financial information is available.
17.

General

17.1

No exceptional factors have influenced the Companys activities.

17.2

Except as disclosed in this document, there have been no significant authorised or

contracted capital commitments at the date of publication of this document.

17.3

The expenses of the Acquisition, Placing and Admission are estimated at 1,508,829
plus VAT and are payable by the Company.

17.4

Except as stated in this document and for the advisers named on page 10 of this
document and trade suppliers, no person has received, directly or indirectly, from the
Company within the 12 months preceding the date of this document or has entered

111

into any contractual arrangements to receive, directly or indirectly, from the Company
on or after Admission, fees totalling 10,000 or more or securities in the Company with
a value of 10,000 or more calculated by reference to the Placing Price or any other
benefit with a value of 10,000 or more at the date of Admission.
17.5

Strand Hanson has given and not withdrawn its written consent to the issue of this
document with references to its name in the form and context in which it appears.

17.6

Renaissance has given and not withdrawn its written consent to the issue of this
document with references to its name in the form and context in which it appears.

17.7

Degeconek Nigeria Limited has given and not withdrawn its written consent to the
issue of this document with the inclusion in it of its report and references to it and to
its name in the form and context in which they respectively appear.

17.8

Where information contained in this document has been sourced from a third party, the
Company confirms that such information has been accurately reproduced and, so far as
the Company is aware and is able to ascertain from the information published by that
third party, no facts have been omitted which would render the reproduced
information inaccurate or misleading.

17.9

The Companys accounting reference date is 31 December (the current year having been
extended from 31 July).

18.

Copies of this document

Copies of this document will be available to the public free of charge at the offices of Strand
Hanson at 26 Mount Row, London, W1K 3SQ during normal business hours on any weekday
(other than Saturdays and public holidays), until one month following the date of Admission.
13 October 2010

112

APPENDIX 1
UNAUDITED INTERIM FINANCIAL INFORMATION ON THE COMPANY
SECTION A Interim Results for the six month period ended 31 January 2010
Introduction and update
The Board is pleased to report that it continues to make steady progress in the development
of the Companys core strategy to build an oil and gas based business and has established a
framework from which Sirius can pursue its strategy.
To date this framework consists of the core agreement with Taglient Oil Nigeria Limited
supplemented by strategic partnership agreements with Nigerian based businesses Bolad
Energy Company announced by Sirius on 4 December 2008, RT5 Petroleum Limited announced
by Sirius on 19 December 2008, Dajo Oil Limited announced by Sirius on 3 November 2009 and
Frontier Oil Limited announced by Sirius on 2 December 2009. These agreements provide the
Company with wide ranging and high level contacts throughout the Nigerian oil related
administration and with major oil companies. In addition, Sirius has established a local office
in Lagos for its Nigerian subsidiary. Sirius announced that it obtained a licence to allow the
Company to import refined oil products into Nigeria on 9 October 2009. On 2 December 2009
Sirius raised 1.1 million of funding to undertake due diligence on various opportunities and
on 25 August 2009 announced that it had entered into an US$80 million framework funding
agreement with CapInvest.
More recently, on 16 February 2010, Sirius announced that it had entered into a Consultancy
and Warrant Agreement with South Africa Hi-Tech Energy Consultancy Inc under which the
Company has agreed to issue a warrant for 80,000,000 new ordinary shares at 7.125 pence
each on the completion of an acquisition of oil and gas based assets with a value of at least
US$0.5 billion. On 22 February 2010 Sirius announced that it has entered into an acquisition
and joint operating agreement with Del Sigma Petroleum Nigeria Limited for development of
the Ke marginal field which has aggregate recoverable hydrocarbon reserves estimated to be
in excess of 25 mmbls (2P reserves) located in OML55, Nigeria.
The Companys shares have been suspended from trading on AIM following the
announcement of the Ke field agreement and whilst the Competent Persons Report is
completed and an AIM Admission document is prepared for circulation to shareholders.
Results
These results cover the six month period ended 31 January 2010 and, like those for the year
ended 31 July 2009, relate to a period when the Company has been developing its strategy,
negotiating partnership agreements and reviewing potential marginal field opportunities and
during which no trading activities took place. The vast majority of the Groups future revenue
is expected to be generated in US dollars, and the same is expected to be the case with regard
to the associated costs. Accordingly, when the Group reported its last final results on
21 December 2009 the board indicated that it proposed to change the Companys reporting
currency, from GBP to US dollars for future reporting periods. The half year results have been
prepared in accordance with that policy. The Group incurred a loss before taxation of $958,000,
(period ended 31 January 2009: loss of $1,160,000, year ended 31 July 2009: loss of $1,650,000).

113

Outlook
The Board remains confident that its vision for the future will start to show concrete results
over the coming year.
Sirius announces that it has appointed Strand Hanson Limited as its Nominated Adviser and
Broker to the Company with immediate effect.
Babatunde Agboola
Chairman
31 March 2010

114

Independent Review Report to Sirius Petroleum PLC

Introduction
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 31 January 2010 which comprises
the consolidated statement of comprehensive income, consolidated statement of changes in
equity, consolidated statement of financial position, consolidated cash flow statement, and
related notes. 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 guidance contained in ISRE (UK
and Ireland) 2410, Review of Interim Financial Information performed by the Independent
Auditor of the Entity. Our review work has been undertaken so that we might state to the
Company those matters we are required to state to them in a 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 conclusion we
have formed.
Directors responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors.
As disclosed in Note 1, the annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International Accounting Standard 34,
Interim Financial Reporting, as adopted by the European Union.
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 enquiries, 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 31 January 2010 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union.
GRANT THORNTON UK LLP
AUDITOR
Birmingham
31 March 2010

115

Consolidated Statement of Comprehensive Income

FOR THE PERIOD ENDED 31 JANUARY 2010
6 months to
31/01/2009
Unaudited
(Restated)
$000

Year ended
31/07/2009
Unaudited
(Restated)
$000

(958)

(965)
(199)

(965)
(690)

Administrative expenses and loss

from operations
Finance income

(958)

(1,164)

(1,655)

Loss before taxation

Taxation

(958)

(1,160)

(1,650)

Loss after taxation and retained loss

attributable to equity holders of the
company

(958)

(1,160)

(1,650)

Note

Fees payable in respect of services

agreements and sign-on fees
Other administrative expenses

Other comprehensive income

Total comprehensive (expenditure)

for the period
Loss per share (cents)
basic and diluted

6 months to
31/01/2010
Unaudited
$000

116

(958)

(1,160)

(1,650)

(0.19c)

(0.26c)

(0.35c)

Consolidated Statement of Changes in Equity

FOR THE PERIOD ENDED 31 JANUARY 2010
Share
based
payment Exchange
reserve
reserve
$000
$000

Share
capital
$000

Share
premium
account
$000

1,401
907

2,847

3,107

828

828

907

828

1,735

Loss for the year and total

recognised income and expense
for the year

(1,160)

(1,160)

Total comprehensive income

for the period

(1,160)

(1,160)

2,308

3,675

3,107

(8,372)

Transfer of share based

payment reserve

(3,107)

3,107

Transactions with owners

(3,107)

3,107

Loss for the year and total

recognised income and
expense for the year

(490)

(490)

Total comprehensive income

for the period

(490)

(490)

2,308

3,675

(5,755)

Issue of share capital

Share based payments
Exchange reserve
Proceeds of issue of share
capital in excess of par value
less costs

76

83

1,732

Transactions with owners

76

1,732

83

Loss for the period and

total recognised income
and expense for the year

(958)

(958)

Total comprehensive income

for the period

(958)

(958)

2,384

5,407

83

At 1 August 2008 (audited

and restated)
Issue of share capital
Proceeds of issue of share capital
in excess of par value less costs
Transactions with owners

At 31 January 2009 (unaudited

and restated)

At 31 July 2009 (audited

and restated)

At 31 January 2010 (Unaudited)

117

Profit
and loss
account
$000

(7,212)

Total
$000

143
907

718

228

(1)

1,732

(1)

1,890

(1)

(6,713)

76
83
(1)

1,160

Consolidated Statement of Financial Position

AS AT 31 JANUARY 2010

Note

ASSETS
Non-current assets
Tangible assets

31/01/2010
Unaudited
$000

31/01/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

14

17

14

17

511
991

315
715

145
468

Total current assets

1,502

1,030

613

Total assets

1,516

1,030

630

356

312

402

356

312

402

Current assets
Trade and other receivables
Cash and cash equivalents

LIABILITIES
Current liabilities
Trade and other payables

Total current liabilities

EQUITY
Share capital
Share premium account
Share based payment reserve
Exchange reserve
Profit and loss account

2,384
5,407
83
(1)
(6,713)

2,308
3,675
3,107

(8,372)

2,308
3,675

(5,755)

Total equity attributable to equity holders

of the company

1,160

718

228

Total equity and liabilities

1,516

1,030

630

118

Consolidated Cash Flow Statement

FOR THE SIX MONTHS ENDED 31 JANUARY 2010
6 months to
31/01/2009
Unaudited
(Restated)
$000

Year ended
31/07/2009
Audited
(Restated)
$000

(958)
3

(366)
83

(46)
(1)

(1,160)

(4)
(249)

651
(55)

(1,650)
9
(5)
(79)

651
35

(1,285)

(817)

(1,039)

6 months to
31/01/2010
Unaudited
$000

Cash flows from operating activities

Loss after taxation
Depreciation
Finance income
(Increase) in trade and other receivables
Share based payments
Expenses settled in shares
(Decrease)/ increase in trade and other payables
Foreign exchange
Net cash outflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Finance income

(26)
5

Net cash flows from investing activities

(21)

Cash flows from financing activities

Proceed from issue of share capital
Share issue costs

1,808

1,160
(75)

1,160
(75)

Net cash inflow from financing activities

1,808

1,085

1,085

Net increase in cash and cash equivalents

Cash and cash equivalents brought forward

523
468

272
443

25
443

Cash and cash equivalents carried forward

991

715

468

119

Notes to the Interim Report

FOR THE 6 MONTHS ENDED 31 JANUARY 2010

Basis of preparation
The interim financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention. This interim report is
unaudited and does not constitute statutory accounts within the meaning of Section
498 of the Companies Act 2006. The figures for the year ending 31 July 2009 have been
extracted from the 2009 financial statements. The auditors report on these accounts
was unqualified and did not contain a statement under Section 498 of the Companies
Act 2006.
The Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and for this reason they
continue to adopt the going concern basis in preparing the financial statements.
The principal accounting policies of the Group are consistent with those detailed in the
31 July 2009 financial statements, which are prepared in accordance with International
Financial Reporting Standards (IFRSs, as adopted by the European Union except that as
reported in these financial statements, the presentational currency has been changed
to US dollars and IAS 1 Presentation of Financial Statements (Revised 2007) and IFRS
8 Operating Segments have been adopted).
As a consequence of the change in the presentational currency the consolidated
statement of comprehensive income and consolidated cashflow statement for the
periods ended 31 July 2009 and 31 January 2009 and the statement of financial position
as at those dates has been restated to be presented in US dollars.
The adoption of IAS 1 (revised 2007) does not affect the financial position or profits of
the Group, but gives rise to additional disclosures. The measurement and recognition
of the Groups assets, liabilites, income and expenses is unchanged, however some items
that were recognised directly in equity are now recognised in other comprehensive
income. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and
introduces a Statement of comprehensive income.
The adoption of IFRS 8 has required management to review the disclosure of segmental
information based on internal management reporting practices, as opposed to the risks
and rewards approach as required within IAS 14.
Segmental reporting
(a) By business segment (Primary segment)
As defined under International Financial Reporting Standard 8 (IFRS 8) the Group has
no material business segment.
(b) By geographical segment (Secondary segment)
Under the definitions contained in IFRS 8 the only material geographic segment the
Group operates in is the United Kingdom.
Subject to further acquisitions and the future development of the business in Nigeria
the Group expects to further review its segmental information during the forthcoming
financial year.

120

Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary
shareholders divided by the weighted average number of shares in issue during the
period. The impact of the options on the loss per share is anti-dilutive.
Basic loss per share
6 months to
Year ended
6 months to
31/01/2009
31/07/2009
31/01/2010
Unaudited
Audited
Unaudited
(Restated)
(Restated)

Loss on ordinary activities after tax ($000)

Weighted average number of 0.25p
ordinary shares
Loss per share basic (cents)

(958)

(1,160)

(1,650)

507,874,820

442,992,755

472,993,015

0.19c

0.26c

0.35c

Trade and other receivables

31/01/2010
Unaudited
$000

Other receivables
Prepayments and accrued income

31/01/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

452
59

302
13

81
64

511

315

145

Other receivables are usually due within 30 60 days and do not bear any effective
interest rate. The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.

Trade and other payables

31/01/2010
Unaudited
$000

Trade payables
Other payables
Accruals and deferred income

31/01/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

62
213
81

96
187
29

88
244
70

356

312

402

The fair value of trade and other payables has not been disclosed as, due to their short
duration, management considers the carrying amounts recognised in the balance sheet
to be a reasonable approximation of their fair value.

121

Share capital
31/01/2010
Unaudited
$000

Allotted and issued

520,827,720 (31 January 2009 and
31 July 2009: 502,494,385) ordinary
shares of 0.25p

2,384

31/01/2009
Unaudited
(Restated)
$000

2,308

31/07/2009
Audited
(Restated)
$000

2,308

On 8 December 2009 the Company placed 18,333,335 new ordinary shares at 0.06 per
share. The premium on issue of $1,732,207 has been recognised within the share
premium account. At 31 January 2010, 4,166,667 of these shares remained unpaid and
$399,800 has been included in other receivables in respect of the consideration for
these shares.

Contingent liabilities
At 31 January 2010 there is a contingent liability of $245,000 relating to a fee payable
to Taglient Oil. This fee is payable only on completion of a transaction that constitutes
a reverse takeover under the AIM Rules of Companies. As a reverse takeover had not
occurred by 31 January 2010 no amount has been recognised in the financial statements
in respect of this agreement. The Board consider that this fee is only likely to become
payable on signing an agreement to acquire a marginal field and completion of the
related fund raising.

Post balance sheet events

Sirius announced on 16 February 2010 that it had entered into a Consultancy and
Warrant Agreement with South Africa Hi-Tech Energy Consultancy Inc under which the
Company has agreed to issue a warrant for 80,000,000 new ordinary shares at 7.125
pence each on the completion of an acquisition of oil and gas based assets with a value
of at least US$0.5 billion.
On 22 February 2010 Sirius announced that it has entered into an acquisition and joint
operating agreement (the Agreement) with Del Sigma Petroleum Nigeria Limited
(Del Sigma) for development of the Ke marginal field which has aggregate
recoverable hydrocarbon reserves estimated to be in excess of 25 mmbbls (2P reserves)
and is located in Oil Mining Lease 55 (OML 55) in Nigeria (the Ke Asset and,
together with the Agreement, the Transaction). Completion of this Agreement will
be conditional on inter alia shareholder approval and approval from Nigerias
Department of Petroleum Resources (DPR).
Under the terms of the Agreement, Sirius will be entitled to a direct 40 per cent. interest
in the Ke Asset and an application will be made for this interest to be registered with
the DPR. Sirius will jointly operate the Ke Asset with Del Sigma, and fund 100 per cent.
of the development costs. Upon production of oil, Sirius will receive a net preferential
cash flow of 78 per cent. from the production revenues until full recovery of its
investment following which its cash receipts will revert to 40 per cent. to match its
underlying economic interest in the field pursuant to the Agreement.
The transaction is categorised as a reverse takeover under the AIM Rules for Companies
(AIM Rules) and so requires shareholder approval. Sirius is in the process of preparing
an admission document and circular (the Admission Document) to its shareholders

122

pursuant to the AIM Rules, which will contain full details of the proposed Transaction
including a Competent Persons Report which will be prepared in respect of the Ke
Asset, together with a Notice of General Meeting and these will be posted to
shareholders as soon as possible.
In the meantime, as required by the AIM Rules, the Company has requested that its
shares be suspended from trading with restoration of trading due on publication of
the Admission Document. Following completion of the Transaction, the Company will
no longer be an investing company for the purposes of the AIM Rules and will be an
operating oil development company working to bring the Ke Asset into production as
soon as possible.

123

SECTION B Second Interim Results for the period ended 30 June 2010
Introduction and update
The board of directors of Sirius (the Board) is pleased to report that it has made significant
progress in implementing the Companys core investing strategy to identify oil and gas
opportunities, particularly interests in marginal fields in Nigeria (the Investing Strategy)
The Company will, today release a detailed announcement, AIM Admission Document (the
Admission Document) and Notice of General Meeting in connection with the proposed
acquisition of a 40 per cent. interest in the Ke Field and joint operating agreement entered
into with Del Sigma Petroleum Nigeria Limited for the development of the Ke Field, as
announced on 22 February 2010 and the proposed share placing. The Ke Field is a multiple
horizon onshore hydrocarbon reservoir contained within the Ke Farmout Area, which is
situated in the Niger Delta, within the boundaries of Oil Mining Lease No. OML 55 held by
NNPC and Chevron Nigeria Ltd. The Ke Farmout Area extends to an area of approximately
12,900 acres. The share placing is conditional on the renewal of the award by the Department
of Petroleum Resources of Nigeria of the participating interest in the Ke Field to Del Sigma
Petroleum Nigeria Limited, from whom the Company will acquire its 40 per cent. interest.
The Companys shares were suspended from trading on AIM on 22 February 2010 whilst a full
Competent Persons Report was prepared and detailed due diligence was completed. These
exercises are now complete and an Admission Document has been prepared for circulation to
the Companys shareholders. Comprehensive details of the transaction are set out in the
Admission Document.
Results
The Board has decided to change the Companys accounting reference date to 31 December
in order to report its results by calendar year. Accordingly, these results cover the five and
eleven month periods ended 30 June 2010 with comparative figures for the five and eleven
month periods ended 30 June 2009 and the year ended 31 July 2009. An interim statement for
the six months ended 31 January 2010 has previously been issued. The results relate to a period
during which the Group has been developing its Investing Strategy, negotiating partnership
agreements and reviewing potential marginal field opportunities. No trading activities took
place during this period.
The majority of the Groups future revenue will be generated in US dollars, along with the
associated costs. Accordingly, when the Group reported its last final results (for the year ended
31 July 2009) on 21 December 2009, the Board indicated that it proposed to change the
Groups presentational currency, historically GBP, to US dollars for future reporting periods.
The five and eleven month results have been prepared in accordance with this change.
The Group produced a loss before taxation of $828,000 in the 5 months ended 30 June 2010
and $1,786,000 in the eleven months ended 30 June 2010, (5 months ended 31 June 2009: loss
of $348,000, 11 months ended 30 June 2009: loss of $1,508,000, year ended 31 July 2009 loss
of $1,650,000).
Outlook
The Board believes that the proposed transaction is in the best interests of the Company and
that shareholders will benefit from significant returns in the future.
Babatunde Agboola
Chairman
13 October 2010

124

Independent Review Report to Sirius Petroleum plc

Introduction
We have been engaged by the Company to review the condensed set of financial statements
in the interim financial report for the period ended 30 June 2010 which comprises the
consolidated statement of comprehensive income, consolidated statement of changes in
equity, consolidated statement of financial position, consolidated cash flow statement, and
related notes. We have read the Chairmans statement contained in the interim 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 guidance contained in ISRE (UK
and Ireland) 2410, Review of Interim Financial Information performed by the Independent
Auditor of the Entity. Our review work has been undertaken so that we might state to the
Company those matters we are required to state to it in a 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 conclusion we
have formed.
Directors responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors.
As disclosed in Note 1, the annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The condensed set of financial statements included in this interim financial
report has been prepared in accordance with International Accounting Standard 34, Interim
Financial Reporting, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial
statements in the interim 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 enquiries, 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 interim financial report for the period ended
30 June 2010 is not prepared, in all material respects, in accordance with International
Accounting Standard 34 as adopted by the European Union.

125

Emphasis of matter Going Concern

In forming our conclusion, which is not qualified, we have considered the adequacy of the
disclosures made in note 1 to the financial information concerning the Groups ability to
continue as a going concern. The conditions stated in Note 1 indicate the existence of a
material uncertainty which may cast significant doubt about the Groups ability to continue as
a going concern. The financial statements do not include the adjustments that would result if
the Group was unable to continue as a going concern.
GRANT THORNTON UK LLP
AUDITOR
Birmingham
13 October 2010

126

Consolidated Statement of Comprehensive Income

FOR THE PERIOD ENDED 30 JUNE 2010

5 months 11 months
to
to
30/06/2010 30/06/2010
Unaudited Unaudited
Note
$000
$000

5 months 11 months
to
to Year ended
30/06/2009 30/06/2009 31/07/2009
Unaudited Unaudited
Audited
(Restated) (Restated) (Restated)
$000
$000
$000

Fees payable in respect of services

agreements and sign-on fees
Other administrative expenses

(829)

(1,787)

(349)

(965)
(548)

(965)
(690)

Administrative expenses and loss

from operations

(829)

(1,787)

(349)

(1,513)

(1,655)

Finance income

Loss before taxation

(828)

Taxation

Loss after taxation and retained

loss attributable to equity
holders of the Company

(828)

Other comprehensive income

Total comprehensive (expenditure)

for the period
Loss per share (cents)
- basic and diluted

1
(1,786)

(1,786)

1
(348)

(348)

5
(1,508)

(1,508)

5
(1,650)

(1,650)

(828)

(1,786)

(348)

(1,508)

(1,650)

(0.16c)

(0.35c)

(0.07c)

(0.32c)

(0.35c)

127

Consolidated Statement of Changes in Equity

FOR THE PERIOD ENDED 30 JUNE 2010
Share
based
payment Exchange
reserve
reserve
$000
$000

Share
capital
$000

Share
premium
account
$000

1,401
907

2,847
828

3,107

907

828

(1,160)

2,308

3,675

3,107

(8,372)

718

2,308

3,675

3,107

(8,372)

718

(3,107)

3,107

Transactions with owners

(3,107)

3,107

Loss for the period and total

comprehensive income for
the period

(348)

2,308

3,675

(5,613)

370

1,401
907

2,847
828

3,107

(7,212)

143
1,735

(3,107)

3,107

907

828

(3,107)

3,107

1,735

(1,650)

(1,650)

2,308

3,675

(5,755)

At 1 August 2008 (audited

and restated)
Issue of share capital
Transactions with owners
Loss for the period and total
comprehensive income for
the period
At 31 January 2009 (unaudited
and restated)
At 1 February 2009 (unaudited
and restated)
Transfer of share based payment
reserve

At 30 June 2009 (unaudited

and restated)
At 1 August 2008 (audited
and restated)
Issue of share capital
Transfer of share based payment
reserve
Transactions with owners
Loss for the year and total
comprehensive income for
the period
At 31 July 2009 (audited
and restated)

128

Profit
and loss
account
$000

(7,212)

Total
$000

143
1,735
1,735

(1,160)

(348)

228

Consolidated Statement of Changes in Equity

FOR THE PERIOD ENDED 30 JUNE 2010 (CONTINUED)
Share
based
payment Exchange
reserve
reserve
$000
$000

Share
capital
$000

Share
premium
account
$000

2,308
76

3,675
1,732

83

(1)

76

1,732

83

(1)

At 31 January 2010 (unaudited)

2,384

5,407

83

(1)

(6,713)

1,160

At 1 February 2010 (unaudited)

Share based payments
Exchange reserve

2,384

5,407

83
97

(1)

(2)

(6,713)

1,160
97
(2)

Transactions with owners

97

(2)

Loss for the period and total

comprehensive income for
the period

At 30 June 2010 (unaudited)

2,384

5,407

180

At 1 August 2009 (audited

and restated)
Issue of share capital
Share based payments
Exchange reserve
Transactions with owners
Loss for the period and total
comprehensive income for
the period

129

(3)

Profit
and loss
account
$000

(5,755)

(958)

(828)
(7,541)

Total
$000

228
1,808
83
(1)
1,890

(958)

95

(828)
427

Consolidated Statement of Financial Position

AS AT 30 JUNE 2010

Note

ASSETS
Non-current assets
Tangible assets

30/06/2010
Unaudited
$000

30/06/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

14

19

17

14

19

17

590
232

296
406

145
468

Total current assets

822

702

613

Total assets

836

721

630

409

351

402

409

351

402

Current assets
Trade and other receivables
Cash and cash equivalents

LIABILITIES
Current liabilities
Trade and other payables

Total current liabilities

EQUITY
Share capital
Share premium account
Share based payment reserve
Exchange reserve
Profit and loss account

2,384
5,407
180
(3)
(7,541)

2,308
3,675

(5,613)

2,308
3,675

(5,755)

Total equity attributable to equity holders

of the Company

427

370

228

Total equity and liabilities

836

721

630

130

Consolidated Cash Flow Statement

FOR THE PERIOD ENDED 30 JUNE 2010

5 months 11 months
to
to
30/06/2010 30/06/2010
Unaudited Unaudited
$000
$000

Cash flows from operating activities

Loss after taxation
Depreciation
Finance income
(Increase)/decrease in trade and
other receivables
Share based payments
Expenses settled in shares
Increase/(decrease) in trade and
other payables
Foreign exchange

5 months 11 months
to
to Year ended
30/06/2009 30/06/2009 31/07/2009
Unaudited Unaudited
Audited
(Restated) (Restated) (Restated)
$000
$000
$000

(828)
9
(1)

(1,786)
12
(1)

(79)
97

(445)
180

53
(2)

7
(3)

(751)

(2,036)

(284)

(1,101)

(1,039)

Cash flows from investing activities

Purchase of property, plant and equipment
Finance income

(9)
1

(9)
1

(26)
1

(26)
5

(26)
5

Net cash flows from investing activities

(8)

(8)

(25)

(21)

(21)

Net cash outflow from operating

activities

(348)
7
(1)

(1,508)
7
(5)

(1,650)
9
(5)

19

(230)

651

(79)

651

39

(16)

35

Cash flows from financing activities

Proceed from issue of share capital
Share issue costs

1,808

1,160
(75)

1,160
(75)

Net cash inflow from financing activities

1,808

1,085

1,085

Net (decrease) in cash and cash equivalents

Cash and cash equivalents brought forward

(759)
991

(236)
468

(309)
715

(37)
443

25
443

Cash and cash equivalents carried forward

232

232

406

406

468

131

Notes to the Interim Report

FOR THE PERIOD ENDED 30 JUNE 2010

Basis of preparation
The interim financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention. This interim report is
unaudited and does not constitute statutory accounts within the meaning of Section
498 of the Companies Act 2006. The figures for the year ending 31 July 2009 have been
extracted from the 2009 financial statements. The auditors report on these accounts
was unqualified and did not contain a statement under Section 498 of the Companies
Act 2006.
The principal accounting policies of the Group are consistent with those detailed in the
31 July 2009 financial statements, which are prepared in accordance with International
Financial Reporting Standards (IFRSs), as adopted by the European Union except that
as reported in these financial statements, the presentational currency has been changed
to US dollars and IAS 1 Presentation of Financial Statements ( Revised 2007) and IFRS
8 Operating Segments have been adopted.
As a consequence of the change in the presentational currency the consolidated
statement of comprehensive income, the consolidated statement of changes in equity
and consolidated cash flow statement for the periods ended 30 June 2009 and 31 July
2009 and the statement of financial position as at those dates has been restated to be
presented in US dollars.
The adoption of IAS 1 (revised 2007) does not affect the financial position or profits of
the Group, but gives rise to additional disclosures. The measurement and recognition
of the Groups assets, liabilities, income and expenses is unchanged, however some
items that were recognised directly in equity are now recognised in other
comprehensive income. IAS 1 (Revised 2007) affects the presentation of owner changes
in equity and introduces a Statement of comprehensive income.
The adoption of IFRS 8 has required management to review the disclosure of segmental
information based on internal management reporting practices, as opposed to the risks
and rewards approach as required within IAS 14.
Going concern
The directors have prepared cash flow forecasts through to 30 June 2012 which take
account of the proposed strategy following the proposed acquisition of a 40 per cent
interest in the Ke field, the share placing and other funding available to the Group
following this acquisition. The cash flow forecasts demonstrate that the company will
have sufficient funding available to pursue its proposed strategy and continue in
operational existence for the foreseeable future.
The share placing is conditional on the renewal of the award by the Department of
Petroleum Resources of Nigeria of the participating interest in the Ke Field to Del Sigma
Petroleum Nigeria Limited, from whom the Group will acquire its 40 per cent. interest.
The directors are very confident that the renewal will be received. On this basis the
Directors continue to adopt the going concern basis in preparing the financial
statements.
If the renewal is not forthcoming by 31 December 2010, the placing proceeds will not
be received and the Company would need to seek alternative sources of finance. These
financial statements do not include the adjustments that would result if the placing

132

proceeds are not received nor alternative sources of finance could be found and the
company was not able to continue as a going concern.
Segmental reporting
An operating segment is a distinguishable component of the Group that engages in
business activities from which it may earn revenues and incur expenses, whose
operating results are regularly reviewed by the Groups chief operating decision maker
to make decisions about the allocation of resources and assessment of performance
and about which discrete financial information is available.
The chief operating decision maker reviews financial information for and makes
decisions about the Groups performance as a whole, as the Group has not traded
during the period.
Subject to further acquisitions and the future development of the business in Nigeria
the Group expects to further review its segmental information during the forthcoming
financial year.

Loss per share

The calculation of the basic loss per share is based on the loss attributable to ordinary
shareholders divided by the weighted average number of shares in issue during the
period. The impact of the options on the loss per share is anti-dilutive.

5 months
to
30/06/2010
Unaudited

Loss on ordinary activities

after tax ($000)
Weighted average number
of 0.25p ordinary shares

(828)

(1,786)

(348)

(1,508)

Year ended
31/07/2009
Audited
(Restated)

(1,650)

520,827,720 513,691,991 502,494,385 470,254,864 472,993,015

Loss per share basic (cents)

11 months
to
30/06/2010
Unaudited

Basic loss per share

5 months
11 months
to
to
30/06/2009
30/06/2009
Unaudited
Unaudited
(Restated)
(Restated)

0.16c

0.35c

0.07c

0.32c

0.35c

Trade and other receivables

30/06/2010
Unaudited
$000

30/06/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

Other receivables
Prepayments and accrued income

545
45

225
71

81
64

Total

590

296

145

Other receivables are usually due within 30 60 days and do not bear any effective
interest rate. The fair value of these short term financial assets is not individually
determined as the carrying amount is a reasonable approximation of fair value.

133

Trade and other payables

30/06/2010
Unaudited
$000

30/06/2009
Unaudited
(Restated)
$000

31/07/2009
Audited
(Restated)
$000

Trade payables
Other payables
Accruals and deferred income

142
199
68

44
251
56

88
244
70

Total

409

351

402

The fair value of trade and other payables has not been disclosed as, due to their short
duration, management considers the carrying amounts recognised in the balance sheet
to be a reasonable approximation of their fair value.

Share capital
30/06/2010
Unaudited
$000

Allotted, issued and fully paid

520,827,720 (30 June 2009 and 31 July 2009:
502,494,385) ordinary shares of 0.25p

2,384

30/06/2009
Unaudited
(Restated)
$000

2,308

31/07/2009
Audited
(Restated)
$000

2,308

On 8 December 2009 the Company placed 18,333,335 new ordinary shares at 0.06 per
share. The premium on issue of $1,732,207 has been recognised within the share
premium account.

Contingent liabilities
At 30 June 2010 and 31 July 2009 there is a contingent liability of $231,000 relating to
a fee payable to Taglient Oil. This fee is payable only on completion of a transaction
that constitutes a reverse takeover under the AIM Rules of Companies. As a reverse
takeover had not occurred by 30 June 2010 no amount has been recognised in the
financial statements in respect of this agreement. The Board consider that this fee is
only likely to become payable on signing an agreement to acquire a marginal field and
completion of the related fund raising.

Post balance sheet events

On 22 February 2010 the Company announced it had entered into a conditional
agreement to acquire a 40 per cent. interest in the Ke Field and had entered into a
joint operating agreement with Del Sigma Petroleum Nigeria Limited for the
development of the Ke Field. The Ke Field is a multiple horizon onshore hydrocarbon
reservoir contained within the Ke Farmount Area, which is situated in the Niger Delta,
Nigeria, within the boundaries of Oil Mining Leave No. OML55 held by the National
Nigerian Petroleum Corporation and Chevran Nigeria Ltd.
The proposed transaction constitutes a reverse takeover under the AIM Rules for
Companies and accordingly is subject to shareholder approval. Accordingly an AIM
Admission document will be sent later today to the Companys shareholders, seeking
their approval of the proposed transaction.

134

APPENDIX 2
NOTICE OF GENERAL MEETING

SIRIUS PETROLEUM PLC

(Company Number 5181462)

Notice is given that a general meeting of the members of the Company will be held at
11.00 a.m. on 29 October 2010 at the offices of Fladgate LLP, 16 Great Queen Street, London
WC2B 5DG to consider and, if thought fit, pass the following resolutions:
Ordinary resolutions
1.

That the Acquisition, as defined in the Companys admission document dated 13 October
2010 (Admission Document), of which this notice forms part, be approved for the
purposes of rule 14 of the AIM Rules for Companies and the Companys directors be
authorised to take all steps necessary, expedient or desirable in order to complete the
Acquisition.

2.

To appoint Jack Pryde as a director.

3.

To appoint Billi Folahan as a director.

Special resolutions
4.

That the Companys current articles of association (Articles) be amended by deleting all
the provisions of the Companys Memorandum of Association which, by virtue of section
28 of the Companies Act 2006, are to be treated as provisions of the articles and that the
Articles be amended by the insertion of a new article 1.8 as follows, The liability of the
members is limited to the amount, if any, unpaid on the shares held by them.

5.

That the directors be and they are empowered pursuant to section 551 of the Companies
Act 2006 (CA 2006) to allot equity securities (within the meaning of section 560 CA 2006)
wholly for cash pursuant to the authority conferred by resolution 7 at the Companys
annual general meeting on 19 January 2010 as if section 560 CA 2006 did not apply to
any such allotment, provided that this power will expire either 12 months from the date
of this resolution or at the Companys next annual general meeting, whichever is sooner,
except that the Company may, before such expiry, make an offer or agreement which
would or might require equity securities to be allotted after such expiry and the directors
may allot equity securities in pursuance of any such offer or agreement notwithstanding
that the power conferred by this resolution has expired, and provided that this power
is limited to the allotment of equity securities:
5.1

the allotment of equity securities of an aggregate nominal amount of up to

650,000 in respect of the Placing described in the Admission Document;

5.2

the allotment of equity securities of an aggregate nominal amount of up to

466,747, in respect of the Transaction Shares described in the Admission
Document;

5.3

the allotment of equity securities of an aggregate nominal amount of up to

200,000 to satisfy the fee due to South Africa Hi-Tech Energy Consultancy Inc
under the agreement described in the Admission Document; and

5.4

the allotment of equity securities of an aggregate nominal amount of up to

20,000 upon exercise of the options granted to Abba Dasuki pursuant to an
agreement dated 5 October 2009, as described in the Admission Document;
135

5.5

the allotment of equity securities of an aggregate nominal amount of up to

86,692 upon exercise of the Renaissance Warrant, Strand Warrant, Corvus
Warrant and the Toumazou Warrant as described in the Admission Document;

5.6

the allotment of equity securities of an aggregate nominal amount of up to

241,881 upon exercise of options granted, from time to time, to directors,
employees and consultants to the Company;

5.7

in connection with an offer of such securities by way of rights to holders of

ordinary shares in the Company in proportion (as nearly as may be practicable) to
their respective holdings of such shares, but subject to such exclusions or other
arrangements as the directors may deem necessary or expedient in relation to
fractional entitlements or any legal or practical problems under the laws of any
territory, or the requirements of any regulatory body or stock exchange;

5.8

otherwise than pursuant to sub-paragraphs 5.1 to 5.7 above up to an aggregate

nominal amount of 241,881 (being ten per cent. of the Companys issued share
capital on Admission).

By order of the board

Kitwell Consultants Limited
Company secretary
13 October 2010
Registered Office:
Stanmore House
2nd floor, 29-30 St Jamess Street
London SW1A 1HB

136

Notes to the notice of general meeting:

Appointment of proxies
1. As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your
rights to attend, speak and vote at the meeting and you should have received a proxy form
with this notice of meeting. You can only appoint a proxy using the procedures set out in
these notes and the notes to the proxy form.
2.

A proxy does not need to be a member of the Company but must attend the meeting to
represent you. Details of how to appoint the chairman of the meeting or another person as
your proxy using the proxy form are set out in the notes to the proxy form. If you wish your
proxy to speak on your behalf at the meeting you must appoint your own choice of proxy
(not the chairman) and give your instructions directly to the relevant person.

3.

You may appoint more than one proxy provided each proxy is appointed to exercise rights
attached to different shares. You may not appoint more than one proxy to exercise rights
attached to any one share. To appoint more than one proxy, you must complete a separate
proxy form for each proxy and specify against the proxys name the number of shares over
which the proxy has rights. If you are in any doubt as to the procedure to be followed for the
purpose of appointing more than one proxy you must contact the Companys registrars, Capita
Registrars, PXS, 34 Beckenham Road, Kent BR3 4TU. If you fail to specify the number of shares
to which each proxy relates, or specify a number of shares greater than that held by you on
the record date, proxy appointments will be invalid.

4.

If you do not indicate to your proxy how to vote on any resolution, your proxy will vote or
abstain from voting at his discretion. Your proxy will vote (or abstain from voting) as he thinks
fit in relation to any other matter which is put before the meeting.

Appointment of proxy using the hard copy proxy form

5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution
or withhold his vote.
6.

To appoint a proxy using the proxy form, it must be:

6.1. completed and signed;
6.2. sent or delivered to the Companys registrars, Capita Registrars, PXS, 34 Beckenham Road,
Kent BR3 4TU; and
6.3. received by the Companys registrars no later than 11.00 a.m. on 27 October 2010.

7.

In the case of a member which is a company, the proxy form must be executed under its
common seal or signed on its behalf by an officer of the company or an attorney for the
company.

8.

Any power of attorney or any other authority under which the proxy form is signed (or a duly
certified copy of such power or authority) must be included with the proxy form.

9.

The Company, pursuant to regulation 41 of The Uncertificated Securities Regulations 2001,

specifies that only those ordinary shareholders registered in the register of members of the
Company 48 hours before the meeting shall be entitled to attend or vote at the meeting in
respect of the number of Ordinary shares registered in their name at that time. Changes to
entries on the relevant register of securities after that time will be disregarded in determining
the rights of any person to attend or vote at the meeting.

Appointment of proxies through CREST

10. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy
appointment service may do so for the meeting and any adjournment(s) by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a voting service provider(s), should
refer to their CREST sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
11. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST
message (a CREST Proxy Instruction) must be properly authenticated in accordance with

137

Euroclear UK & Ireland Limiteds (EUI) specifications and must contain the information required
for such instructions, as described in the CREST Manual. The message must be transmitted so
as to be received by the issuers agent (ID: RA1O) by 11.00 a.m. 27 October 2010. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which the issuers agent is able
to retrieve the message by enquiry to CREST in the manner prescribed by CREST.
12. CREST members and, where applicable, their CREST sponsors or voting service providers should
note that EUI does not make available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in relation to the input of CREST
Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the
CREST member is a CREST personal member or sponsored member or has appointed a voting
service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as are necessary to ensure that a message is transmitted by means of the CREST system
by any particular time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Appointment of proxy by joint members
14. In the case of joint holders of shares, where more than one of the joint holders purports to
appoint a proxy, only the appointment submitted by the most senior holder (being the first
named holder in respect of the shares in the Companys register of members) will be accepted.
Changing proxy instructions
15. To change your proxy instructions simply submit a new proxy appointment using the method
set out in paragraphs 6 or 11 above. Note that the cut off time for receipt of proxy
appointments specified in those paragraphs also applies in relation to amended instructions.
Any amended proxy appointment received after the specified cut off time will be disregarded.
16. Where you have appointed a proxy using the hard copy proxy form and would like to change
the instructions using another hard copy proxy form, please contact the Companys registrar
as indicated in paragraph 3 above.
17. If you submit more than one valid proxy appointment, the appointment received last before
the latest time for the receipt of proxies will take precedence.
Termination of proxy appointments
18. In order to revoke a proxy instruction you will need to inform the Company by sending a
signed hard copy notice clearly stating your intention to revoke your proxy appointment to
the Companys registrar as indicated in paragraph 3 above. In the case of a member which is
a company, the revocation notice must be executed under its common seal or signed on its
behalf by an officer of the company or an attorney for the company. Any power of attorney
or any other authority under which the revocation notice is signed (or a duly certified copy of
such power or authority) must be included with the revocation notice.
19. The revocation notice must be received by the Company no later than 11.00 a.m. on
27 October 2010.
20. If you attempt to revoke your proxy appointment but the revocation is received after the time
specified then, subject to paragraph 21 below, your proxy appointment will remain valid.
21. Appointment of a proxy does not preclude you from attending the meeting and voting in
person. If you have appointed a proxy and attend the meeting in person, your proxy
appointment will automatically be terminated.
Documents available for inspection
22. The following documents will be available for inspection at the registered office of the
Company on any weekday) (except Saturdays, Sundays and Bank Holidays) during normal
business hours from the date of this notice until the date of the meeting and at the place of
the meeting for 15 minutes prior to and until the conclusion of the meeting: statement of

138

transactions of Directors (and of their family interests) in the share capital of the Company and
any of its subsidiaries; copies of the Directors service agreements and letters of appointment
with the Company; the register of Directors interests in the share capital of the Company
(maintained under section 325 of the Act); and the proposed new articles of association of the
Company marked to show changes from the current articles of association.
Total voting rights
23. As at 11.00 a.m. on 12 October 2010, the Companys issued share capital comprised 520,827,720
ordinary shares of 0.25p each. Each ordinary share carries the right to one vote at a general
meeting of the Company and, therefore, the total number of voting rights in the Company as
at 11.00 a.m. on 12 October 2010 is 520,827,720.
Communication
24. Except as provided above, members who have general queries about the meeting should
contact the Companys registrar, Capita Registrars, PXS, 34 Beckenham Road, Kent BR3 4TU.

139

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