Sefton Resources : New Development Agreement & Update on Litigation

News and Press Releases

New Development Agreement & Update on Litigation
25 June 2015

Highlights:

• The Company has entered into the Development Agreement to explore a potential transaction involving producing oil and gas assets in Indonesia.
• The Development Agreement has been signed as part of a transaction structure with the dual purpose of protecting shareholder interests and gaining a first mover advantage on the transaction.
• The Company continues to perform confirmatory due diligence on the target assets and through the Development Agreement will be working closely with experienced oil and gas professional, Rob Shepherd, on the potential transaction.
• The Development Agreement represents significant progress by the Board towards establishing a clearly defined strategy based on the acquisition of cash generative assets to underpin long term sustainable growth of the Company.

The Development Agreement

The board of directors of Sefton (the "Board") is pleased to announce the Company has entered into a development agreement (the "Development Agreement") with UTAS Petroleum Services Limited ("UTAS"), a company controlled by Rob Shepherd, an experienced and well respected oil and gas executive with over 8 years of experience as an executive of AIM quoted companies (see www.utaspetro.com). UTAS was formed by Mr Shepherd in 2012 to advise companies engaged in or investing in the oil and gas exploration and productions sectors. Using Mr Shepherd's extensive industry experience and financial contacts, particularly in emerging markets, UTAS advises clients on business strategy particularly new country entries, mergers and acquisitions, contractual negotiations, listings and capital raisings, due diligence, farm outs and strategic partner searches.

Rob Shepherd is an engineer by background who started his career at Shell before taking a number of financial positions in oil and gas industry. He was Finance Director of AIM quoted Dominion Petroleum which was acquired by Ophir Energy in 2012, a non-executive director of FTSE-250 listed Imperial Energy which was acquired by ONGC in 2008, and recently the Chief Executive of the dual-quoted (AIM and ASX) Azonto Petroleum until earlier this year. Mr Shepherd has an extensive network in both Europe and Asia, a key factor in successful transaction execution in this sector.

The Development Agreement has been carefully constructed, and the Board, having taken appropriate advice, believes it to be in the best interests of Sefton's shareholders in light of the Company's current situation. Under the Development Agreement, Sefton and UTAS have entered into an unincorporated joint venture (the "JV").

Under the terms of the Development Agreement, the Company will make an advanced payment under commercial terms of £500,000 (the "Payment Advance") to UTAS to allow the JV to progress the due diligence and possible funding arrangements for certain oil and gas properties in Indonesia which have been identified as potential target assets (the "Potential Transaction").

All activities undertaken and expenditure made by UTAS in relation to the Potential Transaction require pre-approval by the Company. Furthermore, a JV committee will be formed on which Directors of the Company will form a majority of the representatives and which will be responsible for the decisions made at all levels of the JV. The Board will receive updates on the progress of the work performed on a regular basis.

Under the terms of the Agreement, Rob Shepherd will be paid a market day rate on a monthly basis from the proceeds of the Payment Advance. With the exception of these payments, neither UTAS, nor any of the individuals associated with it, will personally profit from the terms of the Development Agreement.

In the event the Development Agreement is terminated, any unspent funds made under the Payment Advance will be repaid to the Company.

Under the Development Agreement the Company has the option to acquire the subsidiary created by UTAS to pursue the Potential Transaction for a nominal amount (the "Option"). If the Option is exercised, it is anticipated (subject to normal due diligence and take on processes expected under the AIM Rules for the appointment of directors) that Rob Shepherd would join the Company as Chief Executive Officer together with a number of additional Non-Executive directors who have been identified. His compensation at that point in time will be the subject of a separate agreement in line with market rates. The final structure, value and nature of the Potential Transaction remains subject to negotiation at this time, and there can be no certainty that it will proceed.

To the extent that the Company elects not to exercise its option or is unable to pursue the Potential Transaction, UTAS has the right to market the Potential Transaction to third parties provided that an amount equal to the Payment Advance (less any unspent funds already returned) is paid to the Company on completion of any transaction by UTAS with a third party.

The Company will update shareholders with a further announcement as and when appropriate.

The Target Asset Portfolio

The Company has identified a balanced portfolio of onshore exploration, development and producing assets in Indonesia that will be investigated under the Development Agreement. These assets are currently producing c.250 boepd, and the Board believes that they have the potential to produce up to 1,000 boepd within 12 months if developed appropriately.

The Board believes that the Company is ideally placed to secure the identified assets and maximise their production potential under the terms of the Development Agreement. Jossy Rachmantio's in-country expertise, Raylene Whitford's experience in the development and implementation of operational excellence programmes for underperforming assets, Rob Shepherd's transactional experience and network of funders, as well as the backing of a network of financial, legal and technical advisors who will be engaged by UTAS gives the Board comfort that this venture presents the best avenue possible to help grow the business.

Update on Litigation

As previously announced, James Ellerton (Sefton's former Executive Chairman) initiated legal proceedings in the State of Colorado against the Company in May 2015 (the "Ellerton Claim"). The Board believes that the Ellerton Claim is without merit, a view supported by its US legal counsel, and it is aggressively defending against the matter in the federal court in Colorado. If the Ellerton Claim cannot be resolved amicably between the parties, Sefton intends to assert counter-claims against Mr Ellerton, C&J Resources, Inc., and affiliated entities. The federal court has set an initial scheduling conference for 31 August 2015, during which a litigation and discovery plan will be put into place.

Annual Accounts

The Company confirms that it will publish its annual accounts for the thirteen-month period ended 31 January 2015 on 30 June 2015.

Raylene Whitford, CFO, commented:

This agreement with UTAS represents significant progress for Sefton, and the Board is delighted to be working with someone of Rob Shepherd's background and industry reputation. As we continue to review the target assets in Indonesia, we are increasingly confident that the portfolio has adequate substance to allow the Board to refocus and rebuild the Company, creating sustainable long term value for our shareholders.

It is important to reassure shareholders that despite the issues and relative uncertainty surrounding the Ellerton Claim, a significant amount has been done in the past two months to progress the Potential Transaction. The Development Agreement will take the Potential Transaction to the next level, allowing the recent funds raised to be deployed in the most effective means possible to the benefit of all shareholders. The signing of the Development Agreement is the next step in the turnaround of Sefton."

Visit www.seftonresources.com or contact:

Raylene Whitford, Chief Financial Officer	Tel: [phone]
Nick Harriss, Nick Athanas, Allenby Capital (Nomad)	Tel: [phone]
Nick Bealer, Cornhill Capital (Broker)	Tel: [phone]
Ben Romney, Buchanan (PR)	Tel: [phone]