MEDITERRANEAN OIL & GAS PLC (the Company or MOG ) Unaudited Interim Results for the six month period ending 30 June 2012

Transcription

1 MEDITERRANEAN OIL & GAS PLC (the Company or MOG ) 25 September 2012 Unaudited Interim Results for the six month period ending 30 June 2012 The Board of Mediterranean Oil & Gas Plc (AIM: MOG) is pleased to present the Company s Interim Report and Unaudited Financial Statements for the half year ending 30 June Financial Highlights Gas production of 26.2MM scm; 0.93 Bcf (H1, 2011: 4.74MM scm; 0.17 Bcf), from all production assets. Revenue of 8.5 million (H1 2011: 1.5 million), from all production assets. Revenue of 7.9 million (H1 2011: 1.0 million), excluding assets which are to be transferred to Canoel International Energy Limited ( CIL ). Profit from operations of 2.3 million (H1 2011: loss of (1.6) million), excluding assets which are to be transferred to CIL. Operational Highlights January: issuance of Competent Person s Report by RPS Energy Limited, increasing 2P recoverable reserves at Guendalina gas field by 42% to 31.2 Bcf (6.2 Bcf net to MOG). January: appointment of Keith Henry as Chairman and Jake Ulrich as Non-Executive Director. March: appointment of Bill Higgs as Chief Executive. April: entry into gas purchase agreement for Guendalina gas field with Repower Italia SpA. May: Italian Ministry for Economic Development grant of three year extension to the exploration permit at Ombrina Mare (BR269 GC). Post Reporting Date Highlights July: acquired 10% interest in Malta Offshore Area 4 from Leni Gas and Oil Investments Limited. August: Italian law DLGS 134/2012 passed confirming that offshore restrictions on exploration and production activities under DLGS 128/2010 will no longer apply to the Company s Ombrina Mare oil and gas field. This has enabled MOG to reactivate the authorization process to seek the award of the production concession. August: entered agreement with Genel Energy Plc ( Genel ), to farm out a 75% interest in Malta Offshore Area 4, together with a three year Area of Mutual Interest agreement in respect of offshore Malta, Libya and Tunisia. September: entered agreement with CIL to divest the Company s entire working interest in 13 non-core exploration and production gas assets, held onshore Italy. Outlook Guendalina gas sales continue to provide the majority of the Company s revenues and cash flow. Completion of the farm out of the 75% interest in Malta Offshore Area 4 to Genel, allowing the Company to proceed with planning for the first exploration well. Completion of Equipoise CPR in relation Malta Offshore Area 4. Completion of sale of non-core onshore Italy gas assets to CIL. Reach an investment decision for the Aglavizza field onshore Italy. Obtain approval from the Italian Ministry of Environment for the Environmental Impact Assessment in relation to the Ombrina Mare project and, subsequently, the award of the Production Concession, from the Ministry of Economic Development.

2 Capture exploration, development and production opportunities that can add future material resources and reserves to the Company s portfolio. William Higgs, Chief Executive, commented: The first half of 2012 was a period of consolidation after the start-up of the Guendalina gas field. We used this time to chart the path for our business and have recently achieved key steps along that path, across our portfolio. Our focus on delivering excellent technical work has been rewarded with the farm out in Malta and our retention of the operatorship for at least the first exploration well. The divestment of non-core assets onshore Italy will enable the team to concentrate on adding value at Ombrina Mare and Malta in the coming months, as well as adding additional opportunities for growth into our Resources Factory. ENQUIRIES: Mediterranean Oil & Gas Plc Bill Higgs, Chief Executive Tel: +44 (0) Chris Kelsall, Finance Director Tel: +44 (0) Liberum Capital Limited (Nominated Adviser and Broker) Clayton Bush/Ryan de Franck Tel: +44 (0) Pelham Bell Pottinger (Public Relations) Archie Berens/Charles Goodwin Tel: +44 (0) / (0)

3 Chairman s Statement Dear Shareholder, Mediterranean Oil & Gas plc (the Company or MOG ) is pleased to announce the Company s results for the six month period to 30 June I am delighted to be able to report that production from the Guendalina field and our onshore assets has performed well and the Company continues to make good progress with the development of our key assets. In May, the Italian Ministry for Economic Development granted a three year extension to our exploration permit for Ombrina Mare (WI:100% MOG). This positive step was followed in June by the Italian Government s approval of Decree 83/2012 (the Decree ), and this was ratified by both houses of the Italian Parliament in August. In summary, the ratification of the Decree lifted the restrictions imposed in August 2010 on the development of newly discovered fields offshore Italy. As a result, MOG is now able to seek the award of a production concession for the Ombrina Mare field. One of our other key assets is our Malta Offshore Area 4 Production Sharing Contract (the Malta PSC ). In July, we acquired the 10% interest held in the Malta PSC by Lenigas and Oil Investments Limited ( LGOI ). In August, the Company negotiated a farm-out agreement with Genel Energy Plc ( Genel ) whereby MOG, as operator, retains a 25% working interest and Genel holds the remaining 75%. The agreement with Genel, which still requires the approval of the Maltese authorities, provides for MOG to receive $10 million on completion of the transaction. Furthermore, Genel will cover 100% of the cost of drilling the first well, and 100% of the first $30 million of the cost of drilling the second well. Our agreement with Genel also includes an Area of Mutual Interest ( AMI ) agreement whereby we will work together to acquire exploration and production assets in the offshore basins of Libya, Tunisia and Malta. The agreement is for a minimum three year period and any assets acquired under this AMI will be shared 20% to MOG and 80% to Genel. Consistent with our strategy to divest assets that are no longer key to the growth of the Company, in early September we entered into an agreement with Canoel International Energy Limited to sell 13 non-core exploration and production assets onshore Italy. This transaction, which is awaiting the approval of the Italian authorities, will free up our team to focus on the more value-adding assets in our portfolio. We were pleased to announce the appointment of Bill Higgs as our Chief Executive in March. Bill s knowledge and experience, gained from more than 20 years experience at Chevron, has already been of immense value to the Company, as the above progress demonstrates. The above summary of some of the key events that have occurred during the period are described in more detail in the report below. We remain committed to actively seeking opportunities to grow the Company and expand our portfolio. The positive progress we have made in recent months with regards to Ombrina Mare and Malta, in particular, demonstrates MOG is building a team which can deliver on those goals. Keith Henry Chairman

4 Chief Executive s Review Dear Shareholder, In the first half of the year the Company has continued the transformation that began last year with the recapitalisation in May 2011 and the start-up of the Guendalina gas field in October 2011, with good progress being made on both the financial and operational fronts. Uninterrupted gas production at the Guendalina field has delivered important cash flow for the development of the Company. The revenues from the first half of 2012 have enabled the Company to complete payment of the capital investment for the Guendalina development and to entirely repay the loan partially used to finance the acquisition and processing of 1,012 km 2 of 3D seismic data, offshore Malta Area 4. Positive cash flow has exceeded group operational costs in the first half of the year, resulting in a steady accumulation of cash in the Company s treasury. At the close of the period the Company s cash balance stood at 4.1 million. In Italy, the ratification of Decree 83/2012 (the Decree ) relating to offshore exploration and production activities confirmed that restrictions introduced by decree DLGS 128/2010 will no longer apply to applications for production concessions that were under review at the time DLGS 128/2010 came into force. The key benefit is that MOG can now seek the award of a production concession at the Ombrina Mare oil and gas field based upon the application previously submitted in December 2008, which had received technical approval in June 2009 and was in the final stages of environmental approval when DLGS 128/2010 came into force. Ombrina Mare is a project of considerable strategic importance to the Company and one that we look forward to progressing once a production concession has been awarded. The Company s current financial and operational strength enables MOG to actively seek strategic growth opportunities while continuing to progress its portfolio of production, development and exploration assets. MOG s cashflow more than covers the Company s operating costs and enables funding of our existing portfolio. Expenditure in the reporting period has primarily been applied to de-risking activities for Malta Offshore Area 4. Production In the first half of 2012, gas production was 26.2 MMscm (0.93 Bcf), which represented an increase of over 400% compared to the first half of A full half year of gas production at the Guendalina field, is the main reason for this significant growth. Gas production onshore Italy (4.75 MMscm) matched the first half of 2011 (4.74 MMscm). Onshore Italy the Company s average realised gas sales price for the first half of 2012 was 0.30 per scm (USD11.1 per Mcf). Offshore Italy, the Company s average realised gas sales price for Guendalina gas was 0.32 per scm (USD11.7 per Mcf). Forward oil price forecasts and, in turn, forecast future gas prices, indicate that this positive trend may continue with the gas price approaching 0.33 per scm (USD12.1 per Mscf) at December 2012, based on the present forward curve for Brent crude oil and the USD/Euro exchange rate (Source: Bloomberg). The new gas sales contract for Guendalina, signed in April 2012 with Repower Italia SpA ( Repower Italia ), reflects current positive market conditions and MOG is pleased to have the contract in place with Repower Italia until the end of the next thermal year, which ends on the 1 October Development Ombrina Mare The Decree has re-opened the opportunity for the Company to develop its most important oil and gas discovery, by including a modification to the offshore restrictions to the oil and gas exploration and production activity, originally introduced by DLGS 128/2010 in August According to the Decree, the restriction applicable to offshore exploration and production activities under DLGS 128/2010 will now apply to activities up to 12 miles offshore the Italian coastline; however, the restrictions will no longer apply to: i) applications for production concessions that were under review at the time DLGS 128/2010 came into force, and any connected or subsequent proceedings; ii) any titles, including exploration licences that had already been issued prior to DLGS 128/2010 coming into force; and iii) any proceedings connected with or subsequent to such titles, including possible extensions of the same.

5 The key benefit of the new law is that the Company s subsidiary, Medoilgas Italia SpA is now seeking the award of a production concession covering the Ombrina Mare oil and gas field in the central Adriatic. The relevant application, which includes the proposed field development plan, was submitted in December 2008, received technical approval in June 2009 and was completing the final stages of environmental approval when DLGS 128/2010 came into force. Furthermore, the Company s existing production concession AC19.PI in the Northern Adriatic is now also excluded from the restrictions of DLGS 128/2010. The immediate goals of the Company are to seek the award of a production concession for the Ombrina Mare field, enabling the development of the 40 million barrels of certified 2P oil reserves and 6.5 Bcf of certified 2P gas reserves, and to increase the priority of the development of the Northern Adriatic discoveries comprised in AC19.PI, which have already discovered approximately 35 Bcf of contingent resources net to the Company. Aglavizza Activity in the reporting period for the Aglavizza development opportunity, located onshore central Italy in the Abruzzo region, has focused on seeking the final award of a production concession and in planning a production test of the well to be drilled following the concession award. We aim to have received the concession award, conducted the production test and reached the investment decision on Aglavizza, prior to year end. Exploration Offshore Malta Area 4 Activity to date during 2012 has focused on the processing and interpretation of the 1,012 km 2 of new long offset 3D seismic acquired in late 2011, together with further geological and geophysical analysis and preparation to farm out a portion of the Company s equity in the block. Post the period end, the Company announced two transactions in respect of this licence. On 13 August, the Company announced that the Maltese Minister for Resources and Rural Affairs had approved the transfer of the 10% interest held by Leni Gas and Oil Investments Limited ("LGOI") in the Malta Offshore Area 4 (Blocks 4, 5, 06 and 7) Production Sharing Contract (the Malta PSC ) to Phoenicia Energy Company Limited ("PECL"), a 100% owned subsidiary of MOG. This transaction, which had been agreed with LGOI in July, resulted in PECL (a 100% owned subsidiary of MOG) owning 100% of the equity in the Malta PSC. Leni Gas and Oil plc ( LGO ), the 100% owner of LGOI has recently suggested, by way of public announcement, that MOG or PECL may have misrepresented to LGO the factual position prior to the sale by LGOI of its 10% interest. MOG s legal advisers have written to LGO s legal advisers to set out, in detail, why any suggestion of misrepresentation is unfounded, and why the sale of LGOI s working interest in the Malta PSC is unaffected. In addition, MOG continues to reserve its rights in respect of statements made in LGO s announcement on 3 September In late August the Company agreed the farm out of a 75% interest in the Malta PSC (the Malta Farm Out ) to Genel Energy plc ( Genel ). This transaction is conditional upon receipt of approval by the Maltese Minister for Resources and Rural Affairs, together with the grant of a minimum one year extension to the first phase exploration period of the Malta PSC. Completion of the Malta Farm Out will allow the Company to move ahead with the planning of the first exploration well. Under the terms of the Malta Farm Out, in consideration for Genel acquiring a 75% interest in the Malta PSC, Genel will: pay PECL US$10 million upon completion of the Malta Farm Out; provide PECL a 100% carry on the first exploration well, which is planned to be drilled to a minimum depth of 2,500 metres; provide PECL a 100% carry on the second exploration well up to a maximum of US$30 million gross expenditure; provide, at PECL s option should the costs of the second well exceed US$30 million, a loan facility to fund PECL s 25% share of any additional expenditure, at an interest rate equivalent to 3 Month Libor plus 400 bps. Further, under the Malta Farm Out, PECL is to remain as operator until completion of the first exploration well, at which time Genel may elect to become the operator, or at such later date as the parties may agree. Upon completion of the Malta Farm Out, MOG through its wholly owned subsidiary PECL, will be fully funded on its share of the first and second exploration wells under the Malta PSC. The Company retains a significant ownership interest and exposure to the exploration upside in the Malta PSC through its residual 25% interest. An Area of Mutual Interest Agreement ("AMI") has been also entered with Genel to cooperate in acquiring exploration and production assets in the offshore basins of Libya, Tunisia and Malta for a minimum term of three years. The equity in any

6 asset acquired within the AMI will be shared on the basis of 20% to MOG and 80% to Genel. Through this strategic partnership the Company will be well placed to realize additional growth potential offshore Malta, as well as Libya and Tunisia. Monte Grosso Onshore Italy Permitting activity and existing well site maintenance works were the main activities conducted during the period. The Monte Grosso 2 exploration drilling project presently remains on hold, pending resolution of residual permitting issues. S. Laurent Onshore France The gas potential of the permit is currently the key exploration target in this asset. Large and high-risk gas leads of between 3 and 4 Tcf have been highlighted in the area and an infill seismic campaign is currently being prepared to supplement existing seismic data and allow an improved definition of the leads. Portfolio Rationalisation In early September, the Company announced that, through its subsidiaries, Medoilgas Italia SpA and Medoilgas Civita Limited, it had entered into a sale and purchase agreement (the Sale and Purchase Agreement ) with Canoel International Energy Limited ( CIL ), to transfer to CIL and/or its nominated subsidiary, MOG s entire working interest in the 13 non-core exploration and production gas assets onshore Italy (the Assets ). The transaction followed the MOG Board s decision to rationalise the Company s current onshore Italy portfolio by divesting gas production concessions and exploration permits that are no longer considered to be strategic for the growth of the Company s future gas production. The 2P gas reserves, which are to be divested as part of the Transaction, amount to 1.4 Bcf, representing 7.5% of MOG s total 2P gas reserves of 18.4 Bcf. The corresponding gas production that is to be divested is currently 13,800 m 3 /day, representing approximately 6% of MOG s revenues. Under the terms of the Sale and Purchase Agreement, on Completion: CIL will pay to MOG the sum of 100 as consideration for the acquisition of the Company s working interests held in the Assets; CIL agrees to assume the liability for all future plug, abandonment and site remediation costs associated with the Assets; MOG will pay 1,250,000 to CIL as a partial contribution towards the future plug, abandonment and site remediation costs for the Assets; MOG will credit CIL the revenue MOG received from the Assets during the period between the Effective Date of 24th August 2012 and the Completion Date (the Interim Period ), net of allowable operating costs and agreed capital expenditure associated with the Assets and incurred by MOG during the Interim Period. Completion of the transaction is conditional upon MOG receiving the approval of the Italian Ministry for Economic Development for the transfer of the Assets to CIL, and CIL receiving the approval of the Toronto Stock Exchange (TSX). Financial Results The Company has recently announced the divestment of non-core exploration and production assets, onshore Italy ( Assets Held for Sale ) to CIL. Excluding the Assets Held for Sale, the Company generated revenues of 7.9 million in the 6 months ended 30 June 2012 (H1, 2011: 1.0 million). Total production of gas and condensates from all assets was 26.2 MMscm (0.93 Bcf), at an average gas sales price (across both onshore and offshore production) of 0.32 per scm (USD 11.6/Mscf). The significant increase in revenues occurred as a result of the commencement of gas production at the Guendalina offshore gas field in late The full-period effect of increased gas production in turn enabled the Company to achieve profit from operations of 2.3 million (H1, 2011: loss of 1.6 million). Profit from continuing operations after tax was 1.7 million. While this result represented a reduction when compared to the 3.1 million profit from continuing operations in the half year ended 30 June 2011, it is noted that the 2011 half year result was largely attributable to a one off finance gain of 5.7m arising on the settlement of financial liabilities, as part of the Group s recapitalization undertaken in May As at 30 June 2012, MOG held 4.1 million on cash and cash equivalents. The Company expects to remain in a sound funding position given the levels of gas production which are being sustained, particularly at the Guendalina gas field.

7 Health and Safety The Company continues to be committed to maintaining the highest standard in health, safety and environmental management; however one injury requiring medical treatment occurred during the period under review when an individual slipped while undertaking maintenance work at the Ombrina Mare platform. An incident investigation was immediately activated and a remedy plan set up and implemented. Outlook MOG has a broad portfolio of production, development and exploration assets and a secure financial position. Revenues from gas sales provide a sound financial position going forward and more than cover the Company s operating costs. Over the next 12 months, MOG intends to progress its key assets and pursue attractive and material strategic growth opportunities that we expect to identify. One of the strengths of the Company is the wide international experience of its senior managers, particularly in the Mediterranean area, and the operational capability of its staff and organisation. This has been preserved during the critical period of financial uncertainty in 2011 and we believe that it is now a key strength supporting the Company s ambitious growth objectives. William Higgs Chief Executive Qualified person In accordance with the guidelines of the AIM Market of the London Stock Exchange, Dr Bill Higgs, Chief Executive of Mediterranean Oil & Gas Plc, a geologist, explorationist and reservoir manager with over 23 years oil and gas industry experience, is the qualified person as defined in the London Stock Exchange s Guidance Note for Mining and Oil and Gas companies, who has reviewed and approved the technical information contained in this announcement. Glossary Bbls/day BBbbls Bcf Contingent oil/gas resources Mcf MMcf MMbbls MMscm OBM2 DIR P1 & P2 Reserves Prospective oil/gas resources Scm SPE/WPC Stock tank barrels of oil per day Billion stock tank barrels of oil Billion cubic feet of gas Has the meaning ascribed by the SPE/WPC Standard Thousand cubic feet of gas Million cubic feet of gas Million stock tank barrels of oil Million standard cubic metre Horizontal appraisal well drilled on the Ombrina Mare Oil & Gas Field and completed as an oil producer in June 2008 Proven plus probable reserves as defined in the SPE/WPC Standard Has the meaning ascribed by the SPE/WPC Standard Standard cubic metre Society of Petroleum Engineers/World Petroleum Congress SPE/WPC Standard Definitions and methodology for certifying hydrocarbon reserves and resources adopted by the SPE/WPC from time to time which presently requires the application of the 2007 Petroleum Resources Management System standards.

8 INDEPENDENT REVIEW REPORT TO MEDITERRANEAN OIL & GAS PLC Introduction We have been engaged by the company to review the set of interim financial statements in the half-yearly financial report for the six months ended 30 June 2012 which comprise the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of cash flows 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. Directors responsibilities The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts. 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. Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability. 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 interim financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. BDO LLP Chartered Accountants and Registered Auditors London United Kingdom 24 September, 2012 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

9 MEDITERRANEAN OIL & GAS PLC (the Company or MOG ) Consolidated Statement of Comprehensive Income for the period ended 30 June 2012 Note Unaudited six months ended 30 June 2012 Audited year ended 31 December 2011 Unaudited six months ended 30 June 2011 '000 '000 '000 Revenue 7,907 4,661 1,040 Cost of sales (1,157) (1,000) (474) Gross profit 6,750 3, Other operating income Administrative expenses Depreciation, depletion and amortisation (2,410) (1,395) (333) Impairment - (1,086) (1,042) Other administrative expenses (2,093) (3,236) (1,299) Total administrative expenses (4,503) (5,717) (2,674) Profit/(Loss) from operations 2,263 (1, 798) (1,624) Finance expenses (262) (1,454) (1,071) Finance income 91 6,182 6,070 Profit from continuing operations before tax 2,092 2,930 3,375 Tax (expense) / credit (411) 3,598 (18) Profit from continuing operations after tax 1,681 6,528 3,357 (Loss)/profit on discontinued operations net of tax Profit for the period/year and total comprehensive income attributable to the equity holders of the parent (1,259) (96) (42) 422 6,432 3,315 Earnings per share attributable to the equity holders of the parent (in Euro) Basic Diluted Profit per share on continued operations (in Euro) Basic and diluted Loss per share on discontinued operations (in Euro) Basic and diluted

10 Consolidated Statement of Financial Position at 30 June 2012 Unaudited 30 June 2012 Audited 31 December 2011 Unaudited 30 June 2011 Assets '000 '000 '000 Non-current assets Property, plant and equipment 17,840 20,500 2,444 Exploration and evaluation assets 28,900 30,848 39,547 Available-for-sale investments Other receivables ,515 Deferred tax asset 3,742 3,742 - Total non-current assets 51,213 55,823 44,540 Current assets Inventories 2,531 2,533 2,578 Trade and other receivables 6,105 8,414 7,478 Cash and cash equivalents 4,144 3,703 17,478 Non-current assets classified as Held for sale Total current assets 12,780 14,650 27,534 Total assets 63,993 70,473 72,074 Liabilities Non-current liabilities Provisions 5,519 8,376 6,930 Total non-current liabilities 5,519 8,376 6,930 Current liabilities Trade and other payables 4,322 10,217 16,589 Corporation tax liabilities Non-current liabilities classified as Held for sale 3 1, Total current liabilities 6,158 10,538 16,702 Total liabilities 11,677 18,914 23,632 Total net assets 52,316 51,559 48,442 Capital and reserves attributable to equity holders of the company Share capital 5,058 5,058 4,899 Deferred shares 10,721 10,721 10,721 Share premium 40,711 40,711 38,700 Warrant and share option reserve 1, ,940 Contributed equity reserve 8,111 8,111 8,111 Retained deficit (13,349) (13,771) (16,929) Total equity 52,316 51,559 48,442

11 Consolidated Statement of Changes in Equity at 30 June 2012 Contributed Equity reserve Warrant and share option reserve Convertible debt reserve Share capital Deferred shares Share premium Retained deficit Total equity '000 '000 '000 '000 '000 '000 '000 '000 Balance at 1 January ,285-20, (20,440) 11,825 Shares issued fundraising 3,866-16,316-2, ,352 Shares issued settlement of 469-2,331 8,111 - (68) 68 10,911 convertible debt Share consolidation (10,721) 10, Share-based payment Lapse of options (128) Income for the period ,315 3,315 Unaudited balance at 30 June ,899 10,721 38,700 8,111 2,940 - (16,929) 48,442 Balance at 1 January ,285-20, (20,440) 11,825 Shares issued - fundraising 4,025-18, ,352 Shares issued settlement of 469-2,331 8,111 - (68) 68 10,911 convertible debt Share consolidation (10,721) 10, Share-based payment Lapse of options (169) Income for the period ,432 6,432 Audited balance at 31 December ,058 10,721 40,711 8, (13,771) 51,559 Balance at 1 January ,058 10,721 40,711 8, (13,771) 51,559 Share-based payment Income for the period Unaudited balance at 30 June ,058 10,721 40,711 8,111 1,064 - (13,349) 52,316

12 Consolidated Statement of Cash Flows for the period ended 30 June 2012 Unaudited six months ended 30 June 2012 Audited year ended 31 December 2011 Unaudited six months ended 30 June 2011 Cash flows from operating activities '000 '000 '000 Profit for the period/year 422 6,432 3,315 Adjustments for: Depreciation, depletion and amortization 2,410 1, Impairment - 1,086 1,042 Foreign exchange 42 (245) (320) Finance income (17) - (28) Finance expense Share-based payments expense Other net finance expense - 1,038 - Unwinding of discount on provision Income tax expense /(credit) 411 (3,598) 18 Finance gain on settlement of debt - (5,707) (5,707) Loss on discounted operations net of tax 1, Cash flows from operating activities before changes in 5,008 1,050 (115) working capital and provisions Decrease/(Increase) in trade and other receivables 2,379 (4,496) (4,087) Decrease in inventories (Decrease)/Increase in trade and other payables (4,901) 4,692 2,984 (Decrease)/Increase in provisions (311) Taxes paid (47) (633) (4) Net cash flows from/(used in) operating activities 2,130 (1,047) (1,197) Investing activities Purchase of Property, plant and equipment (1,176) (16,327) (2,025) Exploration costs incurred (439) (1,440) - Interest received Net cash used in investing activities (1,615) (17,752) (2,009) Financing activities Issue of new shares cash received - 22,748 22,748 Issue of new shares cost of issuing - (826) (826) New loan draw down 2, Interest paid 51 (257) (109) Repayment of loan (2,051) (3,877) (3,877) Net cash generated from financing activities - 17,788 17,936 Net increase in cash and cash equivalents 515 1,083 14,730 Cash and cash equivalents at the beginning of the 3,703 2,810 2,810 period/year Foreign exchange (losses) on cash and cash equivalents (74) (190) (62) Cash and cash equivalents at the end of the 4,144 3,703 17,478 period/year

13 Mediterranean Oil & Gas Plc Unaudited notes forming part of the consolidated interim financial statements for the period ended 30 June Accounting polices Basis of preparation The interim financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board (IASB) and in accordance with the Companies Act 2006, as applicable to companies preparing their accounts under IFRS, adopted by the EU. The interim financial statements have been prepared using the accounting policies which will be applied in the Group's statutory financial statements for the period ended 31 December The group has not elected to apply IAS 34. For the purposes of this interim statement, the comparative periods presented are the year ended 31 December 2011 and the six months ended 30 June The financial information for the period ended 31 December 2011 does not constitute the full statutory accounts for that period. The Annual Report and Financial Statements for 2011 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for 2011 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act However it did draw attention to certain matters by way of emphasis. Going concern The directors consider that it is appropriate for the interim financial statements to be prepared on a going concern basis. At 30 June 2012, the Group has a net cash position of 4.1m and no outstanding loans or borrowings. Management has prepared cash flow projections which indicate that the Group can continue to meet its liabilities as they fall due and meet minimum spend commitments on its licences for a period of not less than 12 months from the date of authorisation of the interim financial statements. 2 Financial reporting period The interim financial information for the period 1 January 2012 to 30 June 2012 is unaudited. In the opinion of the directors the interim financial information for the period presents fairly the financial position, and results from operations and cash flows for the period and is in conformity with generally accepted accounting principles which are consistently applied. The accounts incorporate comparative figures for the audited year ended 31 December 2011 and unaudited six months ended 30 June The financial information contained in this interim report does not constitute statutory accounts as defined by section 435 of the Companies Act 2006.

14 Mediterranean Oil & Gas Plc Unaudited notes forming part of the consolidated interim financial statements for the period ended 30 June Discontinued operations The company has recently announced the divestment of non-core exploration and production gas assets onshore Italy. These assets which belong to its subsidiaries Medoilgas Italia Spa and Medoilgas Civita Limited, are listed below: Masseria Grottavecchia San Teodoro Torrente Cigno Misano Adriatico Sant Andrea Masserai Petrilli Masseria Acquasalsa Lucera San Mauro Montalbano Serra dei Gatti Villa Carbone Colle dei Nidi The above assets are presented in the Consolidated Statement of Financial Position as non-current assets held for sale in accordance with IFRS 5 Non-current assets held for sale and discontinued operations. The movements of this operation in the consolidated statement of financial position can be summarised as follows: Unaudited 30 June 2012 Assets Property, plant and equipment 2,482 Exploration and evaluation assets 241 Impairment of assets (2,723) Non-current assets classified as held for sale - Non-current liabilities Decommissioning liabilities 2,717 Release of decommissioning liability (1,467) Non-current liabilities held for sale (1,250) The income statement loss on discontinued operations is summarised as follows: '000 Unaudited Audited Unaudited 31 December 30 June 30 June '000 '000 '000 Revenue Cost of sales (518) (850) (338) Unwinding discount (129) (234) (117) Impairment of assets classified as held for sale (2,723) - - Release of decommissioning liability 1, Loss on discontinued operations net of tax (1,259) (96) (42)

15 Mediterranean Oil & Gas Plc Unaudited notes forming part of the consolidated interim financial statements for the period ended 30 June Earnings/(loss) per share The calculation of basic loss per share has been based on the profit for the period of 422,409 (December ,432,000; June ,314,631) and the weighted average number of shares being 429,117,710 ordinary shares in issue for the period ended 30 June 2012 (December ,140,596; June ,015,822). Earnings per share for the period ended 30 June 2012 on continued operations: basic and diluted Earnings per share for the period ended 30 June 2012 on discontinued operations: basic and diluted In the current period the number of potentially dilutive ordinary shares, in respect of Directors and employee share options is 15,571,823. These potentially dilutive ordinary shares may have a dilutive effect on future earnings per share. 5 Subsequent events On 3 August 2012 the Italian Parliament approved and ratified Decree 83/2012 which confirmed that the earlier restrictions of Decree 128/2010, as it related to MOG s offshore licences including Ombrina Mare, would no longer apply. Following this, the Company has reactivated the process to obtain the award of a production concession covering the Ombrina Mare oil and gas field. On 13 August 2012 the Company announced that the Maltese Minister for Resources and Rural Affairs had approved the transfer of the 10% interest held by Leni Gas and Oil Investments Limited ("LGOI") in the Malta Offshore Area 4 (Blocks 4, 5, 6 and 7) Production Sharing Contract (the Malta PSC ) to Phoenicia Energy Company Limited ("PECL"), a 100% owned subsidiary of MOG. This transaction, which had been agreed with LGOI in July, resulted in PECL owning 100% of the equity in the Malta PSC. Leni Gas and Oil plc ( LGO ) has recently suggested, by way of public announcement, that MOG or PECL may have misrepresented to LGO the factual position prior to the sale by LGOI of its 10% interest. MOG s legal advisers have written to LGO s legal advisers to set out, in detail, why any suggestion of misrepresentation is unfounded, and why the sale of LGOI s working interest in the Malta PSC is unaffected. In addition, MOG continues to reserve its rights in respect of statements made in LGO s announcement on 3 September On 23 August 2012 the Company announced it has agreed, among other things, the farm out of a 75% interest in the Malta PSC (the Malta Farm Out ) to Genel Energy plc ( Genel ). This transaction is conditional upon receipt of approval by the Maltese Minister for Resources and Rural Affairs, together with the grant of a minimum one year extension to the first phase exploration period of the Malta PSC. Under the terms of the Malta Farm Out, in consideration for Genel acquiring a 75% interest in the Malta PSC, Genel will: (1) pay PECL US$10 million upon completion of the Malta Farm Out; (2) provide PECL a 100% carry on the first exploration well, which is planned to be drilled to a minimum depth of 2,500 metres; (3) provide PECL a 100% carry on the second exploration well up to a maximum of US$30 million gross expenditure; and (4) provide, at PECL s option, should the costs of the second well exceed US$30 million, a loan facility to fund PECL s 25% share of any additional expenditure, at an interest rate equivalent to 3 Month Libor plus 400 bps. On 6 September 2012, the Company announced the divestment of interests in 13 non-core exploration and production assets (onshore Italy) held by its subsidiaries Medoilgas Italia Spa and Medoilgas Civita Limited by entering a sale and purchase agreement with Canoel International Energy Limited ( CIL ). As part of this agreement the Company is required to pay 1.25m to CIL as partial contribution towards future plug, abandonment and site remediation cost for these assets. The transaction has been undertaken by the Company in order to rationalise its onshore Italy portfolio by divesting gas production concessions and exploration permits which are not considered to be strategic for the Company s future growth. The economic impact of this transaction is described in Note 3.