Circle Oil announces its results for the six month period ended 30 June 2009

Highlights

Morocco

- Completed six well drilling programme in Morocco with discoveries in five wells and log and pressure sampling indicating likely commercial gas in the sixth well which is yet to be tested.
- Gas well ONZ-6 brought into production joining ONZ-4 with combined 2-2.5MMscfd currently being produced from both.

Egypt

- Drilling continues on NW Gemsa permit with five commercial wells completed since drilling began in mid 2008. A sixth well is presently planned to be tested.
- Production commenced in Al-Amir field from two wells at 2,300 bopd, and has since almost doubled to approximately 4,500 bopd in 3rd Quarter 2009.
- 500,000 barrels of 41oAPI oil have been produced from NW Gemsa permit by mid-September 2009.

Finance

- Raised c.£16.5m (c.$27.2m) in secondary placing with broker Fox Davies Capital.

Thomas Anderson, Chairman of Circle, commented:

"I am delighted with the progress of the Company during this period. Our daily production levels, particularly in Egypt, are building up and we are working hard to bring the next four gas wells in Morocco on-stream which should result in a healthy increase in revenues."

"There is no doubt that the Company has been transformed over the past 12 months by our extraordinary success rate with the drill bit and our ability to bring discoveries into production quickly. I believe that we can look forward to further success in Morocco and Egypt and I am also confident that we can add significantly to our growth with further drilling success both onshore and offshore in Tunisia and from proving up our blocks in Oman," he added.

Operations

It is our intention to increase our production levels in both Egypt and Morocco as quickly as possible. In Morocco, two fields ONZ-4 and ONZ-6 are already in production and four more are in the process of being tied into existing infrastructure. We have also commenced the planning and engineering processes to build a new larger trunk line to Kenitra, north of Rabat, to deliver gas from both the 2008-09 drilling campaign and any future discoveries. Negotiations are ongoing with a number of gas users in the area to take the increased production and all of the output from the Sebou permit will be sold locally.

In Egypt, Al-Amir SE1 and Al-Amir SE2 went into production in February at a rate of 2,300 bopd. Earlier this month Al-Amir SE3 and Geyad 1 went into production giving a combined average rate from the four wells of 4,300-4,500 bopd.

Plans are being finalised to bring the heavy oil discovery at Al-Amir 1 into production at an initially projected rate of approximately 500 bopd.

The appraisal drilling continues and future successful wells will be connected to the infrastructure and brought into production as quickly as possible.

Looking forward to the next 12 months the Company intends to embark on the next six well programme in Morocco and continue, without a break, our NW Gemsa drilling. We are at the final stage of selecting the contractor for the 3D seismic study in Oman on Block 49 and expect to begin the data acquisition later this year. Processing and interpretation will follow during 2010.

We are also planning a follow up 2D seismic study on the offshore Block 52 in Oman. We have had some interest from potential joint venture partners in this block and continue to work towards concluding a joint venture agreement on the permit in the medium term. We are also planning a small 2D seismic programme on our onshore blocks in Tunisia to give us better geological control in both permits before commencing further drilling on both areas.

As mentioned in the 2008 Annual Report in June, the Company is examining the possibility of adding value rapidly by investing in development or production projects in the MENA region. We have been examining a number of P1/P2 projects in this area with a view to negotiating farm-ins. These studies are ongoing and we will report on them to shareholders in due course.

Financial

In order to fund the exploration and development programme outlined above the Company decided to carry out a secondary placing of its shares with institutional investors which closed on 21 August 2009. Despite the tough market conditions, £16.5m ($27.2m) gross was raised by placing 61 million shares at a price of 27 pence each. These funds together with increasing revenue from production will be used to pay for our upcoming ambitious programme.

First production revenue recorded in the income statement amounted to $3.5m and relates to oil and gas sales in Africa. Cost of sales has been stated at an equivalent amount as sufficient information will not be available until field appraisal is more complete which will then fully quantify the detailed commercial aspects of extracting oil and gas from the Groups exploration and evaluation assets in this area.

The Company remains well funded with cash balances of US$8.8 million at 30 June 2009. This does not include the $27.2m proceeds from the share placing noted above. The loss for the period is mainly made up of a non-cash accounting charge in accordance with IAS 39 Financial Instruments: Recognition and Measurement, relating to the conversion rights attaching to the convertible loan.

Outlook

In summary, I am delighted with the progress of the Company during this period. Our daily production levels, particularly in Egypt, are building up and we are working hard to bring the next four gas wells in Morocco on-stream which should result in a healthy increase in revenues from there.

There is no doubt that the Company has been transformed over the past year by our impressive success rate with the drill bit and our ability to bring discoveries into production quickly. I believe that we can look forward to further success in Morocco and Egypt and I am also confident that we can add significantly to our growth by further drilling success both onshore and offshore in Tunisia and from proving up our blocks in Oman.

I would like to thank all our shareholders for their support, my fellow directors and the Circle team in each of our areas of interest for their contribution and commitment over the period.