Persian Gold Interim

I N T E R I M R E P O R T 2 0 0 9

Petrel Resources

Petrel Resources plc

Interim Results for the Six Month Period to 30th June 2009

Iraq remains the focus of Petrel. The country has the best natural resources playworldwide, but it is a complicated place to do business. No one has more recent practicalexperience or understands the potential and challenges of the country better than Petrel.The position of the Petrel/Makman contract on the Subba and Luhais oilfielddevelopment has not changed in recent months. There is ongoing contact between thepartners, but agreements accepted by Petrel are not being implemented. There is asolution to this problem. We will continue to talk to the parties involved and to new partieswho believe that they can broker a settlement. In the meantime, development at Subbaand Luhais is at a standstill, while nothing is happening on our other interests; Block 6and Merjan. Meanwhile, progress is being made in Jordan, where protracted farm outdiscussions continue. Our technical and geological analysis has been accepted by thepotential partner. The challenging capital market conditions of the past twelve monthshave made capital raising difficult for the partner.

Let me once again try to explain the current situation in Iraq.

Iraqi oil output has fallen since 1990. But State producing companies have done well tostabilise output at c. 2.5 million barrels per day. While well below pre-2003 levels, this hasto be seen in terms of decades of strife, sanctions and under-investment.

Security continues to improve. Gradual withdrawal of international forces helps re-establish Iraqi sovereignty and legitimacy. Regional tensions have reduced with the newUS Administration. Neighbours are now working more closely with the Iraqi authorities.

As of September 2009, no one is sure how the laws, contracts and general governmentwill evolve. The understandable preference of the Iraqi authorities is to drive the bestbargain for their citizens. For historical reasons, there is public suspicion of the super-major oil companies. Hence, the attempts to develop the oil industry by means of servicecontracts. Such an approach is normal in the region, but not suitable for a country thathas Iraq’s recent history.

The Oil Ministry has been active. Several deals have been announced, but none havegone smoothly. In the recent bid round, the lowest bids were from emerging National OilCompanies. But these enterprises do not have the technology and have notdemonstrated the performance that Iraq rightly demands and needs.

The bid round process was off to a shaky start this June when the bids deviated widelyfrom Ministry expectations. Only a BP-led consortium concluded a deal, and it is unlikelythat this will be implemented to the satisfaction of both parties. Service contracts do notalign the interests of the players or guarantee access to the best technology to maximiserecovery from reservoirs.

Petrel Resources

The recent bid round did provide valuable information. The majors submitted bids basedon increased production. The targets proposed by the majors were impressive. The BPconsortium expected to increase output by nearly 2 million barrels daily on the Rumailafield alone – effectively doubling Iraqi exports through just one project! This confirmsPetrel’s long held belief that Iraqi oil potential is world class, but it needs moderntechnology, international capital and skilled management to unlock the potential.Persuading the Iraqi authorities that 80% of a big cake is better than 95% of a smallercake is the challenge. The forthcoming second round will face similar difficulties to the first. Iraq remains achallenging location. Companies will only invest when returns are adequate.

The current legal situation is further complicated by attempts of regional authorities inIraq to extend their influence into areas properly belonging to the central Government.This exacerbates nationalism and complicates matters. Attempting to bypass thelegitimate sovereign authorities is not a sensible or ethical way to invest. This leads topolitical sensitivities that impede the cutting of pragmatic deals that would rapidly boostproduction.

We expect most issues to clarify in the coming months. Divisions among the policy-making parties probably require democratic endorsement in the upcoming elections inJanuary.

It remains unclear how these negotiations will play out.

The opportunities in Iraq and the position of Petrel encouraged UK institutions to investin Petrel. In May, some £1,840,500 was subscribed at 45p a share.

The opportunity in Iraq is greater than ever. Iraqi oil is low risk and low cost. Reservoirsare large and infrastructure is extensive. OPEC quotas are not a constraint.

Petrel is determined to stay in Iraq to participate in the growth. We must resolve thecurrent impasse and move on. Efforts continue.

Petrel has survived through all the challenges, demonstrated its commitment andresilience, and expects to share in the rewards.

John TeelingChairman

25th September 2009

Financial Information (unaudited)Six Months Ended Year Ended

30 June 09 30 June 08 31Dec08unaudited unaudited audited

Condensed Consolidated Income Statement €€’000 €€’000 €€’000

REVENUE 0 8,370 8,233Cost of Sales 0 (8,370) (8,233)

–––––– –––––– ––––––Gross Profit 0 0 0

Operating Costs (280) (246) (568)Foreign exchange (Loss) / Profit 48 (224) (286)

–––––– –––––– ––––––OPERATING LOSS (232) (470 (854)

Investment revenue 4 53 92–––––– –––––– ––––––

LOSS BEFORE TAXATION (228) (417) (762)

Income tax expense 0 0 0–––––– –––––– ––––––

LOSS FOR THE PERIOD (228) (417) (762)–––––– –––––– –––––––––––– –––––– ––––––

LOSS PER SHARE - basic and diluted (.31c) (.58c) (1.05c)–––––– –––––– –––––––––––– –––––– ––––––

Condensed Consolidated Balance Sheet 30 June 09 30 June 08 31 Dec 08unaudited unaudited audited

€€’000 €€’000 €€’000NON-CURRENT ASSETSIntangible assets 4,937 4,611 4,782

–––––– –––––– ––––––

CURRENT ASSETSConstruction contracts 7,097 2,623 5,316Trade and other receivables 38,153 35,300 38,685Cash and cash equivalents 1,337 1,606 559

–––––– –––––– ––––––46,587 39,529 44,560

–––––– –––––– ––––––TOTAL ASSETS 51,524 44,140 49,342

–––––– –––––– ––––––

CURRENT LIABILITIESProject advance payments (13,721) (12,315) (13,932)Bank borrowings (22,940) (18,247) (21,560)Trade and other payables (974) (1,052) (1,807)

–––––– –––––– ––––––(37,635) (31,614) (37,299)

NET CURRENT ASSETS 8,952 7,915 7,261–––––– –––––– ––––––

TOTAL ASSETS LESS CURRENT LIABILITIES 13,889 12,526 12,043–––––– –––––– –––––––––––– –––––– ––––––

EQUITYShare capital 18,742 16,596 16,596Reserves (4,853) (4,070) (4,553)

–––––– –––––– ––––––TOTAL EQUITY 13,889 12,526 12,043

–––––– –––––– –––––––––––– –––––– ––––––

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Condensed Consolidated Statement of Changes in Shareholders Equity

Six Months Ended 30 June 09Share Share Other Translation Retained Total

Capital Premium Reserves Reserves Losses Equity€€'000 €€'000 €€'000 €€'000 €€'000 €€'000

As at 1 January 2008 903 15,693 214 0 (3,867 12,943 Loss for the period (417) (417)

–––––– –––––– –––––– –––––– –––––– ––––––As at 30 June 2008 903 15,693 214 0 (4,284) 12,526

Loss for the period (139) (344) (483)–––––– –––––– –––––– –––––– –––––– ––––––

As at 31 December 2008 903 15,693 214 (139) (4,628) 12,043 Shares issued 55 2,137 2,192 Share issue expenses (46) (46)Loss for the period (72) (228) (300)

–––––– –––––– –––––– –––––– –––––– ––––––As at 30 June 2009 958 17,784 214 (211) (4,856) 13,889

–––––– –––––– –––––– –––––– –––––– –––––––––––– –––––– –––––– –––––– –––––– ––––––

Condensed Consolidated Cash Flow Six Months Ended Year Ended30 June 09 30 June 08 31Dec08unaudited unaudited audited

€€’000 €€’000 €€’000CASH FLOWS FROM OPERATING ACTIVITIESLoss for the period (228) (417) (762)Investment revenue recognised in loss (4) (53) (92)Exchange movements (357) (779) 273

–––––– –––––– ––––––(589) (1,249) (581)

Movements in Working Capital (2,293) (5,479) (9,184)–––––– –––––– ––––––

CASH USED IN OPERATIONS (2,882) (6,728) (9,765)

Investment revenue 4 53 92 –––––– –––––– ––––––

NET CASH USED IN OPERATING ACTIVITIES (2,878) (6,675) (9,673)

INVESTING ACTIVITIESPayments for intangible assets (227) (421) (731)

–––––– –––––– ––––––NET CASH USED IN INVESTING ACTIVITIES (227) (421) (731)

–––––– –––––– ––––––FINANCING ACTIVITIESProceeds from issue of equity shares 2,192 0 0 Share issue costs (46) 0 0

–––––– –––––– ––––––NET CASH GENERATED BY FINANCING ACTIVITIES 2,146 0 0

–––––– –––––– ––––––NET DECREASE IN CASH AND CASH EQUIVALENTS (959) (7,096) (10,404)

Cash and cash equivalents at beginning of the period (21,001) (10,324) (10,324)

Effect of exchange rate changes on cash held 357 779 (273)–––––– –––––– ––––––

CASH AND CASH EQUIVALENT AT THE END OF THE PERIOD (21,603) (16,641) (21,001)

–––––– –––––– –––––––––––– –––––– ––––––

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Financial Information (unaudited)

1. InformationThe financial information for the six months ended June 30th, 2009 and the comparative amounts for the sixmonths ended June 30th, 2008 are unaudited. The financial information above does not constitute full statutoryaccounts within the meaning of section 148 of the Companies Act 1963.The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting asadopted by the European Union. The accounting policies and methods of computation used in the preparation ofthe Interim Financial Report are consistent with those used in the Group 2008 Annual Report, which is availableat www.petrelresources.comThe interim financial statements have not been audited or reviewed by the auditors of the Group pursuant to theAuditing Practices board guidance on Review of Interim Financial Information.

2. No dividend is proposed in respect of the period.

3. Loss per share30 June 09 30 June 08 31 Dec 08

€€ €€ €€

Loss per share – Basic and Diluted (0.31c) (0.58c) (1.05c)–––––– –––––– –––––––––––– –––––– ––––––

Basic and diluted loss per shareThe earnings and weighted average number ofordinary shares used in the calculation of basic lossper share are as follows:

Loss for the year attributable to equity holders of the Parent (227,981) (416,808) (761,637)––––––– ––––––– –––––––––––––– ––––––– –––––––

Weighted average number of ordinary shares for the purpose of basic earnings per share 73,558,973 72,229,796 2,229,796

––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

4. Intangible Assets30 June 09 30 June 08 31 Dec 08

Exploration and evaluation assets: €€’000 €€’000 €€’000Opening balance 4,782 4,190 4,190Additions 227 421 731Exchange translation adjustment (72) - (139)

––––––– ––––––– –––––––Closing balance 4,937 4,611 4,782

––––––– ––––––– –––––––––––––– ––––––– –––––––

Exploration and Evaluation expenditure at 30 June 2009 represents exploration and related expenditure inrespect of projects in Iraq and Jordan.

No amortisation is charged prior to the commencement of production. When production commences within anarea of interest previously capitalised in respect of exploration, evaluation and development, these costs areamortised over the commercial reserves of the mining property on a unit of production basis.

The group’s activities are subject to a number of significant potential risks including;• Funding risks – include the ongoing funding of the Subba & Luhais development services contract and

raising of capital to fund further exploration;• Recoverability of receivables – Trade receivables relating to amounts billed in respect of the Subba & Luhais

development services contract are past due at the reporting date for which the group has not made anyimpairment provisions as the amounts are still considered recoverable;

• Going concern;• Valuation of work in progress.• Price fluctuations;• Foreign exchange risks;• Uncertainties over development and operational costs;• Political and legal risks, including arrangements for licenses, profit sharing and taxation;• Foreign investment risks including increases in taxes, royalties and renegotiation of contracts;• Liquidity risks;

The realisation of these intangible assets is dependent on the successful development of economic reserves,including the ability of the Group to raise finance to develop the project. Should this prove unsuccessful the valueincluded in the balance sheet would be written off.

The directors are aware that by its nature there is an inherent uncertainty in such exploration and evaluationexpenditure as to the value of the asset. Having reviewed the exploration and evaluation assets at 30 June 2009,the directors are satisfied that the value of the intangible asset is not impaired.

Petrel Resources

Financial Information (unaudited)

Regional Analysis – Group Iraq Jordan Total€€000 €€000 €€000

At 1 January 2008 3,542 648 4,190Additions 204 217 421

––––––– ––––––– –––––––Balance at 30 June 2008 3,746 865 4,611Additions 202 108 310Exchange translation adjustment (134) (5) (139)

––––––– ––––––– –––––––Balance at 31 December 2008 3,814 968 4,782Additions 96 131 227Exchange translation adjustment (58) (14) (72)

––––––– ––––––– –––––––Balance at 30 June 2009 3,852 1,085 4,937

––––––– ––––––– –––––––––––––– ––––––– –––––––

5. Construction Contracts 30 June 09 30 June 08 31 Dec 08Work in progress: €€000 €€000 €€000Opening Balance 5,316 9,558 9,558Additions 1,781 1,435 3,991Work completed - (8,370) (8,233)

––––––– ––––––– –––––––Closing Balance 7,097 2,623 5,316

––––––– ––––––– –––––––––––––– ––––––– –––––––

The above relates to expenditure incurred and not billed in respect of the Subba and Luhais development servicecontracts.

The Subba & Luhais development services contract represents a contract with the Iraqi Ministry of Oil to assistdesign, supply materials and services for the development of this oilfield. The total amount of this contract isUS$197 million.

The contract sets out details of when invoices should be raised, and on that basis, in the opinion of the directorsthe carrying value is recoverable under the terms of the contract.

6. CASH AND CASH EQUIVALENTSThe Interim Report for the six months to June 30th, 2008 was approved by the Directors on 26th September2008.

30 June 09 30 June 08 31 Dec 08€€000 €€000 €€000

Cash and cash equivalents 1,337 1,606 559Bank overdraft (22,940) (18,247) (21,560)

––––––– ––––––– –––––––(21,603) (16,641) (21,001)

––––––– ––––––– –––––––––––––– ––––––– –––––––

7. SHARE CAPITAL 30 June 09 30 June 08 31 Dec 08€€000 €€000 €€000

Authorised:200,000,000 ordinary shares of €0.0125 2,500 2,500 2,500

––––––– ––––––– –––––––––––––– ––––––– –––––––

Allotted, Called Up and Fully Paid:Opening 72,229,796 shares of €0.0125 903 903 903Issued 4,434,828 shares of €0.0125 55 - -

––––––– ––––––– –––––––Closing 76,664,624 shares of €0.0125 958 903 903

––––––– ––––––– –––––––––––––– ––––––– –––––––

Movements in issued share capitalOn 4 February 2009, 344,828 shares were issued at a price of 29p each to engineering consultants engaged bythe company in lieu of fees for work done.

On 14 May 2009, 4,090,000 shares were issued at a price of 45p each to provide additional working capital andfund development costs.

8. The Interim Report for the six months to June 30th, 2009 was approved by the Directors on 25th September2009.

9. Copies of this announcement will be sent to shareholders and will be available for inspection at the CompaniesRegistered Office at 162 Clontarf Road, Dublin 3, Ireland. The Interim Report may also be viewed at PetrelResources plc’s website at www.petrelresources.com

Petrel ResourcesPetrel is listed on AIM in London (PET)

Financial Information (unaudited)