The Hardman report is out,

I gave a valuation last week with an upside to70m but that was in ''s not $'s so I was slightly out LOL.

Been in this for donkeys now ever since the first time it got torched for thos that remember!! Things looking up and been blue for a while now and will continue to hold. Shame some of the oldies that held this stock aren't around to see this day......

Sefton Resources is so close to starting drilling that we are reinstating and updating our financial forecasts. It has been a long year but a great deal work has been accomplished.

At Tapia, the surface facilities at have been revamped expanded and upgraded to handle larger fluid volumes and achieve improved separation in cold-weather conditions. Wells will no-longer have to be shut in waiting for collecting tankers so the planned production increases can be handled more effectively.

The steam generator is ready and on site to test Sefton’s thermal recovery plans and a cost effective finance facility has been negotiated.

The engineering data we have been studying indicates conventional development at Tapia should approximately triple current production levels.

If the steam-enhanced recovery proves effective, peak production flows may nearly be double again.

Sefton should achieve profitability this financial year although the eventual numbers will depend on exactly when drilling commences and new production may be tied-in. Our current best estimates suggest an EBIT of around USD 800k may be achievable in FY2007.

Once full conventional drill-out is completed – peak production should ramp up to around 150k barrels per year at Tapia by 2009 with significant upside if the steam-enhanced recovery program proves viable.

We estimate a core pre-tax NPV10 valuation for Sefton of $US 24.1m (=10.1p/share) with an upside to around $US 67.8m (28.4p/share) on implementation of both steamflood and cyclic steam recovery programs

Eureka is being readied for additional development and we expect activity in Kansas in the first half of next year.



Background

Sefton Resources, Inc. is a US based petroleum E&P company quoted on London’s Alternative Investment Market. It owns 100% working interests in two oilfields, at Tapia Canyon and Eureka Canyon in California.

Sefton also owns interests in prospective conventional and unconventional gas acreage in the Forest City Basin in Kansas.

Previous operators of Sefton’s Californian fields – the Tapia and Eureka Fields invested only limited resources keeping both fields ticking-over with production.

This was primarily because of historically low oil prices.

Times have changed considerably with current NYMEX WTI spot oil trading north of $US 93/bbl having kissed $US 96.24/bbl. Indeed, wellhead prices have been consistently buoyant for the last four years generating significant value from wellhead production.

A long hiatus in new drilling work ensued last year while Sefton negotiated a cost effective funding line. This was compounded by frustrating delays in obtaining a rig. The time was used by Sefton to extensively redevelop surface facilities at Tapia Field.

The key will now be for Sefton to demonstrate deliverability in achieving its near-term objectives. With drilling set to commence; we feel this is about to happen and that Sefton is finally on the cusp of monetising the potential of Tapia Field.

With the bank funding in place the Company can move forward to develop Eureka, it can start testing work on the gas acreage in Kansas and possibly look to new opportunities.



Tapia Canyon Oilfield

Tapia field has had a number of owners and has to-date, produced oil through natural depletion and by conventional pumping. This has been augmented by a small natural water drive tied to the local aquifer.

Sefton plans to increase production rates and the ultimate recovery by conventional field development (drilling infill wells on a 2.5 acre spacing) and by implementing a planned enhanced oil recovery programme.

Cyclic steam injection stimulation (“huff ‘n puff”) has already been tried on the Yule#5 well by an earlier operator. This well, situated in the middle of the field demonstrated a rate increase from 10bopd before steam to greater than 30bopd after steam injection. This test verified that additional recovery was possible and allowed Sefton to book its EOR reserves.

Earlier this year, Sefton appointed new independent engineers and previous reserves estimates were reduced. We understand the revisions were primarily related to the new firm applying steeper decline rates than were previously used. We note that the decline rates observed however appear to have stabilised above these more conservative projections.

We will run with the new engineering as a basis for our financial models but expect there to be some flux as revisions are made going forward.

Over the last year (while negotiations were ongoing to finalise an appropriate funding arrangement), Sefton has taken the time to renew and replace Tapia Field’s surface facilities. The importance of this work cannotbe understated.
There would be little point drilling and developing production capacity if the resulting flows could not be handled effectively at surface, leading to additional timed production or shut in periods.

Yes, this work could have been staggered in with the drilling program but there would still inevitability have been disruption.

As things have worked out, the storage tank batteries and separation facilities are now inplace and able to handle more than 600bopd.

This should be sufficient for the time being. If production rates are considerably enhanced with the EOR programme a pipeline may eventually be needed – but this would be one of those capital costs that would bring a wry smile to investors.


Current Conventional Plans

Sefton plans to drill two new wells (Hartje#16 & Hartje#17) as soon as the rig is delivered to the field, i.e. spudding almost immediately.

Additional drilling is, we understand, scheduled for early in the New Year. After this, development should bed-down into a batchwise cycle of drilling and until current 18 well program is complete.

Reserves currently booked as proven undeveloped (PUD) will be reclassified as proved developed producing (PDP) as work progresses.

The gravel-pack completions used during the last drilling campaign have proved very successful. The cost is around 25% greater than for a standard completion but the investment has been proven in the field reducing and in many cases removing the need for later intervention work.

Production from conventional production is expected to peak (using current engineering estimates) at around 150kbbl/year in 2009.

This will all change if the field is switched to cyclic steam stimulation or to a complete steamflood operation.





Enhanced Recovery: Pilot Steam Test

While working on the conventional development Sefton is also working to prove that cyclic steam injection may also be effective at Tapia. The pilot steam testing should provide data to confirm plans for a full scale steam programme. Oil produced from the steaming, will also move oil reserves into the Proved Producing reserves category.

The basics are that high-pressure steam will be injected into the target reservoir formation via a production well (Yule 7) for several weeks.

The high-pressure steam will introduce heat into a zone around the wellbore. This should help to make the oil phase less viscous, more mobile and potentially more inter-connected during flow.



Once a portion of the reservoir has been thoroughly saturated, the steam injection will be turned off and the reservoir left to “soak” for several weeks. (While the mobile steam generator moves on for use at another location).

The wellbore is returned to a ‘production state’ with the hopefully now more mobile petroleum phase being recovered to the surface at an enhanced rate. As the enhanced production rates are monitored to tail-off, another cycle of steam injection may be begun.

Sefton has had a generator built for the purpose – bypassing the necessity for contract hire. The plan is to use natural gas which is currently behind pipe in shallower formations to fuel the steam injection programme to significantly reduce net costs of the operation.

Eureka Canyon Oilfield

Sefton is still very much focussed on Tapia field at this time however during the last year the company has carried out a surface geochemical survey over the Eureka lease acreage, seeking to identify areas for futuredevelopment.

The results of this survey have been encouraging with several promising anomalies indentified. These results show areas where oil saturations may be concentrated in the subsurface and we expect more geochemical work will be performed to better define these anomalous zones. Facilities are being upgraded using Tapia as a precedent with new tanker facilities simplifying collection from the field.

We understand it remains management’s plan to drill two step-out wells to further define thelimits of production during 2008.



Kansas: the Anderson and Franklin County Projects

It looks like Sefton has acreage over the thickest sections of the Bevier and Riverton coal deposits in the local area within the Forest Basin. Though the acreage is not currentlyproducing, the leasehold is considerable and proximal to the pipeline network.

A wealth of geological knowledge continues to being gleaned by other operators in the immediate vicinity. This data and experience may, we suspect serve to smooth Sefton’s path towards optimizing future production.

For now we would expect management will turn an eye to the Kansas in the first half of next year once Tapia has progressed further.

Indeed, we would expect several wells to be drilled to test the two coals, but will look to assess this in more detail once plans are more concrete.





The Leavenworth County Project

The Leavenworth project is on the back-burner at the moment as the focus is on California.





Financial Models

We have generated new financial models and net present value estimates for Tapia and Eureka oil fields based on a review of

engineering reports originally compiled in late august. We have adjusted the engineering projections to make allowances for the delay in the rig reaching Tapia Field and present the best production estimates possible at this time, balancing late rigs with flush production rates.

Lease operating expenses assume lifting costs of around USD$7/bbl with transport costs factored in for each field.

Cash flow projections were based on averaged WTI spot prices adjusted to be comparable with local prices for Buena Vista Hills 26 oil (for Eureka) and Midway-Sunset 13 oil (for Tapia).

Revenues are stated after deduction of royalty, production, severance and ad valorem taxes.

With the extreme volatility in oil pricing at the present time – we determined the simple average price for posted WTI crude (approx

$USD77) since the beginning of July. We have used a $USD 75 base WTI price for H2 2007, $USD70 flat for 2008 and $USD65flat for 2009.

These price projections are very conservative and deviate quite a bit from the current futures curve with spot WTI trading on NYMEX near $93. (Oil at Tapia last week was close to $85USD) However we take the view that is better to reassess price benches regularly in a volatile market rather than overcook projections.

The undiscounted and discounted cashflows for each class of asset for Eureka and Tapia Fields are presented in table1 Pre tax, the discounted core value of the conventional program is $USD24.1m with a total discounted EOR cashflow projection of $USD67.8m



Profit and Loss

Projections

All our currently forecast revenues come from the conventional production of oil at Tapia and Eureka. We are not yet going to factor in any additional production from steaming at Tapia until it is practically proven to work on site.

There is going inevitably going to be a margin of error projecting near-term production numbers at Tapia right now. Flush production will, we expect, balance and offset the drilling delays to a degree and we have used the best estimates possible from the current engineering data. This engineering will be reviewed again soon and we will reassess our forecasts as necessary now we are comfortablethat drilling is afoot.

Using our declining WTI price bench, and assuming drilling proceeds as planned, our projections indicate a rapid increase in revenues will be generated by the increased production levels. FY 2007 $US 2.9m FY 2008 $US 7.9m. Yes it is that simple

On this basis we expect Sefton will be profitable this year to maybe around $700k EBIT – depending upon drilling times and flush production rates. This is based on oil prices considerably below current spot. Profits north of $US $4.4m may be expected in FY2008.

We will look to revise these numbers with trailing production data once wells are completed but wish to avoid getting caught up trying to second-guess extreme price volatility.

Our profit and loss forecasts assume no tax will be payable until FY 2009 where a subnormal levy would be charged based on the current tax carry.

Capital investment of approximately $US 2.8m is projected for the current financial year to fund drilling with investment of $US 6.8m pencilled in for FY2008. This will fund further investment in new wells at Tapia and Eureka and the experimental “huff ‘n puff” program.



Further forward our numbers become a little more fluid until we know with more detail of likely schedules for work in Kansas.

Remember plans for steam EOR investment remain contingent in these forecasts

For now, we expect Sefton will draw against its debt facility to the tune of $US 1.5m or so this year with an additional $US 1.9m next year. (The exact timings of draw-downs will be determined by the timing of drilling/investment).

The additional cash generated from the new production streams will initially be reinvested in the development program mitigating the need further debt draw-downs. With its current debt facility Sefton will retain access to sufficient capital to invest significant resources in California, in Kansas or in potential new ventures. The restraints have effectively been removed to get revenues rolling.



Valuation

Our new valuation of the two major oil properties, Tapia and Eureka based on the revised engineering data a gives a core conventional pretax NPV10 valuation of 10.1 pence/share ($US 24.1m) with an upside to 28.4 pence/share ($US 67m) assuming cyclic steam and steamflood recoveries are implemented This still excludes any value for the CBM acreage and compares with a current share price of about 6.2p.

Sefton is expected to be profitable this FY with significant profits next year. Deliverability which the market demands will be demonstrated once rigs hit the subsurface.

Things are finally moving.

Say that again, I average under 4p a share..... Always knew one day this would come true but I won't get too excited yet.

A much more conservative and down to earth report.

I\'ve got a feeling this won\'t be laughed at this time.

SECRUOSER
Its our turn to laugh by xmass I hope.

Driver and all holding, merry christmas cos it's very well deserved.

Cheers.

Interesting to note that the revenue projections factor in absolutely nothing from the steaming programme.

Also "This still excludes any value for the CBM acreage"!

I think at last we're about to make some real progress sp wise Mine Man.

As someone said just now on the other side, it must be odds on for a nice juicy RNS (drilling commenced) in the next few days to coincide with this report!

I've said it before and I will probably say it again, I am feeling good about this.

MERRY XMAS EVERYONE.

for explosive ..... of the minnows, this company at least has some appeal; after all it is actually producing, which is a damn sight more than most of the others about which so many on this BB keep raving.

the chart is also very encouraging with a strong break above 200 dma ...... the downside of course is that the cap is minuscule and thus trading in any cash-meaningful volume can be difficult to downright impossible, especially if the market turns against you

Oil surged to all-time highs near $100 a barrel and gold and other precious metals hit their highest level in almost three decades on Wednesday as investors fled the dollar, which plumbed record lows versus the euro.

World stocks rose for the second consecutive day, buoyed by energy and mining shares. Firmer commodity prices also underpinned emerging market assets.

The U.S. currency had been under pressure in recent sessions as expectations grew the Federal Reserve would cut interest rates further to limit economic damage from the housing market's downturn -- which would shave the yield the dollar offers.

Rubbing salt into the dollar's wounds, a senior Chinese political figure said China should balance its currency reserves -- the world's largest -- so that strong currencies such as the euro offset weakening currencies like the dollar.

"There's risk aversion against the dollar which is also driving investors into something they think is keeping its value and usually that is gold," said Elwin de Groot, senior market economist at Rabobank.

The dollar has fallen as low as $1.4663 per euro, according to Reuters data, bringing its losses this year to around 10 percent. It set all-time lows against a basket of six major currencies < .DXY>. Sterling set a new 26-year high above $2.0954.

Diversification comments from Cheng Siwei, vice chairman of the standing committee of the National People's Congress -- China's Parliament -- were followed by remarks from Xu Jian, a Chinese central bank official, who said the dollar is losing its status as a global currency.

U.S. light crude rose as high as $98.17 a barrel, bolstered by a weakening dollar and concerns about a winter fuel crunch due to thinning oil stocks and a North Sea storm.

Analysts say surging oil prices in turn weigh on the dollar, creating a vicious cycle for the U.S. currency.

"Rampant energy prices serve to place even greater sums into the hands of oil exporters who continue to recycle receipts out of dollars and into other liquid FX such as euro and sterling," ING said in a note to clients.

ptholden,

Are you still around? If so, please could you put a link to the new Hardman&Co write-up in the header?

http://www.capmarkets.com/ViewFile.asp?ID1=80607&ID2=184206601&ssid=1&directory=12925&bm=0&filename=Sefton_Nov2007.pdf

666 is back, how many has he got to get rid of?

Not many by all accounts, keep eating the garlic in case Drac turns up!!

Another 1 million bought @ 6.5p!

It's a rollover. Sorry.