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D1 Oils Plc (NEOS)

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Tuesday 04 December, 2007

D1 Oils Plc

Q3 2007 Business Update

D1 Oils Plc
04 December 2007

4 December 2007

                        D1 Oils Q3 2007 Business Update

D1 Oils plc ('D1' or 'the Company'), the UK-based global producer of biodiesel,
today announces its quarterly business update for the third quarter ended 30
September 2007.

We believe continuing high prices for both crude oil and conventional, edible
oils for the production of biodiesel reinforce the validity of D1's strategy to
focus on the plant science and related crop technology of sustainable
feedstocks. We believe that the growing 'food versus fuel' debate further
demonstrates the global need for the development of sustainable biofuel crops
that are outside of the food chain. Our principal feedstock, Jatropha curcas,
addresses this concern.

We are pleased to report that both our jatropha planting programme and the plant
science research that underpins it are progressing well. Our planting joint
venture with BP, D1-BP Fuel Crops, commenced commercial operations on 1 October.
The joint venture leadership team is now managing the planting interests of the

The first quantities of crude jatropha oil are expected to arrive on time in the
second half of 2008.

Higher feedstock prices and heavily subsidised US imports, B99, continue to
adversely impact our refining and trading operations, and, as previously
announced, we are scaling these back as appropriate until conditions improve.

We welcome the decision of the European biodiesel industry to lodge a complaint
to the European Commission against US B99 exports in the form of a joint
anti-dumping and anti-subsidy complaint, possibly supported by WTO measures at a
later date.

Agronomy - plant science programme
We continue to make good progress in our plant science programme. In particular,
plant science operations to support the D1-BP Fuel Crops joint venture are on
track. Multiplication of the selected E1 seedlings, offering higher yield and a
good biodiesel profile, is now underway in all three operating regions. As
previously indicated, the first planting of this material will take place ahead
of schedule in Q4 2007. We expect to plant approximately 50,000 hectares of E1
jatropha seedlings in 2008.

Our central development facility in Cape Verde has now been established and our
global collection of accession material for jatropha is being transferred to
this site. We are also in the process of establishing new research sites in
Indonesia and Thailand.

In addition to focusing on jatropha, we are investigating several other crops
and technologies for the production of biofuel in order to maximise the value of
our plant science business. Under the terms of our joint venture arrangements,
D1-BP Fuel Crops has a right to access (with the agreement of its shareholders)
any new fuel crops that D1 may develop.

Agronomy - planting
Up to 30 September 2007, D1 has planted or obtained rights to offtake from a
total of 200,290 hectares of jatropha worldwide. This represents an increase of
over 25,000 hectares on the total of 175,081 hectares as at 30 June 2007, as
announced in the quarterly update on 27 July 2007; and an increase of 1,600
hectares on the total of 198,690 hectares as at 15 September 2007, as announced
in the Company's interim results on 27 September 2007.

The increase in planting is accounted for predominantly by planting in India,
with planting under contract farming in the North East with Williamson Magor
making particularly good progress. Due to favourable weather conditions,
planting in North East India was able to continue for several weeks longer than
usual beyond the end of the September. Planting in India will resume in March
2008. Planting in Africa has now restarted following the rains, and is underway
again in South East Asia with the onset of cooler weather.

From 1 October 2007 all of D1's planting of Jatropha curcas is intended to be
through D1-BP Fuel Crops. D1's effective economic interest in total planting
assets, including its 50% share in planting undertaken by local joint venture
partners, is in the process of being transferred into the D1-BP Fuel Crops joint

D1-BP Fuel Crops has a promising new business pipeline of potential partners and
land opportunities, and is exploring opportunities in a number of new countries,
including Brazil, Mozambique and Australia. Over the next four years, D1-BP Fuel
Crops is targeting to plant a further one million hectares of jatropha.

The cumulative planting and offtake position as at 30 September is summarised in
the table below:
                                    Managed   Contract   Seed purchase   Total
                                plantations    farming  and oil supply
                                  ---------  ---------      ----------   -------
India              North East           -     50,800           2,000    52,800
                        South           -      8,264               -     8,264
                         Rest           -      4,905          17,123    22,028
                                  ---------  ---------      ----------   -------
                                        -     63,969          19,123    83,092
                                  ---------  ---------      ----------   -------
Africa                 Zambia       2,411     20,760               -    23,171
                    Swaziland       1,227          -           8,017     9,244
                         Rest           -          -           8,629     8,629
                                  ---------  ---------      ----------   -------
                                    3,638     20,760          16,646    41,044
                                  ---------  ---------      ----------   -------
South East Asia     Indonesia           -     36,640           1,758    38,398
                        China           -          -          28,000    28,000
                         Rest           -      4,780           4,976     9,756
                                  ---------  ---------      ----------   -------
                                        -     41,420          34,734    76,154
                                  ---------  ---------      ----------   -------
Total                               3,638    126,149          70,503   200,290
                                  ---------  ---------      ----------   -------

The level of investment costs and security of future oil supply are proportional
to the degree of direct involvement by D1 and its joint venture partners. Where
trees are lost due to natural wastage or mortality, or where planting has not
taken, either replanting or new planting is undertaken in the following planting
season and only the net increase in planting is recorded. Where replanting is
not possible or inappropriate, a provision is made and the planting is reported

D1's planting and rights are generally categorised under three broad types of
arrangements; managed plantations, contract farming and offtake agreements.

Managed plantations are those farms where land and labour is directly controlled
by D1 or its joint venture partners. Under contract farming, the farmer plants
his own trees on his own land. D1 and its partners assist with the provision of
seedlings and the arrangement of bank finance for planting, and offer a buyback
of harvested grains with an offtake agreement, subject to a floor price and the
achievement of agreed quality standards. We provide support and advice during
cultivation, and monitor the condition of the crops. Seed and oil supply
agreements are arms-length supply contracts with third parties whereby D1,
either directly or through joint venture partners, has offtake arrangements in
place over future output from jatropha plantations which the third party is
developing. D1 has limited involvement in this planting and relies on third
parties to measure and manage the crop effectively.

Backed up by the ongoing work of D1's Sustainable Oil Supply Programme,
significant fieldwork is being undertaken on the cropped area. Inter alia, this
work assesses the quality of planting and provides farmers with advice on
appropriate maintenance regimes. The Sustainable Oil Supply Programme is an
essential tool to assist in predicting yields and to ensure that oil quantities
are maximised. Based on initial data gathered to date, the D1-BP Fuel Crops
joint venture is on track to deliver the first quantities of jatropha oil during
the second half of 2008. Initial quantities of oil are expected to be modest but
should increase substantially year on year as pre-existing trees mature and as
new trees become productive.

Now that it is an independent entity, D1-BP Fuel Crops has commenced a process
to establish its business plan for 2008 and beyond. As part of this exercise it
is surveying the performance of planting with a view to establishing its own oil
forecasts and is also considering the most appropriate form of reporting to its
shareholders going forward.

Refining and trading 
Our activities in refining and trading continue to be impacted by the ongoing
challenges of high feedstock prices, exacerbated by heavily subsidised biodiesel
imports from the United States. Refining margins across the industry remain
under very significant pressure. As announced at our interim results, we are no
longer refining virgin oil. We are, however, taking advantage of the flexibility
and precision of our modular D1 20 refinery units to rework parcels of material
purchased from other suppliers and to investigate the potential for refining a
wider range of feedstocks.

We have completed the commissioning of our fifth D1 20 refinery unit on Teesside
and a programme to fully test the operational limits of the unit is underway.
Commissioning of the first 50,000 tonnes of capacity at our Bromborough site is
also ongoing. Between these two sites, our total UK capacity is presently 92,000
tonnes. Until we have more data to fully assess the impact of the Renewable
Transport Fuels Obligation (RTFO) on the UK market following its implementation
in April 2008, we do not believe it is in shareholders' interests to increase
further our total UK refining capacity. However, having completed the necessary
preparatory work for its installation, we are in a position to expand our
capacity rapidly should market conditions improve.

We continue to have confidence in our biodiesel technology and in particular our
modular D1 refining units. As plantations of jatropha and other crops mature, we
see increased demand for biodiesel hardware and technology in a number of
overseas markets. Several opportunities to sell or license our technology are
being examined.

Although we expect the RTFO to have a positive impact on trading conditions for
UK biodiesel refining, we continue to believe this benefit is likely to be
counterbalanced in the short term by both higher feedstock prices and the
continuation of subsidised soya methyl ester imports from the United States,
so-called B99. In the medium term, as supplies of jatropha come on stream, we
expect that higher feedstock prices for competing food grade oils will be
beneficial to D1.

We welcome the decision of the members of the European Biodiesel Board (EBB),
representing the majority of producers in the EU, to lodge a complaint to the
European Commission against B99 exports from the US. This comprehensive legal
action will take the form of a joint anti-dumping and anti-subsidy complaint,
possibly supported by WTO measures at a later stage. However, we would not
expect a formal EU response to this complaint to arrive quickly. It is therefore
likely that the initial market created by the introduction of the RTFO in Europe
will be met through imports of B99 from the United States.

We believe that unless the B99 'double dip' taxation and dumping issues are
addressed, it will be difficult for the EU to develop a robust biodiesel
refinery industry and for UK refiners to supply motorists and road transport
businesses under the RTFO. We share the frustration of the rest of the industry
that these issues cannot be addressed more rapidly.

As commercial volumes of low-cost jatropha oil are not yet available, we have
been purchasing and selling modest quantities of B99 to enable us to meet our
obligations to clients and to develop our supply chain. We currently plan to
continue to do so until the issue of asymmetric subsidies is resolved or
feedstock prices reduce.

The Company's arrangements include a fixed price supply from a US distributor
and onward sale in the UK, largely to the Company's principal offtaker,
Petroplus. D1's offtake agreement with Petroplus will not be renewed once it
ends in December 2007. Our experience is that prices currently bid for such
contracts are not at a level where we believe there is an adequate return even
before the costs of any hedging to lock in profit margins. At the same time the
Company's US distributor is not delivering the requisite quantities under the
purchase agreement and as a result we are taking steps to enforce our
contractual rights. All of the above are symptomatic of a highly competitive and
price-driven market in which ever higher feedstock prices and subsidised imports
are dictating market practice and prices.

Biodiesel market conditions positively reinforce our view that sustainable
feedstock solutions are the key to success in the sector. Our pioneering efforts
with Jatropha curcas have been successful and will continue to provide the
mainstay of our sustainable biodiesel strategy.

With the advent of our planting joint venture, D1-BP Fuel Crops, and in the
context of market conditions, we are currently reviewing a number of options for
our downstream refining and trading operations. In our upstream plant science
business we believe that there are opportunities for growth through additional
sustainable crops and technologies. Such developments would capitalise on our
plant science expertise and would further consolidate our position as a market
and technology leader. These are being actively addressed in order to broaden
D1's business and technology interests.


D1 Oils plc:

Graham Prince, Director, Communications

Tel:     +44 (0)20 3043 8732

Mobile:  +44 (0)7973 323 840

Brunswick Group:

Mark Antelme

Tel:     +44(0)20 7404 5959

Notes to Editors

D1 Oils plc is a UK-based global producer of biodiesel. We are building a global
supply chain and network that is sustainable and delivers value from
'earth-to-engine'. Our operations cover agronomy, refining and trading. We are
pioneering the science, planting and production of inedible vegetable oils; we
design, build, own, operate and market biodiesel refineries; and we source,
transport and trade seeds and seedlings, seedcake, crude vegetable oils and

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