Operational Update

May 29, 2007

PetroNeft Resources plc

Operational Update

PetroNeft Resources plc ('PetroNeft' or 'the Company'), 100% owner of Stimul-T which is the sole owner and operator of Licence 61, Tomsk Oblast, Russian Federation is pleased to provide this update on the progress on its 2006/07 three well drilling programme.

Lineynoye No. 6 Well

The Lineynoye No. 6 well on Licence 61 was spudded on 4 March 2007 and reached Total Depth on 14 April.  Initial petrophysical analysis, released on 24 April, confirmed the presence of hydrocarbons in the Upper Jurassic J1 sandstone in two stratigraphic units (J1and J12 ).  Flow testing of the well was conducted over a 13 metre gross perforated interval (-2,410 to -2,413 metres and -2,419 to -2,429 metres subsea). During initial testing the well flowed oil to the surface at a stabilised rate of 100 barrels per day on a 3 mm (1/8th inch) choke with a flowing tubing pressure of 118 pounds per square inch.  The oil is high quality with a density of 0.805 g/cm3 (44° API).

The well flowed oil to surface without stimulation or any artificial lift and will now be suspended as a future production well.  The reservoir was damaged near the wellbore, as the drilling contractor experienced mechanical problems while cementing the production casing adjacent to the oil bearing reservoir.  When put on production the well will be stimulated and matched with an electrical submersible pump and will produce at a significantly higher commercial rate.

As previously reported, the well confirmed the structural interpretation prior to drilling but also lowered the field wide oil water contact to -2,430.5 metres (subsea) or below.  This is at least 10 metres below the previous conditional oil water contact for the field and when integrated with new seismic data acquired this winter, provides the potential for a modest reserve upgrade in respect of the Lineynoye Field.

Lineynoye and Tungolskoye Drilling Programme

The current appraisal drilling programme which comprises two wells, Lineynoye No. 6 and Tungolskoye No. 4, is designed to confirm prior reservoir data in the Lineynoye and Tungolskoye fields and will provide further input into a Final Development Feasibility Study.  The programme also includes a high impact exploration well, Lineynoye No. 7, on the West Lineynoye Prospect.  These results will also be incorporated into the Final Development Feasibility Study expected to be completed in late 2007.

Tungolskoye No. 4 Well
The Tungolskoye No. 4 well was spudded on 16 May 2007.  The principal target horizons for this well are Upper Jurassic sandstone reservoirs starting at a depth of -2,490 metres. The total planned depth for the well is approximately -3,100 metres.  The well is currently drilling at a depth of -1,920 metres.  It is anticipated that the well will be drilled, logged and tested within approximately 70 days of commencement.

Lineynoye West Prospect. Lineynoye No. 7 Well

West Lineynoye, a high impact prospect, is estimated by Ryder Scott to contain Possible Reserves of approximately 67 million barrels of oil. A third rig which was mobilised to the site for this well is currently being assembled and should commence drilling in June. The principal target horizons for this well are again the Upper Jurassic sandstone reservoirs starting at a depth of -2,375 metres. The total planned depth for the well is approximately -2,750 metres and it is anticipated that the well will also be drilled, logged and tested within approximately 70 days of commencement.

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

'We are pleased to announce positive results for the Lineynoye No. 6 flow testing.  We have established natural flow of high quality oil to the surface without stimulation or artificial lift and this provides positive support for our ongoing Feasibility work. Once the well is effectively stimulated and equipped with an electrical submersible pump it will be capable at producing at a significantly higher rate. The well has also established a lower oil water contact for the field which should lead to a modest  increase in the field reserves once all of the new seismic data has been integrated.' 


For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc
+1 713 988 2500

Desmond Burke, Director Investor Relations, PetroNeft Resources plc
+353 52 53226

John Frain/Brian Garrahy, Davy
+353 1 679 6363

Nick Elwes/Paddy Blewer, College Hill
+44 207 457 2020


The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006.  Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines.  He has also graduated from the Harvard University Program for Management Development.  He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists.  He has over 34 years experience in oil and gas exploration and development.

Glossary of Key Technical Terms

J11 and J12 Sandstones - Stratigraphic units in the top part of the Vasyugan Formation of Upper Jurassic age in the West Siberian Basin.  The Vasugan Formation underlies the Bazhenov Formation and the J1and J12 sandstones are normally of reservoir quality in the region with sufficient porosity and permeability to store and transmit hydrocarbons.

Oil Water Contact - A bounding surface in a reservoir above which predominately oil occurs and below which predominately water occurs.

Stimulation - A treatment performed to restore or enhance the productivity of a well. Stimulation treatments fall into two main groups, hydraulic fracturing treatments and matrix treatments. Fracturing treatments are performed above the fracture pressure of the reservoir formation and create a highly conductive flow path between the reservoir and the wellbore. Matrix treatments are performed below the reservoir fracture pressure and generally are designed to restore the natural permeability of the reservoir following damage to the near-wellbore area. 

Artificial Lift - Any system that adds energy to the fluid column in a wellbore with the objective of initiating and improving production from the well. Artificial-lift systems use a range of operating principles, including rod pumping, gas lift and electrical submersible pumps.


Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies.  Forward-looking statements are identified by their use of terms and phrases such as "believe", "could", "envisage", "potential" "estimate", "expect", "may", "will" or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement.