News

Highlights

West Lineynoye

• L-10 horizontal well brought online at a sustained rate of 230 bopd.

• L-10 result confirms short segment horizontal drilling greatly increases flow rates.

Tungolskoye

• T-503 horizontal well continues to produce at a sustained rate of over 500 bopd.

• T-502 horizontal segment drilling in progress.

• T-508 control well and water injector drilled in 17 days.

Production

• Current gross production from Licence 61 is about 2,600 bopd.

Represents a 41% increase in production thus far this year.

Tungolskoye

• T-503 horizontal well brought online at sustained rate of over 550 bopd.

• Latest test rate was 675 bopd.

Sibkrayevskoye

• Processing and interpretation of 1,000 km of high quality 2D seismic underway.

• Early indications suggest that the Sibkrayevskoye structure is larger than previously understood.

The Company's Annual Report and Accounts for the year ended 31 December 2014 and Notice of AGM has been posted to shareholders today.

2014 Highlights

· Licence 61 Farmout to Oil India Limited completed in July 2014.

· Total investment by Oil India will be up to US$85 million.

· Licence 61 Farmout has left the Company debt free and is funding a major well drilling campaign.

· Drilling recommenced in August 2014.

· Production 728,826 barrels of oil from Licence 61 in 2014.

Highlights

Sibkrayevskoye

• Sibkrayevskoye No. 373 appraisal well flows 100 bopd (stabilised, unstimulated natural flow) and confirms 11.5 m net oil pay. Flow rates with a pump would be considerably higher.

• Acquisition of 1,000 km of high quality 2D seismic completed.

Highlights

Tungolskoye

• Tungolskoye Development drilling contract awarded to Eurasia Drilling, one of the largest drilling companies in Russia

Arbuzovskoye

• Arbuzovskoye further wells now on production

Sibkrayevskoye

• Sibkrayevskoye No. 373 appraisal well has spudded, result expected in April 2015

Highlights

Tungolskoye

· Tungolskoye No. 5 well tested at over 600 bopd and is now in production

· Development of Tungolskoye to proceed immediately

o 11 well Tungolskoye campaign to commence in Q2 2015

o Tenders awarded for drilling and for the development of additional infrastructure at Tungolskoye

Arbuzovskoye & Sibkrayevskoye

· Arbuzovskoye 103 well now in production at a stabilised average rate of 125 bopd and confirms southern lobe of field

· Arbuzovskoye 104 well drilled with 5.4 metres of net pay, expected on production shortly

· Arbuzovskoye 107 well has been spudded

Licence 61

· Arbuzovskoye 106 well now in production at a stabilised average rate of 170 bopd

· Arbuzovskoye 103 well drilling ahead

· Drilling of Tungolskoye 5 horizontal well continuing

· Total production now at 1,850 bopd

· Seismic crew mobilised to the Sibkrayevskoye field

Licence 67

· Processing and interpretation of 3D seismic survey completed

· Reserves calculation for Russian State Approval being finalised

Corporate

· Weakening Russian Rouble acting as a natural hedge to falling oil prices

· Vertical pilot hole successfully completed

· Structural interpretation of Tungolskoye confirmed

· Open hole flow test of 100 bopd, unstimulated

· 8.2 metres of net oil pay encountered

· Horizontal section of T-5 well to commence

Highlights:

· H1 production average of 2,163 bopd.

· Farmout of Licence 61 to Oil India completed, Company is now debt-free.

· Drilling underway at Tungolskoye and Arbuzovskoye.

· Drilling crew mobilised to commence drilling of Tungolskoye No. 5 well within the next week

· Second Drilling crew to re-commence production drilling at Arbuzovskoye will be mobilised shortly

· The Sibkrayevskoye No. 373 delineation well will follow the Tungolskoye No. 5 well

Seismic acquisition crew mobilised to commence operations for the acquisition of 1,000 km of high resolution 2D seismic in Q1 2015

· All debt repaid

· Drilling to re-commence at Licence 61 this month as part of a fully funded exploration and development programme

· Introduces a strong industry partner seeking to build an oil and gas business and strategic position in Russia

· New chapter begins for a significantly strengthened PetroNeft

·         All Russian Regulatory Approvals received

·         Completion of transaction expected in the coming days

·         All debt to be repaid

·         Drilling to re-commence at Licence 61

· Revenue up 12% to $38.6m

· Production up 8% to 870,965 barrels of oil

· Net loss of $9m, driven by $6m foreign exchange loss on intra-group loans

· Licence 61 Farmout will leave Company debt free and fund major well drilling campaign

• Farmout of 50% of Licence 61 approved by shareholders
• Resolutions proposed by Natlata not approved by shareholders

Further to the announcement of 17 April 2014 in connection with the farmout of a 50 per cent. non-operating interest in Licence 61 to Oil India Limited, a Circular to convene an EGM to approve the Licence 61 Farmout (the “Licence 61 Farmout EGM”) has been posted to Shareholders. It will be held at 10.30 am on 9 May 2014 at the Herbert Park Hotel, Ballsbridge, Dublin 4, Ireland

Highlights

· Total investment by OIL of up to US$ 85 million consisting of:

· US$ 35 million upfront cash payment

· US$ 45 million of exploration and development expenditure on Licence 61

· US$ 5 million performance bonus

· PetroNeft to remain operator of Licence 61

· Subject to regulatory and shareholder approvals with completion expected around end-May 2014

Up to six well drilling campaign to start on completion of farmout

All legal documentation and due diligence is now complete and the Company expects to execute binding legal agreements within the next week. Macquarie Bank Limited have been advised of this timetable. Shareholders will be updated fully once the agreements are signed.