Operations Update

June 22, 2011

22 June 2011

PetroNeft Resources plc

(“PetroNeft” or the “Group” or the “Company”)

Operations Update

PetroNeft Resources plc (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to provide an update on its operations.


· Production currently averaging about 2,500 bopd, primarily from 7 wells

· Autumn production enhancement programme planned to re-frac, with larger frac sizes, existing wells on Pad 1 and new wells on Pad 2

· Planned number of wells required from Pad 3 to be reduced recognising thinner oil pays

· Extension of Lineynoye oil field north of Pad 2 with thicker pay zones expected in the longer term to compensate for reserve and production reductions from Pad 3

· Q1 2012 production target has been revised to between 4,000 to 5,000 bopd and Q2 2013 to between 7,000 to 9,000 bopd

· Kondrashevskoye No. 2 sidetrack well progressing, result expected shortly

· Exploration wells at Sibkrayevskaya and Cheremshanskaya, the largest prospects in the 2011 programme totalling over 100 million barrels to spud in early July and August respectively

2011 Licence 61 Development programme – Lineynoye oil field

Production drilling continues with one additional well successfully drilled from Pad 3. Preliminary log and survey data for well 336 indicate net oil pay of 1.4 metres with an additional possible oil pay of 5.6 metres which we will need to test to confirm.

Licence 61 Production

Production is currently about 2,500 bopd with the primary contribution coming from 7 of the 9 wells drilled in 2010. As anticipated the wells have been slowly declining since they were fracture stimulated earlier this year. We have begun water injection/pressure maintenance in the field using the Lineynoye No. 6 well as an injection well; this will help maintain production levels.

We are pleased with the post frac performance of the wells particularly those with the larger size fracs. The initial fracture stimulation programme incorporated a range of fracture sizes depending on the individual reservoir characteristics at each well. Without exception, the larger volume fracture stimulations have shown better and more sustained results than the small or mid-sized fracs. We consequently plan to re-frac some existing wells to boost production.

We anticipate a significant production contribution from the new Pad 2 wells following fracture stimulation; a contract has been signed to conduct this operation in late September/early October. Our next production update will be made following this work.

The positive results from Pad 2 wells have shown that the northern part of the Lineynoye field has thicker pay and extends further than originally anticipated and this has potentially very positive implications for the ability of structures north of West Lineynoye to be oil bearing. The western portion of the field, particularly in the Pad 3 area, is lower structurally and has thinner pays. As a result we will increase the number of wells drilled from Pad 2 and reduce the number of wells drilled from Pad 3. This will mean fewer wells available for production in 2011, thereby reducing our expected near-term production rate. The overall impact on Lineynoye field reserves is expected to be minimal.

The Q1 2012 production target for Licence 61 has been revised to a range between 4,000 to 5,000 bopd and the Q1 2013 production target to a range between 7,000 to 9,000 bopd. These amendments also incorporate a more conservative initial production estimate for the Arbuzovskoye oil field which we plan to bring on-stream in the second half of 2012.

Exploration / Delineation Programme

PetroNeft’s high impact 2011 exploration programme, which has the potential to more than double our reserves, is targeting over 100 million barrels net to PetroNeft on five prospects in Licences 61 and 67

Licence 61 (PetroNeft 100%)

The Kondrashevskoye No. 2 sidetrack well being drilled down dip from the Kondrashevskoye No. 2 well is progressing on schedule and we expect a result in early July.

The second 2011 exploration well will be at Sibkrayevskaya, a prospect of over 40 million barrels. Site preparation and mobilisation of the rig and materials and rig-up operations is complete. Drilling should start in July with results expected in August.

The site for the third exploration well, North Varyakhskaya No. 1, has also been prepared and the rig and materials have been moved to the site for a planned spud in August/September 2011 following Sibkrayevskaya.

Licence 67 (PetroNeft 50%)

The two exploration wells, Cheremshanskaya No. 3 and Ledovoye No. 2a, are located close to existing year-round roads and will be drilled in the second half of the year. We have already mobilised equipment and completed construction of the Cheremshanskaya site and the rig is now being mobilised by barge to a nearby river port. This well is expected to spud in August and is targeting over 60 million barrels net to PetroNeft across three objectives.

Construction of the site for the Ledovoye No 2a well has commenced and we expect to spud in October/November. Ryder Scott have attributed 15 million barrels net to PetroNeft in the Upper Jurassic horizon, however, we will also be testing additional potential in the Lower Cretaceous zone.

AGM Presentation

A presentation on all of the above issues will be given to shareholders at the Company’s Annual General Meeting to be held later today. This presentation will be available on the Company’s website once the AGM is complete.

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

”While the results of Pad 2 drilling are encouraging, the Pad 3 drilling results will limit near term production growth. We are currently producing from less than 10% of our current discovered reserves and this year’s exploration programme has the potential to double these reserves and hence our long term production capability. Further, the experience gained from the drilling programme and hydraulic fracturing to date will be applied in this and future developments to deliver improved production performance. We remain confident in the longer term reserve and production potential of Licences 61 and 67.”

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc

+353 1 443 3720

Paul Dowling, CFO, PetroNeft Resources plc

+353 1 443 3720

Hugh McCutcheon/Brian Garrahy, Davy (NOMAD and Joint Broker)

+353 1 679 6363

Charles Berkeley/Henry Fitzgerald-O’Connor, Canaccord Genuity Limited (Joint Broker)

+44 207 050 6500

Martin Jackson, Citigate Dewe Rogerson

+44 207 638 9571

Joe Murray/Ed Micheau, Murray Consultants

+353 1 498 0300

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 35 years experience in oil and gas exploration and development.

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.


API gravity

The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water.


Barrels of fluid


Barrels of oil per day