North Varyakhskaya Discovery

September 21, 2011

21 September 2011

PetroNeft Resources plc

(“PetroNeft” or the “Company”)

Discovery of New Oil Field at North Varyakhskaya

PetroNeft Resources plc (AIM: PTR), the owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce the discovery of another new oil field in Licence 61 at North Varyakhskaya.


· Seventh oil field discovered in Licence 61

· North Varyakhskaya No. 1 well makes oil discovery in main Upper Jurassic target

o 2.2 metres of net oil pay confirmed in J1-1 interval

o Open hole inflow test of 36 bfpd (unstimulated)

o Good quality oil – 36 degree API

o 2.5 metres of potential additional net pay in J1-2 interval requiring further testing

· Development drilling at Lineynoye continues to push field boundary significantly further north

o Several wells have encountered materially thicker pay beyond the originally expected northern field boundary and have pushed the observed field oil-water contact at least 5 metres deeper

§ 211 well encounters second thickest net pay interval to date

o One additional well is now planned to be drilled to the north of the last two wells

· Exploration commenced at Licence 67 with first well now coring the uppermost objective with oil shows in the core.

North Varyakhskaya No. 1

The North Varyakhskaya No. 1 well at the North Varyakhskaya prospect located 6 km to the east of the Lineynoye Central Processing Facility was spudded on 17 August 2011. The well, which was drilled on the crest of the structure, has encountered approximately 2.2 metres of net oil pay in the J1-1 reservoir interval in a gross sand package of over 5 metres. There is also an additional 2.5 metres of potential oil pay in the J1-2 reservoir interval that will require more detailed logging and testing to confirm. A short open hole test of the J1-1 interval produced an inflow of 36 bfpd consisting of oil and mud filtrate. The oil is of good quality, 36 degree API, which is consistent with other oil fields in the Licence area. This preliminary test indicates that the reservoir will need fracture stimulation for economic development, as is usual in the area.

The field is located along the Lineynoye to Arbuzovskoye pipeline which is planned for construction in the first quarter of 2012, which will reduce development cost. Casing is currently being run in the well which will eventually be utilised as a producer. The field will also qualify for the maximum MET tax relief based on the new MET tax reduction law for small fields that becomes effective on January 1, 2012.

Licence 61 Development programme

Two further successful development wells have been drilled from Pad 2 at the Lineynoye oil field. Well 209 encountered 9.6 metres of net pay. This well was the most northerly well drilled to date at approximately 500 metres further north than the 207 well that was drilled in early August 2011. Both wells were drilled at locations that had originally been interpreted to be outside the boundaries of the oil field and initially projected to have zero net pay. Given the successful results from the 207 and 209 wells we then added another location, well 211, to the northeast of well 207, again outside the original field boundaries. The 211 well encountered 17.9 metres of net pay, the second thickest net pay interval to date in the drilling programme. We are studying the possibility of adding one well (No. 212) to this year’s programme at Pad 2 to enable us to drill the reservoir to the northeast of these two latest wells. In the meantime, we are currently drilling the 210 well which is located nearer the centre of the Pad 2 area.

The Pad 2 drilling results indicate that the field wide oil water contact (owc) is at least 5 metres deeper on the structure than previously interpreted. The owc is about 12 metres lower than the interpreted structural spill point on the northern end of the field providing good evidence that the Lineynoye field extends much further north than previously estimated and possibly connecting the structures of the Emtorskaya high to Lineynoye.

Licence 67 Exploration programme

Exploration at Licence 67 commenced on 28 August 2011 when the high impact Cheremshanskaya No. 3 well was spudded. The well is targeting objectives at the Upper, Middle and Lower Jurassic horizons following up on previously drilled wells where modern log analysis indicates potential “missed pay”. The well is currently coring in the uppermost target horizon and hydrocarbon shows have been encountered. The well will take up to two months to complete drilling and testing of the three target objectives. Further updates will be provided as operations progress.

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

“We are very pleased to announce a new discovery at North Varyakhskaya. The field, while small in comparison to Sibkrayevskaya, is important because it can be easily tied into already planned infrastructure at minimal cost and will also qualify for a reduced Mineral Extraction Tax. The two well exploration programme now underway at Licence 67 is based on re-interpreted data from old wells, similar to our recent significant Sibkrayevskaya discovery. We look forward to updating shareholders on the results of these wells as activities progress.”

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc

+353 1 443 3720

Paul Dowling, CFO, PetroNeft Resources plc

+353 1 443 3720

John Frain/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. No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period.


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 per day

Spill point

The structurally lowest point in a hydrocarbon trap that can retain hydrocarbons




Million barrels