Funding & Operations Update

March 17, 2014


PetroNeft Resources plc

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

Funding & Operations Update

PetroNeft (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce a funding and operations update.


  • $6.7 million fundraising consisting of
    • $5.2 million new equity issue at 5 pence per share
    • $1.5 million in debt
  • Production higher at 2,400 bopd, reflecting improved well performance
  • Licence 61 farmout confirmatory due diligence and legals progressing well; completion anticipated in coming weeks


PetroNeft has agreed the terms of a conditional placing of 62,325,631 new Ordinary Shares at Stg£0.05 per Ordinary Share (the “Placing Shares”), raising gross proceeds of approximately US$5.2 million (the “Placing”).

The Placing, which was oversubscribed, has been arranged by Davy and is conditional, inter alia, on admission of such Ordinary Shares to trading on the AIM Market of the London Stock Exchange (“AIM”) and the ESM Market of the Irish Stock Exchange (“ESM”).

The Company will apply for admission of the Placing Shares to be traded on the AIM and ESM. It is expected that Admission will take place and that trading will commence on or around 19 March 2014.


PetroNeft has also agreed an additional US$1.5 million debt drawdown with Arawak Energy by increasing the existing US$15 million loan to US$16.5 million on the same terms (maturity and interest) as the existing loan. PetroNeft has granted Arawak an additional 2,000,000 warrants over Ordinary Shares at a strike price of US$0.0891 per Ordinary Share.

Use of proceeds

The proceeds of the placing and increase in the Arawak loan will be used for:

· Purchase and delivery of the necessary supplies and equipment to the field to enable a full programme of works be undertaken in 2014. This must be completed while winter roads are still available;

· Payment of US$ 2.5 million to Macquarie; and

· Working Capital purposes.

Under the Macquarie agreement, the bank will have the right from 15 April 2014 to ask for Licence 61 to be put up for sale in its entirety in a competitive process (as well as their other normal rights as lender) if the farmout of Licence 61 is not completed at that date.


PetroNeft continues to make solid progress with the large international oil and gas company referred to in our January update. The proposed deal is structured to enable PetroNeft to repay all of its debts (Macquarie and Arawak), have cash for working capital purposes and significant funds available to invest directly in Licence 61 over the coming years. It will also bring an internationally recognised, financially strong partner with a strong technical team and wide ranging experience around the globe in various hydrocarbon plays. Based on the current progress of confirmatory legal and accounting due diligence and legal documentation we expect to finalise this transaction in the coming weeks.

Once the farmout is completed, plans are in place to drill additional production wells at Arbuzovskoye and delineation wells at Tungolskoye and Sibkrayevskoye, where significant upside potential and near-term developments are possible. The funds raised will ensure all of the necessary supplies and equipment are moved into place during the winter period and for field operations to commence upon completion of the farmout.


Production is currently around 2,400 bopd following the successful completion of some workovers.Our water injection programme continues to function effectively and overall well performance is in accordance with expectations.

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

“We are pleased with the fundraising which will allow us to purchase and transport materials to the field this winter to conduct a full scope of work in 2014 following completion of the farmout.

We have also made significant progress on the farmout in the past month and anticipate that it will be completed at the end of Q1 or shortly thereafter.”

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc

+353 1 647 0280+353 1 647 0280+353 1 647 0280+353 1 647 0280

Paul Dowling, CFO, PetroNeft Resources plc

+353 1 647 0280

John Frain/Brian Garrahy, Davy (NOMAD and Joint Broker)

+353 1 679 6363+353 1 679 6363

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

+44 207 523 8000+44 207 523 8000

Martin Jackson, Citigate Dewe Rogerson

+44 207 638 9571+44 207 638 9571

Joe Murray/Ed Micheau, Murray Consultants

+353 1 498 0300+353 1 498 0300

This Announcement is for information purposes only and shall not constitute an offer to buy, sell, issue, or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for any securities, nor shall there be any sale of securities in any jurisdiction, including, without limitation, the United States, Canada or Japan, in which such offer, solicitation or sale is or may be unlawful prior to registration or qualification under the securities laws of any such jurisdiction (a "Prohibited Jurisdiction"). This Announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in a Prohibited Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. This Announcement has been issued by and is the sole responsibility of the Company.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Davy or by any of their respective Affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any responsibility or liability therefor is expressly disclaimed.

Davy, which is regulated in Ireland by the Central Bank of Ireland, is acting for the Company and for no-one else in connection with the Placing, and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Davy or for providing advice to any other person in relation to the Placing or any other matter referred to herein.

The distribution of this announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by PetroNeft or Davy that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by PetroNeft and Davy to inform themselves about, and to observe such restrictions.

The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares.

This Announcement is not for distribution, directly or indirectly, in or into the United States (such term to be understood throughout this Announcement as including the United States' territories and possessions, any state of the United States and the District of Columbia), Canada, Japan or any jurisdiction into which the same would be unlawful. This Announcement does not constitute or form part of an offer or solicitation to acquire shares in the capital of the Company in the United States, Canada, Japan or any jurisdiction in which such an offer or solicitation is unlawful. In particular, the Placing Shares referred to in this Announcement have not been, and will not be, registered under the Securities Act or under the securities legislation of any state of the United States, and may not be offered, sold, resold or delivered, directly or indirectly, in or into the United States absent registration except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Placing Shares referred to in this Announcement are being offered and sold outside the United States in offshore transactions (as defined in Regulation S under the Securities Act ("Regulation S") meeting the requirements of Regulation S. No public offering of securities of the Company will be made in connection with the Placing in the United Kingdom, the United States, Australia, Canada, Japan, South Africa or elsewhere.

The Placing Shares to which this Announcement relates may be illiquid and / or subject to restrictions on their resale. Prospective subscribers of the Placing Shares offered should conduct their own due diligence on the Placing Shares. If you do not understand the contents of this Announcement you should consult an authorised financial adviser.

Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this announcement should seek appropriate advice before taking any action.

The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than AIM and the ESM. Neither the content of PetroNeft's website nor any website accessible by hyperlinks on PetroNeft's website is incorporated in, or forms part of, this announcement.