Licence 61 Farmout Agreement with Oil India Limited


April 17, 2014

17 April 2014

PetroNeft Resources plc

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

Licence 61 Farmout Agreement with Oil India Limited

PetroNeft (AIM: PTR) owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce that it has entered into a binding agreement in respect of a 50% interest in Licence 61 with Oil India Limited (“OIL”) (the “Licence 61 Farmout”).

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

Licence 61 Farmout

Over the past year, PetroNeft has held discussions with a large number of parties in relation to a potential farmout of up to 50% of Licence 61 and also held discussions with a number of Russian and International banks to refinance the existing debt facilities and put the Company on a sound financial footing for the long-term.

Having considered in detail a number of proposals and offers, PetroNeft is pleased to announce that it has entered into an agreement in respect of a 50% non-operating interest in Licence 61 with OIL.

Under the terms of the Licence 61 Farmout, OIL will acquire a 50% interest in Licence 61 by making a total Investment of up to US$ 85 million consisting of:

· US$ 35 million upfront cash payment,

This will enable PetroNeft to repay in full its existing debts (the Macquarie Debt Facility and the Arawak Loan) and have cash for working capital purposes;

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

· US$ 5 million performance bonus, contingent upon average production from the Sibkrayevskoye Field reaching 7,500 bopd within the next 5 years.

The transaction is subject to shareholder vote and regulatory approval. In this regard, an Extraordinary General Meeting of shareholders will be held at 10.30 AM on 9 May 2014 in order for shareholders to grant their approval. A formal notice of this EGM will be circulated to shareholders and placed on the website (www.petroneft.com) in the coming days. Regulatory approval is expected around the end of May. The transaction is also subject to the rejection by shareholders of all resolutions at the requisitioned EGM due to take place at 11:15AM on 9 May 2014.

Upon completion, PetroNeft will repay all of its existing debts (Macquarie and Arawak), have cash for working capital purposes and significant funds available to invest directly in Licence 61 over the coming years.

The Licence 61 Farmout:

· Materially strengthens PetroNeft financially and strategically

· Fully addresses PetroNeft’s capital structure and long term investment requirements with all existing debt repaid, cash for working capital and investment and significant funds available to invest directly in Licence 61

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

· Positions PetroNeft to fully exploit the potential of its assets and create value for all Shareholders

Evercore acted as Financial Adviser to PetroNeft for the Licence 61 Farmout.

Oil India Limited (BSE: 533106, NSE: OIL) is one of the largest national oil and gas companies in India as measured by total proved plus probable oil and natural gas reserves and production. It is engaged in the business of exploration for oil and gas, production of crude oil, natural gas and LPG and transportation of crude oil, natural gas and petroleum products. OIL has over 50 E&P blocks in India and an International presence spanning Egypt, Gabon, Libya, Mozambique, Nigeria, USA, Venezuela and Yemen. For further detail please refer to www.oil-india.com.

PetroNeft will remain as Operator of Licence 61, but OIL will have the right to second certain technical experts into PetroNeft’s Tomsk team. OIL also has the right to become the Operator of the Licence should there be a substantial change in the management team of PetroNeft within the first three years. On completion OIL will be able to book 50% of production and reserves from Licence 61.

Post Completion Activities

Once the Licence 61 Farmout is completed, PetroNeft will drill up to five additional production wells at Arbuzovskoye and delineation wells at Tungolskoye and Sibkrayevskoye, where significant upside potential and near-term developments are possible. The Tungolskoye No. 5 well will be the first horizontal well drilled on Licence 61. There are also plans in place to acquire additional 2D seismic across the large Sibkrayevskoye oil field and Emtorskaya prospect commencing later in 2014. In 2015 it is likely that the Tungolskoye oil field will be brought into production.

All necessary supplies and equipment for this year’s work programme have already been purchased and moved to the field by winter roads to allow for operations to commence upon completion of the farmout, thus ensuring that PetroNeft does not lose a year in its work schedule. It is expected that drilling will recommence in July 2014.

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

“We are very pleased to announce the farmout of 50% of Licence 61 to OIL. This agreement has come at the end of a lengthy negotiation and due diligence process and is, we believe, the best deal for all PetroNeft shareholders. With OIL we share a common appreciation for the potential of Licence 61 and the terms of the deal are structured as such. Once we have the necessary regulatory approvals in hand, we will move quickly to drill our first horizontal well at Tungolskoye and to complete the Pad 1 production wells at Arbuzovskoye. We look forward to working with OIL for many years in the future on both Licence 61 and other projects”.

For further information, contact:

Dennis Francis, CEO, PetroNeft Resources plc

+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

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

+44 207 523 8000

Martin Jackson / Shabnam Bashir, Citigate Dewe Rogerson

+44 207 638 9571

Joe Murray/Joe Heron, Murray Consultants

+353 1 498 0300