EXI.L Regulatory News (EXI)

Exillon Energy plc

Interim Management Statement and Drilling Update

9 October 2013 - Exillon Energy plc, a London Premium listed independent oil producer with assets in two oil-rich regions of Russia, Timan-Pechora ("Exillon TP") and West Siberia ("Exillon WS"), today issues an interim management statement and drilling update.

Highlights

· Average daily production increased to 16,643bpd in Q3 from 15,737bpd in Q2. Peak daily production reached 17,719 bpd in Q3 compared to 17,013 in Q2.

· Results from five wells (Wells 71, 73, 74, 80 and 92) announced today, and updates on Well 75 and 93 which are nearing completion. This will complete our drilling programme for 2013.

· The expansion of our oil treatment unit in EWS is progressing well and is expected to be operational before the end of 2013.

· Previous production guidance of between 18,000 and 19,000 bpd by the end of 2013 is likely to be met or surpassed.

Formal Sales Process

A further, separate announcement updating shareholders on the Formal Sales Process announced on 18 September 2013 will be made in due course.

Production

Our production for Q3 was:

 Source: Average production data is based on monthly production reports submitted to tax authorities for MET payment purposes. Peak production is based on internal operations reports.

1 The Company records production in metric tonnes. Barrelization ratios are used for illustrative purposes only and are calculated based on the Company's estimate of the typical API of oil produced from specific fields. The barrelization ratios used are 7.8037 bbl / tonne for Exillon WS and 7.44 bbl / tonne for Exillon TP.

2 "Peak daily production" represents the Company's estimate of aggregate production on the day on which aggregate production reached its maximum during the period. It does not represent the combined peak production of each separate field on different days, which may be higher. 

Operational Update

As previously announced in our H1 update, our oil treatment facility on our main EWS I field is operating at full capacity. It is currently being expanded from a capacity of 1,600 tonnes (approximately 12,500 bpd) to 3,000 tonnes (approximately 23,400 bpd). Construction remains on track and we expect this upgrade to be operational later this year.

On 27 August we stated that we expected production to reach between 18,000 and 19,000 bpd once the ongoing upgrade to our oil processing facility was completed. Recent drilling results (particularly from Wells 73 and 74, and early indications from Well 75, all located in the highly prolific north-east area of EWS I) allow us to reiterate that we expect to meet or exceed the higher end of this range.

FinancialsDuring the period, we exported 156,074 barrels of oil at an average realised price of approximately US$ 98.6 per barrel, and sold 1,360,110 barrels within Russia at an average realised price of US$ 50.2 per barrel. The difference in the sales price of exports and domestic sales is principally a function of export duty. We are free to sell either for export or domestically, and our netbacks for domestic and export sales are similar. The average selling price for our oil continues to be higher than our budgeted level of US$ 95 per barrel Urals (and the equivalent level for domestic sales). We ended Q3 with a cash balance of US$ 83.6 million. We have US$ 100.2 million of debt, so our net debt position as at that date was US$ 16.6 million. US dollars account for approximately 86% of our liquid assets, with the remaining 14% held in Russian Rubles. Our current cash balance is US$ 86.4 million. Capital expenditure during the period was approximately US$ 16.1 million (Q3 2012: US$ 16.6 million). Of this total expenditure, US$ 7.6 million was attributable to drilling, US$ 8.3 million to infrastructure and US$ 0.2 million to seismic data acquisition and interpretation. 

Drilling update

East EWS I - 71

Well EWS I - 71 was drilled on the northern part of the East EWS I field. The well was spudded on 27 June 2013 and drilled and cemented in 18 days. The well encountered the Jurassic P reservoir at 1885 meters, confirming 21.7 meters of effective vertical net oil pay.

The well has also detected lowest known oil at a level of 1912 meters, which is 2 meters below the previously assumed oil water contact level.

The well flowed oil naturally to the surface with a flow rate of 709 bbl/day on an 8 mm choke, and 943 bbl/day on a 10 mm choke. The well was drilled 0.6 km to the south-west of Pad 7, and is now connected to our existing production facilities.

Injection well East EWS I - 73

Well East EWS I - 73 was drilled on the western margin of the East EWS I field. The well was spudded on 16 July 2013 and drilled and cemented in 15 days. The well encountered the Jurassic P reservoir at 1904 meters, confirming 12.5 meters of effective vertical net oil pay. Due to the angled trajectory of the well bore the well opened up 20.6 meters of net pay.

The well was drilled to confirm the oil water contact at the margin of the field and is lower than any other well on the structure. It is therefore optimally located for use as an injection well for the purposes of maintaining reservoir pressure. The well was drilled 1.3 km to the south of Pad 7.

East EWS I - 74

Well EWS I - 74 was drilled on the north-eastern part of the East EWS I field. The well was spudded on 2 August 2013 and drilled and cemented in 20 days. The well encountered the Jurassic P reservoir at 1890 meters, confirming 22.5 meters of effective vertical net oil pay. Due to angled trajectory of the well bore the well opened up 29.6 meters of net pay for production.

The well has also detected lowest known oil at a level of 1919 meters, which is 9 meters below previously assumed oil water contact level.

The bottom 3 meters of net pay were perforated and the well flowed oil naturally to the surface with a flow rate of 897 bbl/day on a 12 mm choke. The remaining 19 meters of net pay will be perforated shortly, giving significant upside potential for future production. The well was drilled 0.6 km to the south-east of Pad 7, and is now connected to our existing production facilities.

Exploration Well EWS I - 80

Exploration well EWS I - 80 was drilled to the south of the EWS I field. The well was designed to test prospects that can be located on the margins of the structure.

The well was spudded on 14 June 2013 and drilled and cemented in 37 days. The well encountered the Jurassic P reservoir at 1804 meters, and has been interpreted as 12.2 meters of effective vertical net oil pay.

The well has tested small quantities of oil but insufficient at this stage to justify connection to our production facilities. The well was drilled 0.4 km to the south-east of Pad 8.

EWS I - 92

Well EWS I - 92 was drilled on the central part of the north-west extension of the EWS I field. The well was spudded on 27 June 2013 and drilled and cemented in 34 days. The well encountered the Jurassic P reservoir at 1856 meters, confirming 17.4 meters of effective vertical net oil pay. Due to the angled trajectory of the wellbore the well opened up 28.4 meters of net pay for production.

The well detected lowest known oil at 1874 meters, which is 17 meters below previously known oil water contact level. This most likely implies the presence of a new formation below the Jurassic P reservoir which would suggest a significant increase in the hydrocarbon accumulation area.

The well is currently operated with a submersible pump flowing at a rate of 77 bbl/day, of which 62 bbl/day is oil. A pressure transient analysis is currently underway to optimise production further. The well was drilled 0.4 km to the south-east of Pad 9, and is now connected to our existing production facilities.

EWS I - 93 - progress update

Well EWS I - 93 was drilled on the northern part of the north-west extension of the EWS I field. The well was spudded on 31 July 2013 and drilled and cemented in 32 days. The well encountered the Jurassic P reservoir at 1856.5 meters, confirming 4.9 meters of effective vertical net oil pay. Due to the angled trajectory of the wellbore the well opened up 8.2 meters of net pay for production.

The well is currently under completion. The well was drilled 0.4 km to the south-east of Pad 9.

EWS I - 75 - progress update

Well EWS-75 is the last well currently planned for 2013. It was spudded on 20 September and has reached its target depth of 2257 meters. The well was being drilled to the north-east of Pad 7.

This well is expected to be completed and in production by the end of October.

Media contact:

Tom Blackwell

EM

+7 919 102 9064

Blackwell@em-comms.com