Petro Matad Regulatory News (MATD)

19 January 2018

THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE PLC, NOR IS IT INTENDED THAT IT WILL BE SO APPROVED. 

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE ANY INVITATION, SOLICITATION, RECOMMENDATION, PROSPECTUS, OFFERING MEMORANDUM, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN PETRO MATAD LIMITED OR ANY OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHOULD FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF PETRO MATAD LIMITED OR OTHER EVALUATION OF ANY SECURITIES IN PETRO MATAD LIMITED OR ANY OTHER ENTITY.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU No. 596/2014) ("MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN MAR) WERE TAKEN IN RESPECT OF CERTAIN OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION, AS PERMITTED BY MAR. UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

 Petro Matad Limited

("Petro Matad" or the "Company")

US$16 million Fundraising

Petro Matad Limited (AIM: MATD), the AIM-quoted Mongolian oil explorer, is pleased to announce the successful completion of a US$16 million placing with new institutional investors and subscription for new Ordinary Shares in the Company by existing shareholders and directors of the Company (the "Fundraising").

Highlights

· A total of 127,420,294 New Ordinary Shares (the "Placing Shares") in the Company were placed with institutional investors (the "Placing") and a total of 59,167,335 New Ordinary Shares (the "Subscription Shares") in the Company were subscribed for by new and existing investors, raising net proceeds of US$16 million (£11.5 million) at a price of 6.5 pence per New Ordinary Share, a 11.5 per cent. discount to the average daily volume weighted average price for the three months to 18 January 2018.  

· The New Ordinary Shares will represent, in aggregate, approximately 35.9 per cent. of the Company's issued ordinary share capital immediately following Admission.  

· The Fundraising will allow the Company to re-launch its exploration and appraisal activities in Mongolia, led by industry veteran Mike Buck as CEO, following his appointment in October 2017

· The net proceeds of the Fundraising will be used to fund up to four wells as part of a drilling campaign across the Company's significant, 100% owned, acreage position in Mongolia

· The drilling programme will consist of up to two wells in Blocks IV and V in Western Mongolia and two wells in Block XX, immediately adjacent to the producing Block XIX

· The 2018 drilling campaign is planned to target a combined estimated prospective resource of 398mmbo with an expected combined drilling cost of US$15.5 million

· The Company has contracted a Sinopec drilling rig to undertake the drilling of the two wells in Blocks IV and V, with the spudding of the first prospect anticipated for early May 2018

Stockdale Securities Limited ("Stockdale") is acting as Nominated Adviser and Joint Bookrunner to the Company in connection with the Fundraising. Stifel Nicolaus Europe Limited ("Stifel") and Pareto Securities AS ("Pareto") are acting as Joint Bookrunner to the Company in connection with the Fundraising (together with Stockdale, the "Joint Bookrunners").

Mike Buck, CEO of Petro Matad, commented:

"I am pleased to announce the completion of this significant, oversubscribed fundraise; through the support of new and existing shareholders we are targeting a substantial and unprecedented exploration campaign for an independent E&P company in Mongolia.

"We are uniquely placed in Mongolia; with an extensive acreage position and large resource range and with the access to a suitable rig, the 2018 drilling campaign will allow us to unlock the prospectivity in a timely and economic fashion, providing near term catalysts and longer term value.

"This is a very exciting time for Petro Matad and in my experience, opportunities of this magnitude are rare and with the support of the market we are focussed on delineating the significant potential contained within our portfolio."

For more information, please contact:

Background to and Reasons to the Fundraising

Petro Matad holds a significant, 100% owned and operated, acreage position in Mongolia. It owns and operates three Production Sharing Contracts ("PSCs") covering over 60,000 km2: Blocks IV (28,900 km2) and V (21,100 km2) in western Mongolia and Block XX (10,340 km2) in eastern Mongolia.

The Company is undertaking the Fundraising as part of a re-launch of the business following a period of relative inactivity during the past two years. In June 2015, the Company successfully farmed-out Blocks IV and V to BG Group ("BG"), which included cash payments and a carry on an extensive exploration programme. In April 2016, following the acquisition of BG by Royal Dutch Shell plc ("Shell") and its subsequent re-organisation and divestiture programme, Shell announced the termination of the farm-out agreement and withdrawal from Mongolia. On termination of the agreement, Shell paid the Company an exit fee of c.US$15 million, US$5 million of which is refundable to Shell if the Company farms-out either of Blocks IV or V during the exploration period or any extension of the exploration period.

Following Shell's withdrawal, the Company recommenced the farm-out process, as well as tendering for a rig contract in January 2017 to drill on Block V. The Company also secured extensions to the Block IV and V PSCs. In July 2017, the Company announced it had awarded the drilling contract to Sinopec for a two well campaign, commencing in September 2017. In September 2017, the Company announced that rig inspection and certification had taken longer than anticipated and that the drilling programme was therefore delayed to 2018. In September 2017, the Company announced a 3D seismic programme on Block V and the acquisition of 2D seismic on Block IV in order to high grade and better define drillable prospects.

In October 2017 the Company announced the appointment of a new CEO, Mike Buck, an industry veteran with over 38 years oil industry experience. On appointment, Mike, with the board and management team, initiated a review of operations and financing. In December 2017 the Company terminated its equity draw down facility with Bergen Global Opportunity Fund LP, and commenced preparation for the Fundraising, to finance a larger exploration programme than previously planned across Blocks IV, V and XX. In January 2018, the Company announced that it had secured an extension to the Block XX PSC and that it had completed the 3D survey in Block V.

As previously announced the Company has been running a farmout process, which has generated interest from a range of companies, who have all undertaken substantial reviews of the Company's data room, however at this stage no firm offer has been made. There are currently a number of companies remaining in the process. On review however, the Board and management believe that a self-funded exploration and appraisal programme will allow the Company to expand and maintain the planned drilling schedule commencing in Q2 2018, be less dilutive and create significantly more value for shareholders on success, given the sizeable inventory of low cost drilling targets. The Board and management also believe that a successful exploration campaign would, given the size of the prospects, generate significant interest from potential farminees at a substantially higher value than could be achieved today. As there are still some interested parties, the Company does not however, rule out bringing in a farminee, if on favourable terms, prior to drilling commencing.

The Company intends to use the net proceeds of the Fundraising to undertake an up to four well drilling programme across Blocks IV, V and XX planned for 2018. The Company has conducted significant preparatory exploration work across its Blocks and the drilling campaign offers an attractive mix of lower risk exploration in Block XX, immediately adjacent to producing Block XIX, and high impact exploration in Blocks IV and V.

Block XX

Located in the far east of the country, Block XX is an exploration licence immediately adjacent to PetroChina's producing Block XIX. The Company has identified five prospects on the Block including three that the Company believes are continuations of discovered oil bearing structures on Block XIX. The Company has previously drilled wells on Block XX which, although recovering small amounts of oil, were unsuccessful as they were drilled on a large structural high that was too far from source rock to have significant reservoir charge. Given this data, the work completed subsequently and the information from Block XIX, the Company is confident that it has identified prospects with an attractive chance of success, ranging from 50% to 75%.

The first well intended to be drilled on Block XX in 2018 will target the Gazelle prospect, which management estimate has a mid-case risked recoverable prospective resource of 8 mmbo and is located to the west of the previous Block XX wells and has been selected for the higher quality reservoir modelled to be present in the west of the acreage. The prospect is located on trend with some of the most productive wells in Block XIX and management estimate a better than 50% chance of success. The Company currently anticipates drilling the Gazelle prospect in Q4 2018. The well will be drilled to a total depth of c.2,500m, at an estimated cost of US$2.5 million. Following Gazelle the Company intends to drill another of the five prospects identified, the location to be determined by ongoing technical work. The Company intends to tender for a rig to drill Block XX, shortly after completion of the Fundraising.

In the event of a discovery, management believe that Block XX is also attractively placed for relatively quick development and monetisation given the extensive development and production facilities located on Block XIX as part of PetroChina's operations, which the Company would potentially look to exploit, given the current spare throughput capacity in Block XIX's processing and export facilities.

In a 15 mmbo success case on Block XX, assuming 40 production wells at US$2.4 million a well, and initial production rates of 240 bopd and utilising Block XIX facilities, at the December 2017 forward curve, management estimate indicative economics of US$80 million NPV10 and an IRR of 42%.

Blocks IV and V

Located in the west of the country, where there has been very limited exploration, Blocks IV and V offer a relatively low cost, high impact exploration opportunity. The Company has identified 12 prospective basins across its acreage and has sampled very rich lacustrine source rock and high quality reservoirs in surface outcrops on the basin flanks. Core holes drilled into some of the basinal areas have also found source and reservoir along with shows of oil. Within northern China, close to the Mongolian border there are multiple multi-billion barrel basins that are analogous to the geology in the Company's Blocks and provide an indication of their potential. The Blocks also have an extensive data base of gravity and magnetics surveys including an 11,000km2 full tensor gravity survey, 4,000 km of 2D seismic and 200 km2 of 3D seismic.

The Company has an inventory of 55 prospects and leads and estimate more than two billion barrels of cumulative recoverable resource potential in these features. The initial drilling campaign is intended to be a two well campaign, with the first well on the Wild Horse prospect on Block IV and the second well on the Falcon prospect on Block V. The Company has contracted a Sinopec rig to drill two wells in Block's IV and V involving a lump sum fee structure. The Company anticipates mobilising the rig in late Q1 2018.

The first well of the campaign is intended to drill the Wild Horse Prospect in the Baatsagaan Basin in Block IV. The well will drill a prominent structure and is targeting a mid-case prospective resource of 290 mmbo and if successful will de-risk 13 further prospects and leads with a resource potential of 750 mmbo. The well would be shallower than the other prospects at 1,850m total depth and is estimated to cost approximately US$4 million.

The second well is intended to drill the Falcon prospect in the Tugrug Basin in Block V. The well is targeting a mid-case risked prospective resource of 100 mmbo. Source, and reservoir and a working petroleum system are all proven in the Tugrug Basin, evidenced by the TSC core hole drilled on the edge of the basin, which identified source rock and live oil in good quality reservoir. The Company has recently completed a 3D seismic survey, which will constrain fault mapping and determine the best well location as well as defining turbidite play potential within the basin. The well will be drilled to a total depth of c.3,000m and is expected to cost approximately US$7 million. If successful the well will help to substantially de-risk seven further prospects and leads with a total additional resource potential of 180 mmbo.

Indicative management estimates on economics indicate that a successful 50 mmbo discovery, developed with 36 wells at approximately US$4 million per well and exported initially via truck to Chinese refineries would generate an NPV10 of US$451 million, with an IRR of 100% at the December 2017 forward curve. A 150 mmbo discovery, based on a 117 well development on the same parameters above, would generate an NPV10 of US$1.27 billion and an IRR of 114%.

Use of Proceeds

In addition to approximately US$4.7 million of existing cash the Company intends to use the net proceeds of the Fundraising as below:

This Announcement should be read in its entirety. Investors' attention is drawn to the detailed terms and conditions of the Fundraising described in Appendix 1 and the principal risks and uncertainties described in Appendix 2 (each of which form part of this Announcement). By choosing to participate in the Fundraising and by making an oral and legally binding offer to acquire Placing Shares, investors will be deemed to have read and understood this Announcement in its entirety (including the Appendices) and to be making such offer on the terms and subject to the conditions of the Fundraising contained here, and to be providing the representations, warranties and acknowledgements contained in Appendix 1.

Extraordinary General Meeting

In accordance with the Company's articles of association, shareholder approval is required for the Directors to issue the Placing Shares and the New Ordinary Shares related to the Subscriptions. An Extraordinary General Meeting is expected to be held at Blue Sky Tower, Topaz Conference Hall, Peace Avenue 17, Sukhbaatar District, Ulaanbaatar, Mongolia for the purpose of passing certain Resolutions in relation to the proposed Fundraising. It is currently anticipated that this Extraordinary General Meeting will be held on or around 8 February 2018 to approve the Resolutions in connection with the Fundraising. The Circular, containing a notice convening an Extraordinary General Meeting is expected to be despatched to Shareholders of the Company on or about 22 January 2018, outlining terms of the Fundraising, the Resolutions and recommending all Shareholders to vote in favour of all the Resolutions. Thereafter, the Circular will be available on the Company's website at www.petromatadgroup.com.

Petrovis and certain of their concert parties, Enkhmaa Davaanyam, Oyungerel Janchiv and John Henriksen have irrevocably undertaken to vote their shareholding of 141,296,080 Ordinary Shares (42.4%) in favour of the Resolutions.

The Fundraising, is conditional, inter alia, on the Resolutions being passed by the Shareholders at the Extraordinary General Meeting (or an adjournment thereof) and, in respect of the Placing, the Placing Agreement otherwise becoming unconditional in all respects (save for Admission) and not having been terminated in accordance with its terms prior to Admission.

Application will be made to the London Stock Exchange for the Placing Shares and Subscription Shares to be admitted to trading on AIM. It is currently expected that Admission will become effective, and that dealings in the Placing Shares and Subscription Shares will commence on AIM, at 8.00 a.m. on 9 February 2018.

Participation by Directors, Management and Existing Major Shareholders and Related Party Transaction

Certain Directors and management of the Company have subscribed for 7,756,017 Subscription Shares in the Fundraising to raise gross proceeds of approximately US$700,000. The proposed participations by certain Directors are classified as a 'related party transactions' under Rule 13 of the AIM Rules for Companies ("AIM Rules").

*prior to the Share Awards disclosed below

Petrovis has subscribed for 51,411,318 Subscription Shares in the Fundraising to raise gross proceeds of US$4.6 million.

Petrovis, by virtue of it holding more than 10 per cent. of the existing issued share capital of the Company, is classified as a related party of the Company and its participation in the Fundraising is considered a 'related party transaction' under Rule 13 of the AIM Rules. Furthermore, Oyungerel Janchiv and Enkhmaa Davaanyam, directors of the Company, are connected to Petrovis.

In the absence of independent Directors, Stockdale, the Company's Nominated Adviser, considers that the terms of the participation by each of Petrovis and the above mentioned Directors in the Fundraising are fair and reasonable insofar as Shareholders are concerned.

Timetable

The times and dates set out below are subject to change, and may be adjusted by the Company in consultation with the Joint Bookrunners. The timetable below also assumes that the Resolutions are all passed at the Extraordinary General Meeting without adjournment. In the event of any significant changes from the below expected timetable, details of the new times and dates will be notified to Shareholders by an announcement on a Regulatory Information Service.

Each of the times and dates above refer to Greenwich Mean Time.

Director Awards

Pursuant to the terms of their service agreement or letter of appointment (as the case may be) the following Directors are entitled to receive the following awards of Ordinary Shares (the "Director Share Awards"):

Name No. of Ordinary Shares Issue Price

Mike Buck 1,000,000 $0.01

Tim Bushell 500,000 $0.01

As at the date of this Announcement, no Ordinary Shares have been issued pursuant to the Director Share Awards.

Attention is dawn to the section headed 'Important Information' of this Announcement and the terms and conditions  of the Fundraising in Appendix 1 and the principal risks and uncertainties described in Appendix 2 (each of which form part of this Announcement).

Capitalised terms not otherwise defined in the text of this Announcement are defined in the Definitions section of this Announcement. 

Important Information

This Announcement contains 'forward-looking statements' concerning the Company that are subject to risks and uncertainties. Generally, the words 'will', 'may', 'should', 'continue', 'believes', 'targets', 'plans', 'expects', 'aims', 'intends', 'anticipates' or similar expressions or negatives thereof identify forward-looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the Company's operations; and (iii) the effects of government regulation on the Company's business.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as (i) price fluctuations in crude oil and natural gas; (ii) changes in demand for the Company's respective products; (iii) currency fluctuations; (iv) drilling and production results; (v) reserves estimates; (vi) loss of market share and industry competition; (vii) environmental and physical risks; (viii) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (ix) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (x) economic and financial market conditions in various countries and regions; (xi) political risks, including the risks of renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement of shared costs; and (xii) changes in trading conditions. The Company cannot give any assurance that such forward-looking statements will prove to have been correct. The reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not undertake any obligation to update or revise publicly any of the forward-looking statements set out herein, whether as a result of new information, future events or otherwise, except to the extent legally required.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of the Company or any other person following the implementation of the Placing or otherwise.

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. Past performance is no guide to future performance and persons who require advice should consult an independent financial adviser.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, except pursuant to an exemption from registration. No public offering of securities is being made in the United States.

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 the Company or any of the Joint Bookrunners 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 the Company and the Joint Bookrunners to inform themselves about, and to observe, any such restrictions.

This Announcement is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa or any jurisdiction into which the publication or distribution would be unlawful. This Announcement is for information purposes only and does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire shares in the capital of the Company in the United States, Australia, Canada, the Republic of South Africa or Japan or any jurisdiction in which such offer or solicitation would be unlawful or require preparation of any prospectus or other offer documentation or would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any such jurisdiction.

Stockdale, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser and joint bookrunner to the Company in relation to the Placing and is not acting for any other persons in relation to the Placing. Stockdale is acting exclusively for the Company and for no one else in relation to the matters described in this Announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Stockdale, or for providing advice in relation to the contents of this Announcement or any matter referred to in it.

Stifel, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as joint bookrunner to the Company in relation to the Placing and is not acting for any other persons in relation to the Placing. Stifel is acting exclusively for the Company and for no one else in relation to the matters described in this Announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Stifel, or for providing advice in relation to the contents of this Announcement or any matter referred to in it.

Pareto, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as joint bookrunner to the Company in relation to the Placing and is not acting for any other persons in relation to the Placing. Pareto is acting exclusively for the Company and for no one else in relation to the matters described in this Announcement and is not advising any other person and accordingly will not be responsible to anyone other than the Company for providing the protections afforded to clients of Pareto, or for providing advice in relation to the contents of this Announcement or any matter referred to in it.

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 either Stockdale, Stifel or Pareto 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 liability therefore is expressly disclaimed.

Conversions from US$ to GBP in this announcement have been conducted at an exchange rate of 0.7202:1 being the relevant exchange rate on 18 January 2018.

All Reserves and Resources definitions and estimates shown in this report are based on the 2007 SPE/AAPG/WPC/SPEE Petroleum Resource Management System ("PRMS").

Technical information in this news release has been reviewed by the Company's Senior Petroleum Geology Advisor, Mr. Andrew Barnwell, who is the Petroleum Geologist & Director at Barnwell Parker Geoscience Ltd. He has 30 years of experience in oil and gas exploration and holds a M.Sc./DIC in Petroleum Geology from Imperial College, London. Mr Barnwell is a member of the Petroleum Exploration Society Great Britain.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Placees should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; Placing Shares offer no guaranteed income and no capital protection; and an investment in Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Placing Shares. 

DEFINITIONS

The following definitions apply throughout this document unless the context otherwise requires:

 GLOSSARY

The following glossary of terms applies throughout this Announcement, unless the context otherwise requires:

Appendix 1 - Terms and Conditions of the Placing

APPENDIX - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR INVITED PLACEES ONLY REGARDING THE PLACING.

THIS ANNOUNCEMENT, INCLUDING THIS APPENDIX AND THE INFORMATION CONTAINED HEREIN (TOGETHER THE "ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL. THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTENDED THAT IT WILL BE SO APPROVED.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS DIRECTED ONLY AT:

(A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHO ARE QUALIFIED INVESTORS AS DEFINED IN SECTION 86(7) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMENDED ("QUALIFIED INVESTORS"), BEING PERSONS FALLING WITHIN THE MEANING OF ARTICLE 2(1)(e) OF DIRECTIVE 2003/71/EC AS AMENDED, INCLUDING BY THE 2010 PROSPECTUS DIRECTIVE AMENDING DIRECTIVE (DIRECTIVE 2010/73/EC) AND TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE");

(B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(5) (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) (HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.) OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED;

(C) IN SINGAPORE (I) TO INSTITUTIONAL INVESTORS UNDER SECTION 274 OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE "SFA"), (II) TO A RELEVANT PERSON PURSUANT TO SECTION 275(1) OF THE SFA, OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA, OR (III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA;

(D) IN HONG KONG PURSUANT TO THE TERMS OF THE SECURITIES AND FUTURES ORDINANCE (CHAPTER 571 OF THE LAWS OF HONG KONG) ("SFO") AND COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CHAPTER 32 OF THE LAWS OF HONG KONG) ("COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE") TO PERSONS WHOSE ORDINARY BUSINESS IS TO BUY OR SELL SHARES OR DEBENTURES, WHETHER AS PRINCIPAL OR AGENT, OR TO PROFESSIONAL INVESTORS (AS DEFINED IN THE SFO)

(ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT AND THE INFORMATION IN IT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN PETRO MATAD LIMITED.

THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE INTO THE UNITED STATES. THE PLACING SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT 1933, AS AMENDED (THE "SECURITIES ACT") OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, TAKEN UP, RESOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THE PLACING SHARES ARE BEING OFFERED AND SOLD (I) IN THE UNITED STATES ONLY TO A LIMITED NUMBER OF "QUALIFIED INSTITUTIONAL BUYERS" AS DEFINED IN RULE 144A ("QIBS"); AND (II) OUTSIDE THE UNITED STATES IN OFFSHORE TRANSACTIONS IN RELIANCE ON AND IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"). NO PUBLIC OFFERING OF THE PLACING SHARES IS BEING MADE IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE. NO REPRESENTATION IS BEING MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR THE REOFFER, RESALE, PLEDGE OR TRANSFER OF THE PLACING SHARES.

EACH PLACEE SHOULD CONSULT WITH ITS ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN INVESTMENT IN PLACING SHARES. THE DISTRIBUTION OF THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS, AND ANY PERSON INTO WHOSE POSSESSION THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, SUCH RESTRICTIONS.

No action has been taken by the Company, Stockdale Securities Limited ("Stockdale") Stifel Nicolaus Europe Limited ("Stifel") or Pareto Securities AS ("Pareto") (together the "Joint Bookrunners" and reference to the Joint Bookrunners in this Appendix shall be to them individually or collectively as the context requires) or any of their respective affiliates, agents, directors, officers or employees that would permit an offer of the Placing Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required.

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Australia, the Republic of South Africa, Japan or any other jurisdiction in which the same would be unlawful. No public offering of the Placing Shares is being made in any such jurisdiction.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) (the "FSMA") does not apply.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares and the Placing Shares have not been, nor will they be, registered under or offering in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

The information in this Announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of the Securities Act or the applicable laws of other jurisdictions.

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

This Announcement should be read in its entirety. In particular, you should read and understand the information provided in this "Important Information" section of this Announcement.

By participating in the Placing, each person who is invited to and who chooses to participate in the Placing (a "Placee") will be deemed to have read and understood this Announcement (including the Appendix) in its entirety, to be participating, making an offer and acquiring Placing Shares on the terms and conditions contained herein and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in this Announcement.

In particular, each such Placee represents, warrants, undertakes, agrees and acknowledges (amongst other things):

1 that it is a Relevant Person and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

2 that in the case of a Relevant Person in a member state of the EEA which has implemented the Prospectus Directive (each, a "Relevant Member State") who acquires any Placing Shares pursuant to the Placing:

2.1 it is a Qualified Investor within the meaning of Article 2(1)(e) of the Prospectus Directive;

2.2 in the case of any Placing Shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive:

2.2.1 the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than Qualified Investors or in circumstances in which the prior consent of the Joint Bookrunners has been given to the offer or resale; or

2.2.2 where Placing Shares have been acquired by it on behalf of persons in any member state of the EEA other than Qualified Investors, the offer of those Placing Shares to it is not treated under the Prospectus Directive as having been made to such persons;

3 that in the case of a Relevant Person in Singapore who acquires any Placing Shares pursuant to the Placing, it is an institutional investor under section 274 of the SFA, or is a person who can otherwise participate in the Placing pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA;

4 that in the case of a Relevant Person in Hong Kong who acquires any Placing Shares pursuant to the Placing, it is a person whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or (2) is a professional investors (as defined in the SFO);

5 that it is acquiring the Placing Shares for its own account or is acquiring the Placing Shares for an account with respect to which it exercises sole investment discretion and has the authority to make and does make the representations, warranties, indemnities, acknowledgements, undertakings and agreements contained in this Announcement; and

6 that it understands (or if acting for the account of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Announcement.

No prospectus

No prospectus or other offering document has been or will be submitted to be approved by the FCA in relation to the Placing or the Placing Shares and Placees' commitments will be made solely on the basis of the information contained in this Announcement and any information publicly announced through a Regulatory Information Service (as defined in the AIM Rules for Companies (the "AIM Rules")) by or on behalf of the Company on or prior to the date of this Announcement (the "Publicly Available Information") and subject to any further terms set forth in the form of confirmation to be sent to individual Placees.

Each Placee, by participating in the Placing, agrees that the content of this Announcement is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any information (other than the Publicly Available Information), representation, warranty or statement made by or on behalf of the Joint Bookrunners, the Company or any other person and none of the Joint Bookrunners, the Company or any other person acting on such person's behalf nor any of their respective affiliates has or shall have any liability for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Details of the Placing Agreement and the Placing Shares

The Joint Bookrunners have today entered into a placing agreement (the "Placing Agreement") with the Company under which, on the terms and subject to the conditions set out in the Placing Agreement, the Joint Bookrunners as agent and broker for and on behalf of the Company, have agreed to use their reasonable endeavours to procure Placees for the Placing Shares at the Placing Price. The Placing is conditional upon, amongst other things, Admission becoming effective and the Placing Agreement becoming unconditional and not being terminated in accordance with its terms.

The Placing Shares will, when issued, be subject to the articles of association of the Company and credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares.

Application for admission to trading

Application will be made to the London Stock Exchange for admission of the Placing Shares to trading on AIM.

Subject to, amongst other things, the Placing Agreement becoming unconditional and not being terminated in accordance with its terms, it is expected that Admission will take place no later than 8.00 a.m. on 9 February 2018 and that dealings in the Placing Shares on AIM will commence at the same time.

Principal terms of the Placing

1 Stockdale is acting as nominated adviser and joint broker to the Placing and each of Stifel and Pareto are acting as joint bookrunners to the Placing, as agent for and on behalf of the Company. Each of the Joint Bookrunners is authorised and regulated in the United Kingdom by the Financial Conduct Authority ("FCA") and is acting exclusively for the Company and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to their respective customers or for providing advice in relation to the matters described in this Announcement.

2 Participation in the Placing will only be available to persons who may lawfully be, and are, invited by any of the Joint Bookrunners to participate. Each of the Joint Bookrunners and any of their respective affiliates are entitled to participate in the Placing.

3 The Issue Price will be a fixed price of 6.5 pence per Placing Share. No commissions will be paid to Placees or by the Placees in respect of any Placing Shares.

4 Each Placee's allocation will be confirmed to Placees orally by the relevant Joint Bookrunner, and a contract note will be despatched as soon as possible thereafter. The oral confirmation to such Placee will constitute an irrevocable legally binding commitment upon such person (who will at that point become a Placee) in favour of the Joint Bookrunners and the Company, under which it agrees to acquire the number of Placing Shares allocated to it at the Issue Price on the terms and conditions set out in this Appendix and in accordance with the Company's articles of association. Except with the Joint Bookrunners' written consent, such commitment will not be capable of variation or revocation at the time at which it is submitted.

5 Each Placee's allocation and commitment will be evidenced by a form of confirmation issued to such Placee by the relevant Joint Bookrunner. The terms of this Appendix will be deemed incorporated in that form of confirmation.

6 Each Placee will have an immediate, separate, irrevocable and binding obligation, owed to the Joint Bookrunners (as agent for the Company), to pay to it (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to acquire and the Company has agreed to allot and issue to that Placee.

7 Irrespective of the time at which a Placee's allocation(s) pursuant to the Placing is/are confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

8 All obligations of the Joint Bookrunners under the Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Termination of the Placing".

9 By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

10 To the fullest extent permissible by law and applicable FCA rules, none of (a) the Joint Bookrunners, (b) any of the Joint Bookrunners' respective affiliates, agents, directors, officers, consultants, (c) to the extent not contained within (a) or (b), any person connected with any of the Joint Bookrunners as defined in the Financial Services and Markets Act 2000 ("FSMA") ((b) and (c) being together "affiliates" and individually an "affiliate" of the Joint Bookrunners), (d) any person acting on any of the Joint Bookrunners' behalf, shall have any liability (including to the extent permissible by law, any fiduciary duties) to Placees or to any other person whether acting on behalf of a Placee or otherwise. In particular, neither the Joint Bookrunners nor any of their respective affiliates shall have any liability (including, to the extent permissible by law, any fiduciary duties) in respect of their conduct of the Placing or of such alternative method of effecting the Placing as the Joint Bookrunners and the Company may agree.

Registration and Settlement

Participation in the Placing is only available to persons who are invited to participate in it by the Joint Bookrunners.

Each Placee allocated Placing Shares in the Placing will be sent a contract note stating the number of Placing Shares allocated to it at the Issue Price, the aggregate amount owed by such Placee to the relevant Joint Bookrunner (as agent for the Company) and settlement instructions.

Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed as directed by the relevant Joint Bookrunner in accordance with either the standing CREST or certificated settlement instructions which they have in place with the relevant Joint Bookrunner.

Settlement of transactions in the Placing Shares (ISIN:IM00B292WR19 ) following Admission will take place within the CREST system, subject to certain exceptions. Settlement through CREST is expected to take place on 9 February 2018 unless otherwise notified by the Joint Bookrunners and Admission is expected to occur no later than 8.00 a.m. on 9 February 2018 unless otherwise notified by the Joint Bookrunners. Admission and Settlement may occur at an earlier date, which if achievable, will be notified through a Regulatory Information Service. Settlement will be on a delivery versus payment basis. However, in the event of any difficulties or delays in the admission of the Placing Shares to CREST or the use of CREST in relation to the Placing, the Company and the Joint Bookrunners may agree that the Placing Shares should be issued in certificated form. The Joint Bookrunners reserve the right to require settlement for the Placing Shares, and to deliver the Placing Shares to Placees, by such other means as they deem necessary if delivery or settlement to Placees is not practicable within the CREST system or would not be consistent with regulatory requirements in a Placee's jurisdiction.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above, in respect of either CREST or certificated deliveries, at the rate of 2 percentage points above prevailing LIBOR as determined by the Joint Bookrunners.

Each Placee is deemed to agree that if it does not comply with these obligations, the Joint Bookrunners may sell any or all of their Placing Shares on their behalf and retain from the proceeds, for the Joint Bookrunners' own account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the amount owed by it and for any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of their Placing Shares on their behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees must ensure that, upon receipt, the conditional form of confirmation is copied and delivered immediately to the relevant person within that organisation. Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to United Kingdom stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms.

The obligations of the Joint Bookrunners under the Placing Agreement are, and the Placing is, conditional upon, inter alia:

(a) Admission occurring by not later than 8.00 a.m. on 9 February 2018 (or such later date as the Company and the Joint Bookrunners may agree in writing, in any event being not later than 8.00 a.m. on 16 February 2018);

(b) the performance by the Company in all material respects of its obligations under the Placing Agreement to the extent that they fall to be performed prior to Admission;

(c) an electronic copy of the Circular being submitted to the London Stock Exchange as required by Rule 20 of the AIM Rules;

(d) the Company procuring that a Circular and Form of Proxy are sent to each Shareholder;

(e) the passing of the Resolutions (without any amendment which has not been previously approved by the Joint Bookrunners);

(f) the Subscription Agreements having been completed and the subscription funds received by the Company;

(g) none of the warranties or undertakings on the part of the Company contained in the Placing Agreement being or having become untrue, inaccurate or misleading at any time before Admission in each case which is material in the context of the Placing;

(h) there being no development or event which will or is likely to have a material adverse effect on the condition (financial or otherwise), prospects, management, results of operations, financial position, business or general affairs of the Company or the Group, respectively which is likely to render the Placing or Admission, temporarily or permanently, impracticable or inadvisable;

(i) the Joint Bookrunners' obligations under the Placing Agreement not being terminated in accordance with its terms,

(all conditions to the obligations of the Joint Bookrunners included in the Placing Agreement being together, the "conditions").

If any of the conditions set out in the Placing Agreement are not fulfilled or, where permitted, waived in accordance with the Placing Agreement within the stated time periods (or such later time and/or date as the Company and the Joint Bookrunners may agree, provided that the time for satisfaction of the condition set out in (i) above shall not be extended beyond 8.00 a.m. on 16 February 2018), or the Placing Agreement is terminated in accordance with its terms, the Placing will lapse and the Placee's rights and obligations shall cease and terminate at such time and each Placee agrees that no claim can be made by or on behalf of the Placee (or any person on whose behalf the Placee is acting) in respect thereof.

By participating in the Placing, each Placee agrees that its rights and obligations cease and terminate only in the circumstances described above and under "Termination of the Placing" below and will not be capable of rescission or termination by it.

Certain conditions may be waived in whole or in part by the Joint Bookrunners, in their absolute discretion by notice in writing to the Company and the Joint Bookrunners may also agree in writing with the Company to extend the time for satisfaction of any condition. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.

The Joint Bookrunners may terminate the Placing Agreement in certain circumstances, details of which are set out below.

Neither the Joint Bookrunners, the Company nor any of their respective affiliates, agents, directors, officers, employees shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision any of them may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision any of them may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Joint Bookrunners.

Termination of the Placing

The Joint Bookrunners may terminate the Placing Agreement, in accordance with its terms, at any time prior to Admission if, inter alia:

1 it comes to the attention of the Joint Bookrunners that any of the warranties were not true or accurate, or were misleading when given or deemed given in a way that is material in the context of the Placing; or

2 it comes to the attention of the Joint Bookrunners that the Company has failed to comply with its obligations under the Placing Agreement, FSMA, the AIM Rules or other applicable law in a way that is material in the context of the Placing; or

3 it comes to the attention of the Joint Bookrunners that any statement contained in the Issue Documents has become or been discovered to be untrue, inaccurate or misleading; or

4 there has occurred a force majeure event, or any material adverse change has occurred in the financial position or prospects or business of the Company and its subsidiary undertakings (taken as whole) which, in the opinion of the Joint Bookrunners, will or is likely to be prejudicial to the Placing or (acting in good faith) Admission or to the subscription for Placing Shares by Placees.

If the Placing Agreement is terminated in accordance with its terms, the rights and obligations of each Placee in respect of the Placing as described in this Announcement shall cease and terminate at such time and no claim can be made by any Placee in respect thereof.

By participating in the Placing, each Placee agrees with the Company and the Joint Bookrunners that the exercise by the Company or the Joint Bookrunners of any right of termination, waiver or any condition or decision to extend or not the time for satisfaction of any condition or any other right or other discretion under the Placing Agreement shall be within the absolute discretion of the Company or the Joint Bookrunners and that neither of the Company nor the Joint Bookrunners need make any reference to such Placee and that neither the Joint Bookrunners, the Company, nor any of their respective affiliates, agents, directors, officers or employees shall have any liability to such Placee (or to any other person whether acting on behalf of a Placee or otherwise) whatsoever in connection with any such exercise.

By participating in the Placing, each Placee agrees that its rights and obligations terminate only in the circumstances described above and under the "Conditions of the Placing" section above and will not be capable of rescission or termination by it after the issue by the Joint Bookrunners of a form of confirmation confirming each Placee's allocation and commitment in the Placing.

Representations, warranties and further terms

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) represents, warrants, acknowledges and agrees (for itself and for any such prospective Placee) that (save where the Joint Bookrunners expressly agree in writing to the contrary):

1 it has read, understood and accepts the terms and conditions set out within this Announcement in its entirety and that its acquisition of the Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements and undertakings and other information contained herein and that it has not relied on, and will not rely on, any information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Placing, the Company, the Placing Shares or otherwise, other than the information contained in this Announcement and the Publicly Available Information;

2 it has not received a prospectus or other offering document in connection with the Placing and acknowledges that no prospectus or other offering document: (a) is required under the Prospectus Directive; and (b) has been or will be prepared in connection with the Placing;

3 the Ordinary Shares are admitted to trading on AIM, and that the Company is therefore required to publish certain business and financial information in accordance with the AIM Rules, which includes a description of the nature of the Company's business and the Company's most recent balance sheet and profit and loss account and that it is able to obtain or access such information without undue difficulty, and is able to obtain access to such information or comparable information concerning any other publicly traded company, without undue difficulty;

4 it has made its own assessment of the Placing Shares and has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing and neither the Joint Bookrunners, the Company nor any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them has provided, and will not provide, it with any material regarding the Placing Shares or the Company or any other person other than the information in this Announcement, or and any information publicly announced by the Company to a Regulatory Information Service (the "Publicly Available Information") nor has it requested any of the Joint Bookrunners, the Company, any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them to provide it with any such information;

5 neither the Joint Bookrunners, any person acting on behalf of them or any of their respective affiliates, agents, directors, officers or employees has or shall have any liability for any Publicly Available Information, or any representation relating to the Company, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;

6 the only information on which it is entitled to rely on and on which it has relied in committing to subscribe for the Placing Shares is contained in the Publicly Available Information, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares and it has made its own assessment of the Company, the Placing Shares and the terms of the Placing based on Publicly Available Information; (b) neither the Joint Bookrunners, the Company nor any of their respective affiliates, agents, directors, officers or employees has made any representation or warranty to it, express or implied, with respect to the Company, the Placing or the Placing Shares or the accuracy, completeness or adequacy of the Publicly Available Information; (c) it has conducted its own investigation of the Company, the Placing and the Placing Shares, satisfied itself that the information is still current and relied on that investigation for the purposes of its decision to participate in the Placing; and (d) has not relied on any investigation that the Joint Bookrunners or any person acting on their behalf may have conducted with respect to the Company, the Placing or the Placing Shares;

7 the content of this Announcement and the Publicly Available Information has been prepared by and is exclusively the responsibility of the Company and that neither the Joint Bookrunners nor any persons acting on their behalf is responsible for or has or shall have any liability for any information, representation, warranty or statement relating to the Company contained in this Announcement or the Publicly Available Information nor will they be liable for any Placee's decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement, the Publicly Available Information or otherwise. Nothing in this Appendix shall exclude any liability of any person for fraudulent misrepresentation;

8 the Placing Shares have not been registered or otherwise qualified, and will not be registered or otherwise qualified, for offer and sale nor will a prospectus be cleared or approved in respect of any of the Placing Shares under the securities laws of the United States, or any state or other jurisdiction of the United States, Australia, Canada, Republic of South Africa or Japan and, subject to certain exceptions, may not be offered, sold, taken up, renounced or delivered or transferred, directly or indirectly, within the United States, Australia, Canada, South Africa or Japan or in any country or jurisdiction where any such action for that purpose is required;

9 it and/or each person on whose behalf it is participating:

9.1 is entitled to acquire Placing Shares pursuant to the Placing under the laws and regulations of all relevant jurisdictions;

9.2 has fully observed such laws and regulations;

9.3 has capacity and authority and is entitled to enter into and perform its obligations as an acquirer of Placing Shares and will honour such obligations; and

9.4 has obtained all necessary consents and authorities (including, without limitation, in the case of a person acting on behalf of a Placee, all necessary consents and authorities to agree to the terms set out or referred to in this Announcement under those laws or otherwise and complied with all necessary formalities to enable it to enter into the transactions contemplated hereby and to perform its obligations in relation thereto and, in particular, if it is a pension fund or investment company it is aware of and acknowledges it is required to comply with all applicable laws and regulations with respect to its subscription for Placing Shares;

10 it is not, and any person who it is acting on behalf of is not, and at the time the Placing Shares are subscribed will not be, a resident of, or with an address in, or subject to the laws of, the United States, Australia, Canada, Japan, or the Republic of South Africa, and it acknowledges and agrees that the Placing Shares have not been and will not be registered or otherwise qualified under the securities legislation of Australia, Canada, Japan, or the Republic of South Africa and may not be offered, sold, or acquired, directly or indirectly, within those jurisdictions;

11 it will not distribute, forward, transfer or otherwise transmit this Announcement or any part of it, or any other presentational or other materials concerning the Placing in or into or from the United States (including electronic copies thereof) to any person, and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

12 neither the Joint Bookrunners, their respective affiliates, agents, directors, officers or employees nor any person acting on behalf of any of them is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of any of the Joint Bookrunners and the Joint Bookrunners have no duties or responsibilities to it for providing the protections afforded to its clients or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

13 it has the funds available to pay for the Placing Shares for which it has agreed to subscribe and acknowledges and agrees that it will make payment to the relevant Joint Bookrunner for the Placing Shares allocated to it in accordance with the terms and conditions of this Announcement on the due times and dates set out in this Announcement, failing which the relevant Placing Shares may be placed with others on such terms as the Joint Bookrunners may, in their absolute discretion determine without liability to the Placee and it will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to the terms set out or referred to in this Announcement) which may arise upon the sale of such Placee's Placing Shares on its behalf;

14 the person who it specifies for registration as holder of the Placing Shares will be: (a) the Placee; or (b) a nominee of the Placee, as the case may be. Neither the Joint Bookrunners nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement. Each Placee and any person acting on behalf of such Placee agrees to acquire Placing Shares pursuant to the Placing and agrees to pay the Company and the Joint Bookrunners in respect of the same (including any interest or penalties) on the basis that the Placing Shares will be allotted to a CREST stock account of the Joint Bookrunners or transferred to a CREST stock account of the Joint Bookrunners who will hold them as nominee on behalf of the Placee until settlement in accordance with its standing settlement instructions with it;

15 it is acting as principal only in respect of the Placing or, if it is acting for any other person, (a) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person and (b) it is and will remain liable to the Company and the Joint Bookrunners for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);

16 the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a stamp duty or stamp duty reserve tax liability under (or at a rate determined under) any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services) and that it is not participating in the Placing as nominee or agent for any person or persons to whom the allocation, allotment, issue or delivery of Placing Shares would give rise to such a liability;

17 it and any person acting on its behalf (if within the United Kingdom) falls within Article 19(5) and/or 49(2) of the Order and undertakes that it will acquire, hold, manage and (if applicable) dispose of any Placing Shares that are allocated to it for the purposes of its business only;

18 it is a person of a kind described in: (a) Article 19(5) (Investment Professionals) and/or 49(2) (High net worth companies etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, and/or an authorised person as defined in section 31 of FSMA; and (b) section 86(7) of FSMA ("Qualified Investor"), being a person falling within Article 2.1(e) the Prospectus Directive. For such purposes, it undertakes that it will acquire, hold, manage and (if applicable) dispose of any Placing Shares that are allocated to it for the purposes of its business only;

19 it is an institutional investor under section 274 of the SFA, or is a person who can otherwise participate in the Placing pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA;

20 it is a person whose ordinary business is to buy or sell shares or debentures, whether as principal or agent, or is a professional investor (as defined in the SFO);

21 it has only communicated or caused to be communicated and it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) relating to Placing Shares in circumstances in which section 21(1) of the FSMA does not require approval of the communication by an authorised person and it acknowledges;

22 it has complied and it will comply with all applicable laws with respect to anything done by it or on its behalf in relation to the Placing Shares (including all relevant provisions of the FSMA in respect of anything done in, from or otherwise involving the United Kingdom);

23 if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive (including any relevant implementing measure in any member state), the Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA which has implemented the Prospectus Directive other than Qualified Investors, or in circumstances in which the express prior written consent of the Joint Bookrunners has been given to the offer or resale;

24 it has neither received nor relied on any confidential price sensitive information about the Company in accepting this invitation to participate in the Placing;

25 neither the Joint Bookrunners nor any of its respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them has or shall have any liability for any information, representation or statement contained in this Announcement or for any information previously published by or on behalf of the Company or any other written or oral information made available to or publicly available or filed information or any representation, warranty or undertaking relating to the Company, and will not be liable for its decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement or elsewhere, provided that nothing in this paragraph shall exclude any liability of any person for fraud;

26 neither the Joint Bookrunners, the Company, nor any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of the Joint Bookrunners, the Company or their respective affiliates, agents, directors, officers or employees is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing nor in respect of any representations, warranties, acknowledgements, agreements, undertakings, or indemnities contained in the Placing Agreement nor the exercise or performance of the Joint Bookrunners' rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

27 acknowledges and accepts that the Joint Bookrunners may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Placing Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise and, except as required by applicable law or regulation, the Joint Bookrunners will not make any public disclosure in relation to such transactions;

28 The Joint Bookrunners and each of their respective affiliates, each acting as an investor for its or their own account(s), may bid or subscribe for and/or purchase Placing Shares and, in that capacity, may retain, purchase, offer to sell or otherwise deal for its or their own account(s) in the Placing Shares, any other securities of the Company or other related investments in connection with the Placing or otherwise. Accordingly, references in this Announcement to the Placing Shares being offered, subscribed, acquired or otherwise dealt with should be read as including any offer to, or subscription, acquisition or dealing by the Joint Bookrunners and/or any of their respective affiliates, acting as an investor for its or their own account(s). Neither the Joint Bookrunners nor the Company intend to disclose the extent of any such investment or transaction otherwise than in accordance with any legal or regulatory obligation to do so;

29 it has not offered or sold and will not offer or sell any Placing Shares to persons in the EEA prior to the expiry of a period of six months from Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in any member state of the EEA within the meaning of the Prospectus Directive;

30 it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering Regulations 2007 (together, the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

31 it is aware of the obligations regarding insider dealing in the Criminal Justice Act 1993, FSMA, the EU Market Abuse Regulation No. 596 of 2014 and the Proceeds of Crime Act 2002 and confirms that it has and will continue to comply with those obligations;

32 in order to ensure compliance with the Money Laundering Regulations 2007, the Joint Bookrunners (for itself and as agent on behalf of the Company) or the Company's registrars may, in their absolute discretion, require verification of its identity. Pending the provision to the Joint Bookrunners or the Company's registrars, as applicable, of evidence of identity, definitive certificates in respect of the Placing Shares may be retained at the Joint Bookrunners' absolute discretion or, where appropriate, delivery of the Placing Shares to it in uncertificated form may be delayed at the Joint Bookrunners' or the Company's registrars', as the case may be, absolute discretion. If within a reasonable time after a request for verification of identity the Joint Bookrunners (for themselves and as agent on behalf of the Company) or the Company's registrars have not received evidence satisfactory to them, the Joint Bookrunners and/or the Company may, at its absolute discretion, terminate its commitment in respect of the Placing, in which event the monies payable on acceptance of allotment will, if already paid, be returned without interest to the account of the drawee's bank from which they were originally debited;

33 acknowledges that its commitment to acquire Placing Shares on the terms set out in this Announcement and in the form of confirmation will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or the Joint Bookrunners' conduct of the Placing;

34 it irrevocably appoints any duly authorised officer of the Joint Bookrunners as its agent for the purpose of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the Placing Shares for which it agrees to subscribe or purchase upon the terms of this Announcement;

35 the Company, the Joint Bookrunners and others (including each of their respective affiliates, agents, directors, officers or employees) will rely upon the truth and accuracy of the representations, warranties, acknowledgements and agreements, which are given to the Joint Bookrunners, on their own behalf and on behalf of the Company and are irrevocable;

36 if it is acquiring the Placing Shares as a fiduciary or agent for one or more investor accounts, it has full power and authority to make, and does make, the foregoing representations, warranties, acknowledgements, agreements and undertakings on behalf of each such accounts;

37 time is of the essence as regards its obligations under this Appendix;

38 any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to the Joint Bookrunners;

39 the Placing Shares will be issued subject to the terms and conditions of this Announcement; and

40 these terms and conditions in this Announcement and all documents into which this Announcement is incorporated by reference or otherwise validly forms a part and/or any agreements entered into pursuant to these terms and conditions and all agreements to acquire shares pursuant to the Placing will be governed by and construed in accordance with English law and it submits to the exclusive jurisdiction of the English courts in relation to any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or the Joint Bookrunners in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) agrees to indemnify and hold the Company, the Joint Bookrunners and each of their respective affiliates, agents, directors, officers and employees harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings given by the Placee (and any person acting on such Placee's behalf) in this Announcement or incurred by the Joint Bookrunners, the Company or each of their respective affiliates, agents, directors, officers or employees arising from the performance of the Placee's obligations as set out in this Announcement, and further agrees that the provisions of this Announcement shall survive after the completion of the Placing.

The agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the United Kingdom relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct by the Company. Such agreement assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement related to any other dealings in the Placing Shares, stamp duty or stamp duty reserve tax may be payable. In that event, the Placee agrees that it shall be responsible for such stamp duty or stamp duty reserve tax and neither the Company nor the Joint Bookrunners shall be responsible for such stamp duty or stamp duty reserve tax. If this is the case, each Placee should seek its own advice and they should notify the Joint Bookrunners accordingly. In addition, Placees should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the United Kingdom by them or any other person on the acquisition by them of any Placing Shares or the agreement by them to acquire any Placing Shares and each Placee, or the Placee's nominee, in respect of whom (or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such non-United Kingdom stamp, registration, documentary, transfer or similar taxes or duties undertakes to pay such taxes and duties, including any interest and penalties (if applicable), forthwith and to indemnify on an after-tax basis and to hold harmless the Company and the Joint Bookrunners in the event that either the Company and/or the Joint Bookrunners has incurred any such liability to such taxes or duties.

The representations, warranties, acknowledgements and undertakings contained in this Announcement are given to the Joint Bookrunners for itself and on behalf of the Company and are irrevocable.

Each Placee and any person acting on behalf of the Placee acknowledges that the Joint Bookrunners do not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings, acknowledgements, agreements or indemnities in the Placing Agreement.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that the Joint Bookrunners may (at their absolute discretion) satisfy their obligations to procure Placees by itself agreeing to become a Placee in respect of some or all of the Placing Shares or by nominating any connected or associated person to do so.

When a Placee or any person acting on behalf of the Placee is dealing with any of the Joint Bookrunners, any money held in an account with the relevant Joint Bookrunner on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the relevant rules and regulations of the FCA made under FSMA. Each Placee acknowledges that the money will not be subject to the protections conferred by the client money rules: as a consequence this money will not be segregated from the Joint Bookrunners' money (as applicable) in accordance with the client money rules and will be held by it under a banking relationship and not as trustee.

References to time in this Announcement are to London time, unless otherwise stated.

All times and dates in this Announcement may be subject to amendment.

No statement in this Announcement is intended to be a profit forecast, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

The Placing Shares to be issued or sold pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

Appendix 2 - Certain Risks

Any investment in the Company is subject to a number of risks. Accordingly, prospective investors should carefully consider the risks set out below as well as the other information contained in this Announcement and any other publicly available information about the Company before making a decision whether to invest in the Company. The risks described below are not the only risks that the Company faces. Additional risks and uncertainties that the Directors are not aware of or that the Directors currently believe are immaterial may also impair the Company's operations. Any of these risks may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. In that case, the price of the Ordinary Shares could decline and investors may lose all or part of their investment. Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information in this document and their personal circumstances.

Before making an investment, prospective investors are strongly advised to consult an investment adviser authorised under FSMA who specialises in investments of this kind. A prospective investor should consider carefully whether an investment in the Company is suitable in the light of his or her personal circumstances, the financial resources available to him or her and his or her ability to bear any loss which might result from such investment.

The following factors, which are not presented in any order of priority, do not purport to be a complete list or explanation of all the risks involved in investing in the Company. In particular, the Company's performance may be affected by changes in the market and/or economic conditions and in legal, regulatory, tax and operational requirements.

1. Risks relating to the Company and its operations

Ability to exploit successful discoveries

The general industry risks described below apply to the Company and there is no certainty that the Company will locate hydrocarbons which are economically exploitable. It may not always be possible for the Company to participate in the exploitation of any successful discoveries which may be made in any areas in which it has an interest. Such exploitation will involve the need to obtain further licences or clearances from the relevant authorities, which may require conditions to be satisfied and/or the exercise of discretion by such authorities. It may or may not be possible for such conditions to be satisfied.

In addition, the decision to proceed with further exploitation may require the participation of other companies whose interests and objectives may not be the same as the Company. Such further work may require the Company to meet or commit to financing obligations for which it may not have adequately planned.

Access to major infrastructure such as pipelines or rail links for the transport of crude oil may require the participation of other companies whose interests and objectives may not be the same as those of the Company.

Reliance on key personnel

As is normal with other similar companies in the oil and gas sector, the Company's business is in part dependent on recruiting and retaining the services of a small number of key personnel of the appropriate industry experience and expertise. The success of the Company is, and will continue to be, to a significant extent, dependent on the expertise and experience of the Directors and the loss of one or more could have a material adverse effect on the Company.

Retention of key business relationships

The Company relies on strategic relationships with other entities such as Petrovis.

While the Directors have no reason to believe otherwise, there can be no assurance that its existing relationships will continue to be maintained or that new ones will be successfully formed. The Company could be adversely affected by changes to such relationships or difficulties in forming new ones. Any circumstance which causes the early termination or non-renewal of one or more of the Company's key business alliances or contracts, could adversely impact the Company, its business, operating results and prospects.

Partner and contractor risks

While not a part of the current business strategy the Directors may resolve in the future for the Company to participate with other companies, in the acquisition, exploration, development and production of oil assets, thereby allowing for its participation in larger programmes, permitting involvement in a greater number of programmes and reducing financial exposure in respect of any one particular programme. It may also occur that a particular partner company will assign all or a portion of its interest in a particular programme to another company due to the financial position of the company making the assignment. In determining whether or not the Company will participate in a particular programme and the interest therein to be acquired by it, the Directors will primarily consider the degree of risk to which the Company may be exposed and its financial position at that time. In addition, the Company is exposed to various risks related to its partners and contractors that may adversely affect its proposed activities and licence interests, including:

(i) financial failure, non-compliance with obligations or default by a participant in any joint venture arrangement to which it is, or may become, a party;

(ii) insolvency or other managerial failure by any of the contractors used by any joint venture partner in its exploration and production activities; and

(iii) insolvency or other managerial failure by any of the other service providers used by any joint venture or farm-in party for any activity.

Insurance

Although the Company believes that it will carry adequate insurance with respect to its operations in accordance with industry practice, in certain circumstances the Company's insurance may not cover or be adequate to cover the consequences of all its operations. The occurrence of an event that is not covered or fully covered by insurance could have a material adverse effect on the business, financial condition and results of operations of the Company.

There is a risk that insurance premiums may increase to a level where the Company considers it is unreasonable, or not in its interests, to maintain insurance cover, or not to a level of coverage which is in accordance with industry practice. In addition, the Company may, following a cost-benefit analysis, elect not to insure certain risks on the grounds that the amount of premium payable for that risk is excessive when compared to the potential benefit to the Company of the insurance cover. However, the Company will endeavour to ensure adequate insurance is in place to provide cover for blow-outs, underground blow-outs and resulting pollution or environmental damage.

Potential requirement for further investment

The Company is likely to remain cash flow negative for some time and, although the Directors have confidence in the future revenue earning potential of the Company, subject to its exploration activities being successful, there can be no certainty that the Company will achieve or sustain profitability or positive cash flow from its operating activities. The Company may require additional capital in the future for the exploitation of any discoveries, the exploration and (if applicable) exploitation of additional blocks which it is successful in acquiring and/or otherwise for its growth strategy and any unforeseeable events, whether from equity or debt sources. There can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient. If additional funds are raised by issuing equity securities, dilution to the then existing shareholdings may result. Debt finance providers may impose onerous covenants on the Company. The level and timing of future expenditure will depend on a number of factors, many of which are outside of the Company's control. If the Company is not able to obtain additional capital on acceptable terms, or at all, it may be forced to curtail or abandon its growth strategy and intended operations.

Risks relating to the Group's PSCs

The Group has breached certain terms of its PSCs which give rise to a right for MRPAM to terminate the relevant PSC and the Company is in discussions with MRPAM as to the quantum of outstanding historic work programme obligations in respect of Block XX. However, given that MRPAM have not exercised their right to terminate the relevant PSC to date and the Group has recently been granted extensions to its PSCs by MRPAM in relation to Blocks IV and V and Block XX, the Company does not believe, based on this recent extension process, the Company's experience of dealing with MRPAM and having taken legal advice from Mongolian counsel that the risks of termination is material.

The Company is currently finalising with MRPAM the re-issue of its technical permit in connection with Block XX which is required in addition to the PSCs in Mongolia to allow for exploration to take place. The relevant application and payments have been made to MRPAM by the Company. This has been confirmed by MRPAM and the Company awaits issue of the relevant technical permit. Based on the Company's experience of petroleum law in Mongolia and previous dealings with MRPAM and having taken advice from Mongolian legal counsel, the Company considers that the risk of MRPAM refusing to issue the relevant technical permit is not material. However, if the Company were to undertake exploration work without a current technical permit for Block XX this may provide MRPAM with a right to terminate the particular PSC. The Company has no intention to undertake such work without the technical permit

2. General industry-related risks

Exploration risks

The business of exploration for oil and gas involves a high degree of risk. Drilling may result in unprofitable efforts, not only with respect to dry wells, but also with respect to wells which, though yielding some hydrocarbons, are not sufficiently productive to justify commercial development. Furthermore, the successful completion of a well does not assure a profit on investment or recovery of drilling, completion and operating costs.

Resource and reserve estimates and lack of an independent prospective resources or reserves report

Hydrocarbon resource and reserve estimates are expressions of judgement based on knowledge, experience and industry practice. They are therefore imprecise and depend to some extent on interpretations, which may prove to be inaccurate. Estimates that were reasonable when made may change significantly when new information from additional drilling and analysis becomes available. This may result in alterations to development and production plans which may, in turn, adversely affect operations. The reserves and resources estimates and the economic valuations of the Company's prospects on an NPV basis contained in this Announcement are based on sources and information generated by the Company and are not based on an independent prospective resources or reserves report or any other independent source.

Estimates of the possible hydrocarbon resources that might be hosted on the licence areas where the Company has, or may in the future have, interests should not be taken to imply that any hydrocarbon resources are present in these structures.

Title and other regulatory obligations

The Company's exploration rights will be subject to applications for renewal or grant or for an extension of the activities it covers, including to enable exploitation in the event of a commercial discovery, (as the case may be). The renewal or grant of the term of each PSC, or extension of its scope, is, or may be, at the discretion of the relevant government authority. If a contract is not renewed or granted, or if its scope is not extended, the Company may suffer significant damage through loss of the opportunity to develop and discover any hydrocarbon resources on that licence area.

Under the contractual agreements to which the Company is or may in the future become party, the Company is or may become subject to material payment and other obligations.

Moreover, as has historically been the case, if the Company does not meet its work and/or expenditure obligations under the PSCs or any future permits and/or licences in which it has a participating interest this may lead to dilution of its interest in, or the loss of, the particular PSC, or other permits or licences.

The conduct of petroleum operations and the steps involved in the Company acquiring its current interests involve or have involved the need to comply with numerous procedures and formalities. It may not in all cases be possible to comply with or obtain waivers of all such formalities.

Reliance on Third Party Service Providers

Oil and gas companies require third party service providers in order to conduct operational activities. The Company has already contracted a rig for two wells in Blocks IV and V. As the Mongolian oil and gas industry is small and at a relatively early stage, there is a limited availability of oil and gas services providers in Country, and there is no certainty that the Company will be able to obtain service providers in a timeframe and at a cost that is acceptable.

Operating risks

Exploration and development activities may be delayed or adversely affected by factors outside the control of the Company. These include adverse climatic conditions (including drought preventing the access to sufficient water for drilling and other operations), the performance of joint venture or farm-in partners on whom the Company may become reliant, compliance with governmental requirements, shortage or delays in installing and commissioning plant and equipment or import or customs delays. Problems may also arise due to the quality or failure of locally obtained equipment or interruptions to services (such as power, water, fuel or transport or processing capacity) or technical support which result in failure to achieve expected target dates for exploration or production and/or result in a requirement for greater expenditure. Drilling may involve unprofitable efforts, not only with respect to dry wells, but also with respect to wells which, though yielding some oil or gas, are not sufficiently productive to justify commercial development or cover operating and other costs. Completion of a well does not ensure a profit on the investment or recovery of drilling, completion and operating costs.

Industry operating risks include the risk of fire, explosions, blow-outs, pipe failure, abnormally pressured formations and environmental hazards such as accidental spills or leakage of petroleum liquids, gas leaks, ruptures or discharges of toxic gases, the occurrence of any of which could result in substantial losses to the Company due to injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, clean-up responsibilities, regulatory investigation and penalties and suspension of operations. Damages occurring as a result of such risks may give rise to claims against the Company and its partners which may not be covered, in whole or part, by insurance.

Commercial risks

Even if the assets in which the Company holds interests recover quantities of oil or gas, there is a risk it will not achieve a commercial return. The Company may not be able to transport the oil or gas to commercially viable markets at a reasonable cost or may not be able to sell the oil or gas to customers at a price and quantity which would cover its operating and other costs.

Environmental risks

The operations in which the Company has interests are subject to the environmental risks inherent in the oil and gas exploration and production industry. The Company is subject to environmental laws and regulations in connection with all of its operations. Although the Company intends to be in compliance in all material respects with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances, which could potentially subject the Company to extensive liability.

Further, any operator or contractor in relation to oil and gas operations may require approval from the relevant authorities before it can undertake activities which are likely to impact the environment. Failure to obtain such approvals or failure to satisfy regular inspections may prevent the Company or the operator from undertaking or continuing its desired activities. The Company is unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would adversely affect the Company's operations.

Economic and price risks

Changes in the general economic climate in which the Company operates may adversely affect its financial performance and the value of its assets. In particular, the current and expected future price of oil and gas can change rapidly and significantly and this can have a substantial effect on the value of the Company's assets and the potential future revenue and profits that might be earned from the successful development of those assets. The marketability of any oil and gas discovered will be affected by numerous factors beyond the control of the Company. These factors include market fluctuations, capacity of oil and gas pipelines and processing equipment and government regulations including regulations relating to taxation, royalties, allowable production, importing and exporting of oil and gas and environmental protection.

The demand for, and price of, oil and natural gas is highly dependent on a variety of factors including international supply and demand, the level of consumer product demand, weather conditions, the price and availability of alternative fuels, actions taken by governments and international cartels, and global economic and political developments. International oil prices have fluctuated widely in recent years and may continue to fluctuate significantly in the future. Fluctuations in oil and natural gas prices and, in particular, a material decline in the price of oil or natural gas may have a materially adverse effect on the Company's business, financial condition and results of operations. Oil and gas prices could affect the viability of exploring and/or developing the Company's interests.

Development costs

Estimated future development expenditure is based on certain assumptions with respect to the method and timing of development. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect the Company.

Changes in law could materially prejudice the Company

There have been examples in the past, which had a material adverse effect on certain companies operating in Mongolia, of changes in laws at short notice and with no or little public consultation. There is no certainty that equivalent actions may not happen in the future in relation to laws or regulations applicable to the Company.

Lack of clarity of law and regulations

Much of the legislation and regulations applicable to the Company's operations is relatively new and untested by judicial process or otherwise. There can be no certainty that interpretations or rulings of government bodies on which the Company has relied may not be challenged by government agencies or others in the future. If any such challenges were successful, this could materially adversely affect the Company.

3. Risks relating to the jurisdictions in which the Company operates or with which it trades

Emerging markets such as Mongolia are subject to greater risks than more developed markets, and fluctuations in the global economy, particularly emerging market countries, could disrupt the Company's business, as well as cause the value of investments in Mongolia to decline

The Mongolian market and the Mongolian economy are influenced by economic and market conditions in other countries. Moreover, financial turmoil in any emerging market country tends to adversely affect prices in capital markets of all emerging market countries, including Mongolia, as investors move their money to more stable, developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Mongolia and adversely affect the Mongolian economy and the Company. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Mongolian financial markets and indirectly, in the Mongolian economy in general. Any worldwide financial instability could also have a negative impact on the Mongolian economy.

Selective or other government action may have an adverse effect on the Company's business and the value of investments in Mongolia

Governmental authorities have a degree of discretion in Mongolia and at times appear to act arbitrarily. Government entities may also use common or minor defects in official or other documentation to delay or invalidate the issue or registrations of rights or licences or to void transactions. Competitors of the Company may receive preferential treatment from the government and government action, if directed at the Company's operations, could have a material adverse effect on the Company's business, results of operations and prospects and on the value of investments in Mongolia.

Any such selective action relating to activities of the Company, for example in relation to its proposed export route following any successful discovery, could adversely affect the Company. In addition, in accordance with Mongolian law, the Mongolian Government may prohibit, restrict or requisition production of petroleum in any part of the territory of Mongolia for reasons of national security, prevention of damage to natural oil reserves, and environment, or protection of relics of historical and cultural importance.

The government of Mongolia has traditionally exercised and continues to exercise a dominant influence

The Mongolia government has traditionally exercised and continues to exercise a more dominant influence over many aspects of the economy than is the case in some other countries. Its economic policies have had and could continue to have a significant effect on the Company, and on market conditions and prices of Mongolian securities, including securities issued by the Company.

Corruption could materially prejudice the Company

The Mongolian government campaigns regularly against crime and corruption, however, the effectiveness of such campaigns is uncertain. While the Company is not aware of unethical or criminal or corrupt activities affecting the Company, nevertheless, surveys have indicated that there may be some corruption in Mongolia. Corruption could potentially adversely affect the Company, including, for example, if as a result a competitor to the Company was able to achieve a benefit which the Company was not. Another example could be false accusations of corruption or other alleged wrongdoing by the Company or its officers, by news outlets, competitors or others in order to gain a competitive advantage or for other reasons.

Currency and foreign exchange risk

The Company's principal operations are located in Mongolia, but the registered office of the Company is in the Isle of Man. Both the Company's revenues and the majority of its operational costs are denominated in US Dollars and so exchange rate fluctuations between the Mongolian Tugrik and the US Dollar have little impact on the Company.

While most of the Company's financial obligations are denominated in US dollars, a number of foreign currency effects may arise from exchange rate movements. The Company does not engage in active hedging to minimise exchange rate risk.

Legal systems

Mongolia and other jurisdictions in which the Company might operate in the future may have less developed legal systems than more established economies which could result in risks such as (i) effective legal redress in the courts of such jurisdictions, whether in respect of a breach of law or regulation, or in an ownership dispute, being more difficult to obtain; (ii) a degree of discretion on the part of governmental authorities; (iii) the lack of judicial or administrative guidance on interpreting applicable rules and regulations; (iv) inconsistencies or conflicts between and within various laws, regulations, decrees, orders and resolutions; or (v) relative inexperience of the judiciary and courts in modern commercial matters. In certain jurisdictions, the commitment of local business people, government officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be more uncertain, creating particular concerns with respect to the Company's licences and agreements for business. These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed. There can be no assurance that the PSC, joint ventures, licences, licence applications or other legal arrangements will not be adversely affected by the actions of government authorities or others and the effectiveness of and enforcement of such arrangements in these jurisdictions cannot be assured.

Economic, political, judicial, administrative, taxation or other regulatory factors

The Company's current interests are in Mongolia where there may be a number of associated risks over which it will have no, or limited, control. These may include contract renegotiation, contract cancellation, economic, social, or political instability or change, hyperinflation, currency non-convertibility or instability and changes of laws affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, exploration licensing, petroleum export licensing and export duties as well as government control over domestic oil and gas pricing.

Foreign jurisdiction taxation

The operations and activities of the Company in jurisdictions outside the Isle of Man could expose the Company to income and/or capital taxes in jurisdictions outside the Isle of Man which may have a substantial adverse effect on the Company's business, financial condition and prospects. This will depend, in part, on:

· the nature of the Company's income and operations in these jurisdictions (carried on by employees of the Company or service providers on behalf of the Company), including intra-group transactions;

· the attitude of the tax authorities in these jurisdictions; and

· the ability of the Company to claim treaty benefits under any applicable income tax treaties between jurisdictions other than the Isle of Man in which it carries on operations and activities.

Anticipated dependence on Chinese exports

A significant proportion of the Company's revenues in the event of a successful development of its discoveries are expected to be generated by exports to China. Any significant decline in the condition of the Chinese economy, any import or export controls and/or the imposition of any import or export duties could adversely affect any such exports and/or the financial return which the Company would derive there from.

4. Risks relating to the Placing

Conditional nature of the Placing and Placing not underwritten

The Placing is conditional on shareholder approval being granted at the Extraordinary General Meeting and there is no guarantee that the conditions of any element of the Placing will be satisfied. The Placing is not underwritten. If any element of the Placing does not proceed then the Company will not receive the proceeds in respect of that element of the Placing.

Valuation of shares

The Placing Price has been determined by the Company and may not relate to the Company's net asset value, net worth or any established criteria or value. There can be no guarantee that the Ordinary Shares will be able to achieve higher valuations or, if they do so, that such higher valuations can be maintained.

Investment in AIM securities

An investment in shares traded on AIM may be less liquid and is perceived to involve a higher degree of risk than an investment in a company whose shares are listed on the Official List. Prospective investors should be aware that the value of the Ordinary Shares may go down as well as up and that the market price of the Ordinary Shares may not reflect the underlying value of the Group. Investors may therefore realise less than, or lose all of, their investment.

AIM Rules

The AIM Rules are less onerous than those of the Official List. Neither the FCA nor the London Stock Exchange has examined or approved the contents of this document. Shareholders and prospective investors (as appropriate) should be aware of the risks of investing in AIM quoted shares and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser.

Dilution of ownership of Ordinary Shares

Shareholders' proportionate ownership and voting interest in the Company may be reduced pursuant to the Placing. Subject to certain exceptions.

Share price volatility

The market price for the Company's Ordinary Shares is likely to fluctuate in response to a variety of factors, many of which are outside the Company's control.

Potential investors should be aware that the value of securities and the income from them can go down as well as up.

The price which investors may realise for their holding of Ordinary Shares, and when they are able to do so, may be influenced by a large number of factors, some of which are specific to the Company and others of which are extraneous.

Investors should therefore consider carefully whether investment in the Company is suitable for them, in light of the risk factors outlined above, their personal circumstances and the financial resources available to them.