NUOG.L Regulatory News (NUOG)

26 June 2018

Nu-Oil and Gas plc

("Nu-Oil" or "the Company")

Operational and Strategic Update Statement from the Chairman of the Company

Nu-Oil announces the following operational and strategic update from its Executive Chairman, Alan Minty as follows:

"It has been 3 months since my last Chairman's Statement, which accompanied the Company's interim Financial Statements, and I would like to take this opportunity to update the market with respect to the progress we have made and reiterate our strategic goals. We are also aware of certain rumours currently circulating on bulletin boards, which we hope this statement will dispel.

Nu-Oil's strategy is to generate value from marginal field activities in two 'domains'; in both cases we target low-risk, undervalued projects that can be transformed by changing the economics. The first domain is the offshore sector where we target discoveries with proven reserves and preferably producing assets, to reduce capital and subsurface risks. We pursue this through our investment in MFDevCo, in which both Nu-Oil and RMRI Ltd, a company controlled by myself, hold a 50% interest, which has engineering, subsurface and operational experience, supplemented by Nu-Oil's specific capability when required. The second target domain is onshore where we are focusing on a region with large resources and which we know well from our considerable operating experience there; this is western Newfoundland, where we work via our 100% owned subsidiary, Enegi Oil Inc. ("Enegi"), using local partners.

Opportunities in the offshore sector are more capital intensive and take longer to incubate as the evaluation, assessments and planning processes required reflect the additional complexity involved in offshore operations when compared to those onshore. This greater complexity requires more expertise so MFDevCo established a 'support' consortium of experienced, international oil-service companies (the "Consortium"); the prestige of the members illustrates the credibility of the strategy and of the current opportunities.

We undertake extensive screening in both domains. In the offshore sector, one redevelopment project in particular is of great interest because of the value that can be generated and because the commercial circumstances that surround the project provide further hurdles to competition. There can never be a guarantee of concluding a project prior to physical execution but a regeneration strategy has been identified and MFDevCo and the Consortium have undertaken significant work including identification of, and engagement with, the owners of a facility in China for deployment on the project. We are currently leveraging the Consortium's relationships in China with the aim of capitalising on this opportunity.

MFDevCo is building its team as it commissions, and works with, the Consortium on this project; due diligence is vital and extensive. A key task has been to review the complex subsurface model and the work to date provides confidence that the project should be pursued aggressively. The main outputs from such work are accurate recoverable volumes of oil and predicted production rates, based primarily on the performance of the reservoir to date.

Project planning continues at pace as negotiations advance; this exercise is mainly performed by RMRI, also a shareholder of MFDevCo, in conjunction with Aker Solutions. The latter's experience of large scale development projects is invaluable including engineering design and operations such as well completions, subsea infrastructure, process facilities, production operations, logistics and offtake arrangements. Nu-Oil provides support to MFDevCo through engagement in the commercial elements of the project.

Our current priority is to conclude the commercial terms and, within that framework, create a deal whereby Nu-Oil benefits from a financial structure that creates significant value for shareholders and avoids dilution. Such a structure has been developed and is being negotiated. Further announcements will be made when appropriate based on the outcome of discussions.

Onshore opportunities are less complex and while they do not carry the same investment risks as offshore, they still require careful evaluation and planning. Even so, the characteristics of 'marginal field' opportunities onshore will be different from those we target offshore, because fields are 'less stranded' from a location perspective, which naturally has an effect on the 'prospectivity' of the opportunity. Offshore fields are commonly deemed to be marginal once they have been appraised, however onshore marginal fields are likely to be nearer to exploration than to production. As always, expertise and support from a technical group improves the chances of producing successfully.

Nu-Oil chose to remain active in western Newfoundland for a number of reasons: (1) it had identified and understood the potential in the region, (2) it already had licences in place and detailed subsurface models, (3) it recognised that assets in the area are stranded in part by lack of infrastructure, and (4) while the Company shares the rights on EL1070 with Shoal Point Energy Ltd., it is the last remaining operating company active in that part of the Province and as such is ideally positioned to use that as a springboard to other opportunities.

In addition, in PVF Energy we have a partner that is committed to developing and implementing a similar consortium approach in the area. PVF retains a very strong belief in the potential not only of the Garden Hill field but also of the region as a whole, based on many years' experience and their work on site over the last 12 months, and this is evidenced by the recent signing of the Heads of Terms for the farm-in, as announced on 24 May 2018. The over-riding objective remains to maximise production from the lease area through the drilling of a new well. The first step towards this is of course the upcoming production test, and, despite a limited number of engineering issues in preparation for the test, PVF has informed us they expect to undertake and conclude this successfully. The impact of engineering issues is felt far more keenly in western Newfoundland owing to the remoteness of the site and lack of infrastructure.

The results of the test will provide valuable information both for the future development of Garden Hill and as a basis for wider activity in the area. But it is the consortium approach, along with the investment required to ensure that the necessary infrastructure is more readily available in the Province, which will ultimately stimulate activity and deliver the outcomes we seek. We have been encouraged by the results of the work to date, the well has flowed to surface and downhole pressure readings indicate the pressure has recovered, which indicates connectivity to a large source reservoir.

Nu-Oil (via Enegi) has a long history of working in western Newfoundland and we believe in the positive impact not only for the Company but also for the local community of successfully and safely developing the assets in the region. We remain fully committed to achieving this goal.

My own belief remains as strong as ever. Personally, I have invested heavily in the success of both Nu-Oil and MFDevCo, information on which is in the public domain. My position is fully aligned with that of all shareholders and my commitment to the success of the venture has been and remains absolute. I hope that this update addresses the false information that seems to be circulating on bulletin boards. The most malicious information appears to be originating from western Newfoundland and the Company will seek legal advice as to how to address this and create greater order in the market.

This is an exciting time for Nu-Oil and I look forward to a bright future for the Company and its shareholders."

Alan Minty

Executive Chairman

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Disclaimer

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").