PGR.L Regulatory News (PGR)

15 November 2018

Phoenix Global Resources plc

("Phoenix" or the "company")

Q3 2018 Operational Update

Phoenix Global Resources plc (AIM: PGR; BCBA: PGR), the upstream oil and gas company offering its investors an opportunity to invest directly into Argentina's Vaca Muerta shale formation and other unconventional resources, is pleased to announce its operational update for the third quarter of 2018 together with an update on planned drilling and other operational activity for the next six months.

Operational highlights

Financial performance (unaudited)

Outlook

Anuj Sharma, CEO, said:

"I am delighted to announce the significant increase in unconventional activity across our substantial acreage in Argentina. The company's primary focus in the period has been the unconventional drilling and completions campaign at Puesto Rojas and aimed at the appraisal of the significant potential of both the Vaca Muerta and Agrio formations. In September, the company also commenced drilling the first of two unconventional horizontal wells planned at Mata Mora, both of which target the Vaca Muerta formation.

These achievements represent a significant increase in the company's unconventional activity in Argentina and are a significant milestone event in the continued development of our world class asset base."

For further information, please contact:

Qualified Person Review

In accordance with AIM guidance for mining, oil and gas companies, Mr. Javier Vallesi and Mr. Greg

Easley have reviewed the information contained in this announcement. Mr. Vallesi, Chief Operating

Officer of the group, is a petroleum engineer with over 22 years of experience in the oil and gas

industry and is a member of the Argentinian Institute of Oil and Gas. Mr. Easley, Senior Manager -

Reservoir and Engineering, is a petroleum engineer with over 10 years of experience in the oil and gas industry, is a licenced Professional Engineer in the State of Texas and is a member of the Society of Petroleum Engineers.

About Phoenix

Phoenix Global Resources is a London Stock Exchange (AIM: PGR) and Buenos Aires Stock Exchange (BCBA: PGR) listed independent Argentina focused oil and gas exploration and production company. The Company has over 6.3 million licensed working interest acres in Argentina (of which over 5 million are operated), 57.2 million boe of working interest 2P reserves and average production of approximately 9,750 working interest boepd in Q3 2018. Phoenix has significant exposure to the unconventional opportunity in Argentina through its 560,000 working interest acres with Vaca Muerta potential.

The company's website is www.phoenixglobalresources.com

Q3 2018 production

Average total daily production volumes in Q3 2018 compared to full year 2017 and Q2 2018 was as follows:

Total average daily production was down in the quarter compared to Q2 2018 (6.7%) and FY 2017 (11.9%). This decrease was mainly due to several of the more prolific wells in the Puesto Rojas area experiencing downtime. In addition to normal operational downtime, higher downtime was required at some conventional wells to allow for nearby unconventional completions to be undertaken safely.

Drilling and completions campaign

Puesto Rojas Area

In August 2018, the company secured the necessary unconventional permits from Mendoza Province to allow further drilling at the Puesto Rojas area and for the company to undertake unconventional completion of wells previously drilled. These initial wells at Puesto Rojas are part of the early phase of exploration and evaluation on the respective concessions aimed at determining the optimum completion methodology for the different Vaca Muerta and Tight Agrio formations present in the acreage.

The company's planned unconventional activity in Mendoza Province was suspended from late 2017 and through much of the first half of 2018 as the provincial government finalised regulations to govern the environmental aspects of the unconventional oil and gas activity in Mendoza Province. Following the issue of the new regulations, a permitting process had to be established and complied with before work could commence.

The completions campaign commenced in August 2018 with seven wells completed to date. The seven completions have been undertaken across the Cerro Medio (3), Cerro Pencal (2), Cerro los Choiques (1) and Puesto Rojas (1) fields. The completed wells are currently in the flowback stage where the completion fluids are recovered from the well following which the level of initial production for each well can be assessed. The company is flowing back the wells on a formation-by-formation basis which, while lengthening the time that the flowback stage will take, gives significantly more information about the most productive horizons and, ultimately, the best drilling and production targets.

In the initial production phase of these wells, the choke and pump configuration will also be optimised to allow estimates of production potential and the estimated ultimate recovery (EUR) to be assessed on a well-by-well and formation-by-formation basis

Three of the wells that have been completed are testing the full interval from the base of the Vaca Muerta formation through the shallower Tight Agrio formation. Two other well completions have been tailored to add productive intervals in the Tight Agrio formation while two others have been selectively tested in the Vaca Muerta and Tight Agrio sections.

The company expects to provide further information regarding the the results of its Puesto Rojas drilling and completions campaign in conjunction with the reporting of the full year results for 2018. Those results will also include discussion of the evolution of the reserves and resources profile following this current campaign.

In addition to the seven well completions discussed above, the company has also drilled and completed the CDM-3012 unconventional well at Cerro Del Medio. This well represents an initial tailored completion in the Vaca Muerta interval aimed at gathering more data on the zone in advance of the drilling programme planned for the remainder of 2018 and into early 2019.

Mata Mora

Following the drilling activity in Río Negro Province (Laguna El Loro Block) the Nabors rig was moved to the Mata Mora field in Neuquén province to commence drilling of the company's first horizontal well into the Vaca Muerta formation.

This first horizontal well spudded in September and, during the drilling of the vertical section, a gas kick was experienced at the top of the Vaca Muerta formation. Such kicks are not uncommon in the Vaca Muerta and the rig being used to drill the well was pre-specified with a Managed Pressure Drilling system to deal with such an issue should it arise. The kick resulted in pressure control issues that were successfully managed thereby stabilising the well. Drilling was able to safely resume following certain modifications to the well design.

The drilling of the horizontal section has now commenced. Once this section is complete and the production casing is set, the rig will move to drill the second well from the same pad.

Business development activity

During the third quarter the company participated in the August Neuquén open bid round and submitted a bid for the Corralera Noroeste block. If successful, this will unify the company's interest in the Corralera block, adding to the acreage already secured at Correlera Sur and Corralera Noreste in April 2018. The company believes that the addition of Corralera Noroeste could add up to 26,000 additional acres of Vaca Muerta and Tight Agrio potential proximate to the company's existing licenses.

Production operations

Neuquina basin

Puesto Rojas Area

The production decrease at Puesto Rojas was due to several key wells including the CDM-3002, CP-1014, and CP-1010 being shut-in for maintenance and necessary well repairs. The prolific CDM-3002 well was shut in for a total of 20 days due to its proximity to the completion operations being undertaken on wells at Puesto Rojas discussed above. Following this work the well came back on line and returned to production at more than 500 bpd. In addition, unplanned downtime was incurred at certain locations at Puesto Rojas due to unusually high winds in the area that caused wells to be shut-in for HSE reasons.

Other work undertaken at Puesto Rojas in Q3 included the isolation of gas producing perforations in the CP-1009 well to improve oil production. A pump was changed on CP-1010 after a brief drop in production and, following the changeout, the well returned to its approximately 120 bpd production rate. In addition, the rod pump previously in place at CP-1014 was changed to an ESP allowing for increased capacity and adding a further 60 bpd of production.

Chachahuen Sur (non-operated)

Production at Chachahuen was largely consistent with Q2 2018 as drilling activity is reduced in the substantially developed main production area of Chachahuen Sur. The Chachahuen operator, YPF, is currently preparing to ramp up development activity in the Cerro Morado Este portion of the block that is expected to increase overall production from Chachahuen.

Drilling activity at Chachahuen Sur continues albeit at a lower level with eleven new wells drilled during the third quarter (Q2 2018: 13), including two horizontal wells that are currently under evaluation. In addition, YPF continues to selectively convert certain producing wells to water injectors. As a result, overall recoveries are expected to be greater over time due to improved secondary recovery. This activity is part of the field wide enhanced recovery efforts and is aimed at improving waterflood conformance to ultimately increase the recovery factor from the area. In addition, a total of twelve workovers were carried out during this period at Chachahuen.

Going forward, development activity in the main producing Chachahuen Sur field portion of the similarly named Chachahuen Sur concession is expected to decrease as the area is now substantially developed. Most of the future development will likely be focused on the Centenario play in the Cerro Morado Este field portion of the Chachahuen Sur concession.

Other Neuquina basin activity

Final seismic volumes have been delivered from the company's recent seismic acquisition in the southern Puesto Rojas and La Brea concessions. The company is currently interpreting the seismic volumes and integrating the results of that work with existing geologic data to identify new prospects and areas for development in these blocks as well as determining a development strategy for the areas.

The company drilled the Puesto Galdame.x-1 exploration well at the Laguna el Loro concession in the period. This well was designed to evaluate resource potential at the concession however the well was determined to be unsuccessful and has subsequently been abandoned as a dry hole. Abandoning the well resulted in a US$4.8 million exploration expense that has been recognised in the period. The well at Laguna El Loro satisfied the licence commitments for the initial exploration phase on the field.

An initial exploration well planned at Rio Atuel during the period has been deferred because of permitting delays. The well will likely now be delayed until early 2019. It is anticipated that the initial exploration phase of the concession will be extended as a result of delays experienced in the permitting process. The initial exploration phase was originally due to expire in September 2018.

Austral basin

Production remained largely flat in the Austral basin due to a combination of well downtime and natural decline at the company's Santa Cruz assets that was offset by production gains from new wells in the Tierra del Fuego area.

Santa Cruz Sur (non-operated)

Production decreases at Santa Cruz Sur were driven largely by natural decline in the Chorillos area combined with downtime events at the El Indio Oeste field that were not remediated in the period as access to the wells is not possible in periods of seasonal flooding.

Tierra del Fuego (non-operated)

Production increases in Tierra del Fuego were largely driven by the new SM.x-1002 well that came online in August 2018 adding approximately 1,877 boepd of gross production. Also during Q3 2018, the newly drilled May.x-1 well was tested at 1,836 Mscfpd (312 boepd). The well is currently awaiting pipeline connection to commence commercial production.

Three wells were drilled in the Tierra del Fuego area, two of which were offset wells to the successful SM.x-1001 well and the third being an exploration well. The first of these offset wells, the SM.a-1002 came online with gross production of over 2,000 boepd. The well is currently producing at a reduced rate because of offtake capacity constraints related to infrastructure. The remaining two wells show promising log characteristics though will likely need hydraulic stimulation to perform at economic rates. This fracture activity is currently planned for 2019.

Austral basin activity plan

The continued development plans for both Santa Cruz Sur and Tierra del Fuego remain under discussion between Phoenix and the asset operator, ROCH.

Cuyana basin

Natural production decline continues at the relatively mature Cuyana basin assets. The company actively manages the well stock to counter natural decline where possible through workovers of existing wells. The opportunity for further drilling in the mature Cuyana concessions is limited.

Further workover activity is planned at both Tupungato and Chañares Herrados through year end and into 2019.

Cuyana basin activity plan

Operational maintenance and minor facility upgrades took place at the Cuyana basin assets during the quarter.

Additional information

Production summary

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