PTR.L Regulatory News (PTR)

PetroNeft Resources plc

1st February 2021

PetroNeft Resources plc ('PetroNeft' or 'the Company')

Acquisition of an additional 40% Interest in Licence 67

Director Appointment

PetroNeft (AIM: PTR) an oil & gas exploration and production company, operating in the Tomsk Oblast, Russian Federation, and 50% owner and operator of Licences 61 and 67, is pleased to provide the following update:

Highlights

· Execution of Sales Purchase Agreement to acquire an additional 40% interest in Licence 67.

· Alastair McBain appointed as a Non-Executive Director of the company.

PetroNeft is pleased to annouce that it has signed a Sales and Purchase Agreement with Belgrave Naftogas (formerly Arawak Russia B.V.) for the acquisition of a 40% interest in Licence 67 for US$2.9 million to be satisfied in the following way:

· Issuance of 80,000,000 PetroNeft ordinary shares to Belgrave Naftogas (representing a 8.7% shareholding) for a value of US$1.2 million (US$0.015 per ordinary per ordinary share).

· Cash consideration of US$1.7 million which will be financed through a 3 year loan from Belgrave Naftogas to PetroNeft with an interest rate of 8% above Bank of England base rate. The loan and interest are to be repaid at the end of the loan. Up to 50% of the loan can be converted by Belgrave Naftogas to PetroNeft ordinary shares at 2p per ordinary share during Year 1; 2.5p per ordinary share during Year 2; and 3p per ordinary share during Year 3.

Belgrave Naftogas is to be carried by PetroNeft for their 10% share of the Joint Venture costs up to repayment of the loan, after which time Belgrave Naftogas will fund their share of the Joint Venture costs.

Completion of the acqusition is subject to certain conditions precedent, which are expected to be satisfied no later than the 12th March 2021.

Licence 67 contains two oil fields, Ledovoye and Cheremshanskoye. In 2016 Rhyder Scott calculated 2P reserves for the Ledovoye field of 14 mmbbls and 3P reserves of 17.4 mmbbls. In 2019 and following the successful C-4 well, the Russian State Reserves Committee approved C1+C2 reserves (approximately equivalent to International 2P reserves) for the Cheremshanskoye field of 19.2 mmbbls. This qualifies the field for a small field partial exemption of the state Mineral Extraction tax. The Cheremshanskoye is about to commence all year round production imminently.

Net Assets of Russian BD Holdings B.V,.a joint venture company which is currently 50% owned by PetroNeft and 50% by Belgrave Naftogas and owns 100% interest in Licence 67, as at 30th June 2020 amounted to $6,043,753 with Loss for continuing operations before tax for the six months ending 30th June amounting to $254,902 unaudited.

As previously announced, Belgrave Naftogas has the right to nominate a Director to the board and has nominated Alastair McBain as a non-executive director with immediate effect.

Alastair has over 37 years' experience in the International Oil and Gas industry. He spent the first 17 years of his career at Royal Dutch Shell in numerous senior international commercial positions including assignments in Singapore, Dubai, China and Venezuela. He joined the Vitol group in 1995 to head up the growth of the group's portfolio of upstream assets and became CEO of Arawak Energy in 2002. Alastair grew the company from an initial $20M valuation with zero production to a $0.5Bn company producing 12,000 boepd from assets in Kazakhstan and Russia. He also oversaw the migration of the company from a junior listing on the Toronto exchange to a full listing on the London Stock Exchange. Following the sale of Arawak's producing assets, he worked with Vitol in a variety of senior positions including board Chairman of GeoAlliance, one of Ukraine's leading producers of gas liquids. He left Vitol in early 2020 to form Sarum Energy, a company which, through its Dutch subsidiary, owns a 50% interest in Licence 67. He holds an MA in Oriental Studies from the University of Oxford and in addition to his native English, is also a fluent Mandarin speaker.

David Sturt, CEO PetroNeft commented:

"This is an important step forward for PetroNeft and is strong demonstration of our increasing confidence in and understanding of the quality of our assets. Our low-cost operational activity on Licence 67 has already delivered first production. We are confident that the work we have done will provide a platform for significant future growth on this licence. This is another important milestone in delivering the true value of our assets and delivering value to shareholders."

Alastair McBain, Incoming Director of PetroNeft Resources plc, commented:

"I am very pleased to be joining the Company at this important stage in the Company's development. Being the former CEO of Arawak Energy, I have worked alongside PetroNeft for many years and believe that these assets can deliver value to shareholders. I look forward to working with the management and other board members."

G. David Golder, Chairman of the Board commented:

"I would like to welcome Alastair McBain as he joins the Board. His experience and track record particularly in Russia of delivering shareholder value combined with his considerable commercial experience will be very valuable to the company."

The following information is disclosed pursuant to Rule 17 of the AIM Rules for Companies and Rule 5.22 (b) of Chapter 5: Additional Rules for the Euronext Growth Market operated by Euronext Dublin.

Alastair Mc Bain, aged 64, has held the following directorships and/or partnerships in the past 5 years:

Mr. McBain currently holds 12,698,500 shares in PetroNeft, representing 0.66% of the Company's issued share Capital.

Mr McBain is a director and 72% shareholder in Sarum Energy who will hold 80,000,000 PetroNeft shares via its wholly owned subsidiary Belgrave Naftogas , representing an 8.7% of the Company's issued share capital, upon completion of the transaction.

Mr McBain also participated in the 2019 Convertible Loan issuance, providing $400,000 through his wholly owned subsidiary ADM Consulting FZE.

The Company confirms that there is no other information that is required to be disclosed in accordance with Rule 17 of the AIM Rules for Companies and Rule 5.22 (b) of Chapter 5: Additional Rules for the Euronext Growth Market operated by Euronext Dublin.

For further information, contact:

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