PTR.L Regulatory News (PTR)

31 August 2016

PetroNeft Resources plc

("PetroNeft" or the "Group" or the "Company")

Drilling and Operations Update

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, provides an update on drilling and operations at Licence 61.

Highlights

Sibkrayevskoye Well S-374 - Vertical Delineation Well

· Two tight sandstone reservoirs encountered in the J1-2 interval

· Well tested water with no hydrocarbons present

· Well will be plugged and abandoned

Arbuzovskoye Well A-216 - Deviated Production Well

· Water cut has increased significantly since initial production

· Water influx coming from below the oil water contact

· Workover options to plug off water also under review

· Other South Arbuzovskoye wells unaffected

Production

· Current gross production from Licence 61 about 3,300 bopd (1,650 bopd net to PetroNeft)

· This reduction, from peak production in July, is due partly to natural decline with no new wells drilled and partly to increased water cut on the A-216 well

Sibkrayevskoye Development

The S-374 delineation well was spudded on 3 July 2016.  The well was designed to evaluate the southernmost lobe of the Sibkrayevskoye oil field about 10 km from existing wells. The well was drilled to a total depth of 2,640 m MD. The initial log evaluation is as follows:

· The Base Bazhenov was intersected at -2,340.8 m TVDSS (2,554 MD).

· Two tight sandstone reservoirs with total net pay of 3.6 m were identified on the logs:

o J1-2 (2,559.4 to 2,561.1 m MD) net pay 1.7 m

o J1-2 (2,564.6 to 2,566.5 m MD) net pay 1.9 m

A cased-hole DST was conducted over the two intervals and the fluid inflow was minimal with about 6.3 bbls per day of mineralised water with no indications of hydrocarbons.

While this is a disappointing result as it removes some of the upside from the Sibkrayevskoye oil field, it does not change our plans to develop the field or affect the current 2P reserves of 59 million bbls defined by 4 wells in the northern part of the field. This remains a very significant field with robust economics at today's oil prices.

We are currently working on the necessary studies, permits and approvals to sanction Pad 1 development of Sibkrayevskoye which is still due to commence in 2017.

The S-374 well is one of two obligatory exploration wells under the current 5-year exploration programme for Licence 61 which runs to May 2020.

South Arbuzovskoye Development

The water cut in the A-216 well which was brought on production last month has increased significantly. The water ingress is coming from below the oil water contact in the J1-2 interval. The current plan is to monitor the well and control the water influx through alterations to pump settings. However, we are also considering workover options to plug off the water. The other three wells at South Arbuzovskoye continue to perform strongly without any significant water issues.

Production

Current gross production from Licence 61 is about 3,300 bopd (1,650 bopd net to PetroNeft). This is less than the record production reported in July because we have not drilled any new wells and combined with natural decline in production. The reduction is also a result of the reduced oil production in the A-216 well due to higher water cuts. Production is still significantly above our previous estimates given the success of the other wells drilled at South Arbuzovskoye earlier in the year.

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc, commented:

"The S-374 well at Sibkrayevskoye was a major step out well, 10km from the existing well control, which was drilled with the intention of increasing 2P reserves. While the result is disappointing, Sibkrayevskoye remains a very attractive project for PetroNeft with gross 2P reserves of 59 million bbls. Our strategy of developing this field in Q1 2017 remains on course and we are currently putting in place the necessary permits and approvals to progress this important asset."

For further information, contact:

The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining and Oil & Gas Companies issued by the London Stock Exchange in June 2009. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 40 years' experience in oil and gas exploration and development.

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