PXOG.L Regulatory News (PXOG)

Prospex Oil and Gas plc

("Prospex" or the "Company")

Investment Update: Receipt of Competent Persons Report

The Board of Prospex (LSE AIM: PXOG) is pleased to announce that following the engagement of AGR TRACS International Limited ("AGR TRACS") to review the Kolo Licence, held by Hutton Poland Limited, from both a geological and economic perspective the results of that Competent Persons Report ("CPR") has now been received. The Kolo Licence is part of a portfolio of investments held by Hutton Poland Limited, in which Prospex holds a 49% investment stake.

A copy of the CPR is located on the Company's website: www.prospexoilandgas.com and a summary of the findings and the Executive Summary from the CPR are set out below.

Key Points:

· Gross Best Estimate Technical Unrisked Prospective Resources for the Boleslaw prospect (within the Kolo Licence) are estimated at 87.1 Bscf. All estimates are expressed as reservoir gas quality at surface conditions, and include N2 and other inerts.

· The prospect comprises two objectives within the Cretaceous sequence; a Santonian objective (geological possibility of success, POSg, estimated at 40%) supported by distinct seismic amplitude anomalies, and a Deep Cretaceous target (POSg 20%) with possible amplitude indications.

· Economic assessments clearly indicated that in the case of a gas discovery with N2 content less than 50mol% a Gas-to-Power (combined heat and power, "CHP") development concept would be economically robust above a minimum threshold of around 25Bscf GIIP of gas.

· The economic results assuming the CHP notional development were used to interpolate indicative unrisked NPVs (based on a 10% discount rate) for the Mean resource cases under the four N2 thresholds less than 50mol%. The indicative NPVs ranged from $44m to $95m (net to Prospex). These Mean NPVs were combined in decision tree analysis along with the POSg and the N2 risks in order to derive indicative Expected Monetary Values ("EMVs"), which include the potential dry hole costs and failed exploration wells with well test costs where required.

· The notional CHP development scenarios were based on a single well assuming production rates of 20MMscf to 40MMscf per day (3333 to 6666 boe/d)

· The economic assessment based on the AGR TRACS N2 risk profile indicated a risked EMV of $7.1mln/£5.0mln (net to Prospex), while corresponding evaluations assuming Prospex's N2 risk profile suggested a risked EMV of $12.2.mln/£8.4mln (net to Prospex), where both estimates were derived assuming current electricity prices.

Bill Smith, Chairman of Prospex commented "We are pleased with the report prepared by AGR TRACS. We believe it demonstrates the significant value in the Hutton Poland investment, £5mln to £8.4mln, compared to the investment cost of £620,000 and the potential for the project moving forward. If successful, a well on the Boleslaw prospect could unlock significant value for the Company.

Executive Summary

AGR TRACS International Ltd. ("AGR TRACS") was engaged by Prospex Oil & Gas Ltd ("Prospex") to review the Boleslaw prospect in the Kolo Licence, onshore central Poland. The prospect comprises two objectives (Santonian and Deep Cretaceous) within the Upper Cretaceous, and is located in the Kolo licence in the Lodz Trough in the Central Polish Lowlands, approximately 150km west of Warsaw.

In early April 2016 Prospex completed the acquisition of a 49% stake in Hutton Poland Ltd from Hutton Energy Ltd. Hutton and Prospex will fund their respective share of exploration and development costs going forward. The Kolo exploration licence was formally awarded to Hutton Poland Ltd on 26 April 2016 for a four year exploration period comprising two phases each of 2 years' duration with a number of work commitments including seismic acquisition, reprocessing and drilling.

AGR TRACS was provided with a comprehensive dataset, including 66 2D seismic lines (eight of which help define the Boleslaw prospect), a large number of wells, supporting geological and geophysical studies, and the results from the recent seismic inversion project carried out by DownUnder Geosolution ("DUG").

Following this review AGR TRACS can report that the Gross (100%) Best Estimate Technical Unrisked Prospective Resources for the Boleslaw prospect in the Kolo Licence, Poland, are estimated at 87.1 Bscf. The prospect comprises two objectives within the Cretaceous sequence, a Santonian and a Deep Cretaceous target mapped on a grid of 2D seismic data and supported by distinct amplitude anomalies. The Gross (100%) Best Estimate Technical Prospective Resources for the individual targets are estimated at 31.5 Bscf in the Santonian and 55.6 Bscf in the Deep Cretaceous, see Table ES.1. The Net Attributable Best Estimate Unrisked Prospective Resources to Prospex are estimated at 42.7 Bscf for the overall prospect, comprising 15.5 Bscf in the Santonian and 27.2 Bscf in the Deep Cretaceous, see Table ES.1. All these estimates are expressed as reservoir gas quality at surface conditions, and include N2 and other inerts.

Table ES.1: AGR TRACS estimates of Gross and Net Attributable Prospective Resources to Prospex in the Boleslaw prospect, Kolo Licence, Poland

"Risk Factor" for Prospective Resources means the chance, or probability, of discovering hydrocarbons in sufficient quantity for them to be tested to the surface. This, then, is the chance or probability of the Prospective Resources maturing into a Contingent Resource. Where a prospect could contain either oil or gas the hydrocarbon type with the higher probability of being discovered has been listed in the table. The volumes tabulated are expressed as reservoir gas quality including N2 and other inert components, and are the estimated technically recoverable volumes without any economic cut-off applied.

"Operator" is the name of the company that operates the asset.

"Gross" are 100% of the resources attributable to the licence whilst "Net Attributable" are those attributable to the AIM company.

"Total…#" - implies totals have been derived by arithmetic summation without any probabilistic addition.

The Best Estimate Risked Technical Prospective Resources Net Attributable to Prospex are estimated at 11.6 Bscf, comprising 6.2 Bscf in the Santonian and 5.4 Bscf in the Deep Cretaceous, see Table ES.2 below. As before, these estimates are expressed as reservoir gas quality at surface conditions, and include N2 and other inerts.

Table ES.2: AGR TRACS estimates of Net Unrisked and Risked Prospective Resources attributable to Prospex in the Boleslaw prospect, Kolo Licence, Poland

"Total…#" - implies totals have been derived by arithmetic summation without any probabilistic addition.

There is significant uncertainty around the possible N2 content, as the database of 48 gas analyses from nearby wells suggests possible N2 contents from less than 10mol% to more than 90mol%. AGR TRACS and Prospex have discussed this issue in considerable detail, and as a result two risk assessments for the possible N2 content in the Boleslaw prospect were derived and applied in the economic evaluations, see Table ES.3 below. In general, any N2 content greater than 50mol% is considered, at present, to preclude a commercial development of any gas discovery.

Table ES.3: AGR TRACS and Prospex risk assessments for N2 content in the Boleslaw prospect

Economic evaluations were carried out for a range of notional GIIP cases (10, 30, 50, 100 and 200 Bscf) based on notional production profiles and conceptual development costs for two development scenarios; the first based on conventional gas processing with N2 removal (if required) and a Low-Cal gas export pipeline of some 90km length tying into the Low Cal grid in western Poland, and the second assuming a dedicated Combined Heat-Power ("CHP") facility and power export via the national grid a few km away. The economic assessments clearly indicated that the CHP concept was economically robust, while the Low-Cal export option appeared sub-economic to non-commercial with markedly poorer to negative NPVs compared to the notional CHP development scheme.

The CHP results were therefore used to interpolate indicative NPVs for the Mean resource cases under the four N2 thresholds less than 50mol% listed in Table ES.3. These Mean NPVs were combined in an extensive decision tree analysis (with more than 120 outcome nodes) along with the POSg and the N2 risks in order to derive indicative Expected Monetary Values ("EMVs"), which include the potential dry hole costs and failed exploration wells with well test costs where required. The resulting EMVs are listed in Table ES.4, which demonstrate that the prospect is economically robust under both the N2 risk profiles provided in Table ES.3.

Table ES.4: Summary of EMV estimates for CHP development cases and N2 risk scenarios

Bjørn Smidt-Olsen, (SLOAN Fellow, MSc Petroleum Exploration Studies), a managing consultant of APR Tracs, has reviewed and approved the inclusion of the material in this announcement in the form and context in which it appears.

Glossary of Technical Terms