SLE.L Regulatory News (SLE)

21 January 2015

San Leon Energy plc

Operations update

San Leon Energy plc ("the Company" or "San Leon"), the AIM listed company focused on oil and gas exploration in Europe and North Africa, provides an operational update across a number of its assets.

3-Well Drilling Programme in Karpaty and Permian Basin, Poland

The second well in the 3-well programme, Gierałtowice on the Bielsko-Biała concession in Karpaty, has now been completed and tested and is being plugged and abandoned. All planned targets were penetrated. Low gas rates were achieved but the thick sandstone primary target reservoir did not have a sufficient seal, and thinner sands associated with the expected coal beds were insufficient on their own to provide commercial rates during testing. The net cost to the Company for its 60% equity in the well is expected to be below €1 million.

Separately, the decision has been made not to drill the Niwiska well in the near-term. This well, on Block 243 in the Permian Basin, Poland, was targeting oil. San Leon would be required to pay 100% of the cost of the first well drilled on the prospect, estimated at around €1.7 million, in order to complete its farm-in to Block 243 with Celtique Energy. As a result of the current depressed oil price, San Leon has reviewed the risked economics of the prospect and has concluded that it is prudent as a farminee not to drill the well at this time.

Rawicz and Siekierki Drilling Projects, Poland

The Rawicz-12 appraisal well, designed to test the previously-discovered, unproduced Rawicz gas field, has reached a total depth of 1,902 metres MDBRT (measured depth below rotary table). The well successfully drilled the target Permian Rotliegendes sandstone reservoir interval. The well will now be completed and flow tested to evaluate the commercial potential of the field.

Detailed engineering and evaluation continues on the Siekierki gas project. This ongoing work is focused on working over and recompleting the existing Trzek wells, including testing water disposal, and designing an appraisal/development programme. The primary goal is to define an updated work programme to delineate and appraise the Siekierki gas field(s) and evaluate the long-term commercial potential of the project.

Both projects are operated by Palomar Natural Resources ("Palomar") with 65% equity, and San Leon has no up-front drilling costs for its 35% equity share.

Timahdit Oil Shale Bench Test Results, Morocco

Results of the oil shale bench testing, from the Timahdit licence, onshore Morocco, were as follows:

· Successful proof of applicability of the Enefit retorting process to generating shale oil from Timahdit oil shale

· Trials on vVarious combinations of retort temperatures, system retention times, and grain sizes

· High yield of C5+ oil during bench tests, up to 86% of assay amount (with potential upside yield from larger-scale process)

· Approximately 10 tonnes of oil shale processed

· Relatively low retorting temperature results in reduced operating cost.

Bench testing was performed by Enefit in their Frankfurt facility, designed to test the shale oil yield of recently-acquired oil shale samples from the Timahdit licence. The oil shale, from various different rock layers, was crushed and processed under a range of conditions. The results are regarded by Enefit as positive, with the feedstock rock suitable for this process.

Details have been provided to our partner Chevron Lummus Global, who will evaluate shale oil upgrading options using their technology.

Bids from leading engineering companies to update the previous pre-feasibility study are being evaluated. Costs will be strictly controlled in light of the current oil price.

Foum Draa and Sidi Moussa Update, Offshore Morocco

Offshore Morocco, we are reviewing next steps in the Foum Draa and Sidi Moussa licences with our partners.

Completion of Sale of Irish Assets

Further to its announcement on 26 September 2013, the Company has completed the sale of Island Oil & Gas Limited ("Island Oil & Gas") to Ardilaun Energy Limited ("Ardilaun").

Under the finalised terms of the transaction, Ardilaun has agreed to pay San Leon US$3 million in consideration for Island Oil & Gas. San Leon has already received US$1 million and the balance of US$2 million is now payable within 36 months. Ardilaun will issue San Leon shares equivalent to 15 per cent. of its enlarged issued share capital. San Leon will maintain a joint operating contractor status in the Island Oil & Gas licences.

As previously announced, San Leon has retained its Net Profit Interest (NPI) in the Barryroe licence, located in the North Celtic Sea, offshore Ireland. A number of parties have expressed an interest in a financial transaction on the NPI, subject to the completion of a farm-out by the Operator of Barryroe, Providence Resources plc. San Leon is evaluating these expressions of interests.

Oisin Fanning, San Leon Executive Chairman, commented:

"Throughout 2014, San Leon continued to drill wells, both with existing partners and through carried farm-outs in Poland and Morocco. We are now preparing to test the Rawicz-12 well in Poland with our farm-in partner Palomar, and this will be followed by further work on wells in the Siekierki gas field. Neither project has been impacted by the current oil price.

In Morocco, we continue to move the huge resource of our Timahdit shale oil acreage towards development in a prudent fashion. The suitability of the Enefit process to our oil shale is highly encouraging, and provides the backbone for the updated pre-feasibility study which will be used to generate an optimised financial model and to attract development investment.

We are actively managing our portfolio and reviewing our assets in terms of their economic attractiveness as external conditions change. Gas production in Poland will attract high prices and, as the majority of our portfolio in Poland is gas, finding and producing gas this year will be the key to success.

Farm-out discussions and negotiations continue. Some potential farm-in partners are clearly re-thinking their project expenditure, but farm-in activity remains robust.

The Company awaits the test results of the Rawicz-12 well with anticipation, and looks forward to updating the market in due course. Combined with well operations on Siekierki, these projects in partnership with Palomar have material near-term gas tie-in potential in what remains a buoyant gas market."

Qualified personJoel Price, who has reviewed this update, has 20 years' experience in the oil & gas industry and is a member of the Society of Petroleum Engineers. He holds a BA in Natural Sciences from Cambridge University, an MEng from Heriot-Watt University, and an MBA from Durham University. Joel is Chief Operating Officer for San Leon Energy and is based in San Leon's London office.

For further information contact:

www.sanleonenergy.com