Tern Regulatory News (TERN)

20 December 2011

Silvermere Energy PLC

("Silvermere" or "the Company")

Operations Update

Silvermere, the independent oil and gas company, focusing principally on exploration, appraisal and production opportunities in the US, announces a delay in production plans for the I-1 Well on its Mustang Island asset located in Kleberg County, Texas waters in the Gulf of Mexico.

In-line with the announcement made on 6 December 2011, platform construction was completed with load-out operations then scheduled to get underway in Galveston. However, the operator, Dominion Production Company LLC (the "Operator"), has decided, after consultation with the Company, to suspend installation until after the end of March 2012 due to adverse weather conditions and the significant financial costs likely to be incurred.

The fabrication and construction contract (the "Contract") entered into with Laredo Construction Inc. (the "Contractor") by the Operator is a turnkey contract which anticipated that the platform would be ready for installation no later than 31 October 2011. Delays in construction caused by new deck height specifications (API regulations not anticipated at the time the Contract was entered into) and delays from third party suppliers meant that this original target was not achieved although it was still anticipated that installation would be completed by the end of December 2011.

In parallel with the above, the Operator was in discussions with the Contractor to extend the date in the contract specified for turnkey installation in order that installation could proceed without delay. The Operator had understood that this request would be agreed. Unfortunately, recent weather conditions in the Gulf of Mexico have been unfavorable towards installation operations and there is no early expectation that conditions will change for the better. Under these circumstances, which are worse than usual for this time of year, the Contractor finally declined to offer any additional weather protection and/or risk the installation on a turnkey basis due to the very real possibility of incurring significant weather delays and additional downtime costs, which could run to several million dollars.

Accordingly, the Operator confirmed its decision, based on the best interests of the working interest partners, to suspend the installation until after the end of March 2012 when weather conditions are expected to be more favourable. The Operator has agreed to install the platform at the same turnkey price as quoted in the original contract at that time and has further agreed that the remaining stage payments will not become payable until load-out and installation is completed after the end of March 2012.

Commenting on these developments, Andy Morrison, Chief Executive of Silvermere said:

"We previously highlighted the weather as being the significant factor that might delay installation and production by the end of 2011. Due to the nature of the fixed price turnkey contract, we are disappointed to report that this factor has now resulted in a delay. Our financial contribution to the project will be similarly deferred whilst the value of our assets is not affected and we have protected the Company against the risk and potential cost of excessive near-term weather delays."

-ENDS-

About Silvermere Energy PLC

The Company acquired its interest in the Mustang Asset on 30 August 2011. This comprises a 33.33 per cent. working interest and 20.83 per cent. net entitlement interest in the Mustang Licence Area, an area within the southern half of the north west quarter and northern half of the south west quarter of the Block 818-L field as defined in State of Texas Oil and Gas Lease numbers 108873 and 108874. The Mustang Island 818-L field, located in Kleberg County waters of the Gulf of Mexico, is a field re-habilitation project targeting bypassed or only partially produced gas-condensate.

Early in 2011 the Hercules Offshore 205 jack-up rig was contracted to re-enter the I-1 Well on the Mustang Licence Area which was considered to be the most likely of the historic well sites to provide 14 optimum re-entry conditions. The I-1Well re-entry and side-tracking operation was completed in March 2011 leaving it ready to complete in sand horizons I-1 to I-6. Production and flow testing was carried out during June 2011. The well re-entry programme was led by Dominion as the operator. Gas and oil produced from the I-1Well is proposed to be connected to pipeline infrastructure and tied in via a subsea assembly, constructed for the purpose and then transported to the Six Pigs gas facility.

Silvermere's strategy is to acquire a portfolio of US oil and gas licence interests onshore and in shallow offshore waters, characterised by relatively low risk and low cost with the potential for near term production.

Silvermere is quoted on the AIM Market of the London Stock Exchange plc (AIM: SLME) with its offices in London.