Urals Energy Plc Regulatory News (UEN)

Urals Energy Public Company Limited

("Urals Energy" or the "Company")

Petrosakh: Well # 41,operational update and

notification of results

Urals Energy, the Russian focused oil & gas exploration and production company, is pleased to announce that development drilling operations at Petrosakh, located on the east coast of Sakhalin Island, have recommenced with the drilling of Well # 41 and an operational update.

Highlights

·; Drilling of Well#41 recommenced

·; Management team strengthened at Petrosakh

·; Articneft in preparation for the next planned tanker shipment, tentatively scheduled for October 2012

·; Full Year results to be announced by the end of May 2012

Operational update

On 30 September 2011 when the Company announced its half-year results to 30 June 2011, the Board stated that its immediate focus, as part of the Company's recovery strategy, was the continued strengthening of its balance sheet and making further progress on the repayment of its outstanding debts.

To this end, considerable senior management time was devoted with much success, culminating in the assignment of the long standing loans to Taas-Yuriakh Neftegazodobycha to Nagelfar Trade and Invest Ltd for which the Company received US$26.0m. This enabled the Company to settle its long-standing dispute with Finfund and Yakut Energy Limited in exchange for the payment of US$4.4m by Urals to Finfund, reduce the debt to Petraco Oil Company Limited to approximately US$9.9m, and cover certain other long-standing obligations, as well as fund its ongoing operations.

The Board believes that as a result of this transaction the Company entered 2012 in a much stronger position than it has been for many years.

Legacy issues

The Board is pleased to report that it has reached a general understanding with Petraco regarding the process of releasing some of their security of the Company's assets (in accordance with the existing loan restructuring agreement), which is anticipated to take place over the coming months. Further announcements will be made at the relevant time.

Regarding the loan dispute with Mr. Rovneiko, management has made every effort possible to distance itself from him, and despite management time continuing to be diverted in relation to dealing with his various unsubstantiated claims, progress is being made and a decision of the London Court of Arbitration is expected before the end of June 2012.

A satisfactory resolution of the past issues is important and the Board is committed to shifting the Company's focus to operations and growth opportunities.

Petrosakh

The Board has evaluated the reasons for the historical operational problems at Petrosakh with wells #35 and #51. As a result of this assessment personnel changes have been implemented both at the corporate and Petrosakh level, including the appointment of a new corporate Vice President of operations (who presently performs the functions of PSK general manager) and a drilling supervisor, both of whom are experienced professionals in the sector.

In addition, Urals have increased the effectiveness of the operations at Petrosakh and strengthened its vertical reporting systems. As a result, the headcount at Petrosakh has been reduced by more than 50 people and the remuneration of those remaining has been changed so as to be more focused on results.

The Board expects that these measures will lead to the successful finishing of the drilling of well #41 towards the end of May 2012. After this, Urals will evaluate its future drilling plans, including whether to finish well #51, as well as drilling additional wells in the Southern part of the Okruzhnoye field. Finally, the Board is currently evaluating the feasibility of returning to export shipments from Petrosakh, particularly of refined products, as well as shifting the emphasis to higher margin products sold on the local market.

Arcticneft

The Company is currently developing a renewed drilling programme for Arcticneft, which is presently producing at approximately 800 bbpd of crude, in preparation for the next planned shipment to Petraco, tentatively scheduled for October 2012. According to existing information, the State authorities have not yet made a decision regarding the Tarkskoye deposit on Kolguyev Island, but the situation is being monitored and the Company will consider participating in the auction once it is announced.

In addition to the Company's existing operations, the Board continues looking at new opportunities, be it in identifying ways of utilising the upside potential in downstream and marketing opportunities on the existing acreage, evaluating possible acquisitions and joint venture targets with a view to expanding and optimising the portfolio.

Notification of Results

The Company is planning to announce Full Year results for the year ended 31 December 2011 towards the end of May 2012. At this time the Company looks forward to providing further operational and financial updates.

Commenting on today's announcement, Alexei Maximov, CEO said:

"We have been working hard on dealing with our past failures at Petrosakh and preparing the next phase of the development drilling campaign. We hope that well #41 will signal another important step in the rebuilding of Urals' fortunes as the Company focuses on capturing the potential of its Petrosakh and Arcticneft assets, having made considerable progress in drawing the line under the various legacy issues.

The Board is committed to resolving the outstanding legacy issues this year and to reporting to our shareholders a renewed and dynamic growth strategy for 2013 and beyond. To this end we are working to strengthen our team, as well as the Board, and I look forward to updating shareholders as these matters progress."

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