Urals Energy Plc Regulatory News (UEN)

Urals Energy PCL

(''Urals Energy'', the ''Company'' or the ''Group'')

Operational update

Urals Energy PCL (AIM:UEN), the independent exploration and production company with operations in Russia, is pleased to provide an operational update:

Production data for 2015

Total production by the Group during 2015 increased by 2.0% and reached 675,318 barrels. This was made up as follows:

· production at Arcticneft reached 253,592 barrels (2014: 240,865 barrels);

and

· production at Petrosakh reached 421,726 barrels (2014: 421,350 barrels).

Petrosakh

Daily production update

Current daily production at Petrosakh is 1,350 barrels of oil per day ("BOPD"), which is 230 BOPD more than the same period in 2015.

Well 109

Drilling of Well 109 to a depth of 1,842 meters has been completed. At a depth of 1,700 to 1,842 meters, the Well encountered the Pileng formation which is typically an oil-saturated zone. However, during the Well completion (performed via gas injection), the Well flowed high pressured water which may be preventing the flow of oil to the surface.

The Well is still being tested and the team is carrying out downhole logging in order to define the fluid movement profile and its fractional composition. The objective is to determine whether the flow of water can be reduced, and allow oil to flow to the surface. Further announcements will be made as soon as the testing of Well 109 is completed.

The area where Well 109 is situated has a complex geology and the Company has engaged Prokon, a geotechnical analysis company who will be responsible for monitoring the field's development. Prokon will review the data and advise the Company on whether it should deploy a micro seismic survey and undertake further studies of the area, as well as reviewing Urals Energy's plan for two further potential wells this year.

Refinery

Weather conditions in recent months have been adverse on Petrosakh Island, which has led to increased demand resulting in the Company seeing good sales volumes at satisfactory prices. The new refinery control system is proving very effective in optimising production.

Arcticneft

Current daily production

Current daily production at Arcticneft is 680 BOPD which is in line with the same period of 2015. Recent work overs have proven effective and the Company plans to work over a further two wells this year, which should enable production levels to be maintained. The Company is expecting to ship the annual cargo in July/August, the same as last year.

Recent acquisitions

RK-Oil Limited

This year the Company plans just one workover on the RK-Oil license, the acquisition of which was announced on 19 November 2015. The objective is to establish reserves to be registered with the Russian State Authorities. Urals Energy will then prepare a development plan which will incorporate development of the license (which is in Russia's Komi region) on a coordinated and integrated basis with the registered reserves of the license area held by our other recent acquisition, BVN Oil Limited.

Competent Person's report

As indicated in the Company's announcements of 7 October 2015 and 19 November 2015, the Company plans to have a review of the licenses held by RK-Oil Limited and BVN Oil Limited undertaken, in addition to the extension of the license area at Arcticneft, in accordance with an appropriate Standard (in accordance with the AIM Guidance Note for Mining, Oil and Gas Companies) in an updated Competent Person's report to be undertaken later this year. This may also be incorporated into the Group's overall development plan for its existing license areas, as part of an update of the Company's reserves.

Acquisition opportunities

The Company continues to look at various M&A opportunities. The Company has engaged Proxima Capital Group, a Moscow advisory firm, to assist in the search on a selective basis.

Andrew Shrager, Chairman, commented: "While the oil price seems to be recovering somewhat and the Rouble exchange rate remains favourable, we have decided to keep capex spending limited, particularly in terms of drilling expenses which require consumables sourced in US dollars. At current prices for crude and domestic sales, given the Rouble exchange rate and the current tax regime, the Company is able to operate on a broadly cash neutral basis, including funding our limited drilling programme."

The section of this release with respect to Well 109 has been approved by Mr Vasily Nikoluk, Chief Geologist, a graduate of the Ivano Frankivsk University, the former head of department at Gazpromneft and a qualified person, in accordance with the guidance note for Mining, Oil & Gas Companies, issued by the London Stock exchange in respect of AIM companies, which outlines standards for disclosure for oil companies.

- Ends -

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