Uk Oil & Gas Regulatory News (UKOG)

19 March 2015

UK Oil & Gas Investments PLC

("UKOG" or the "Company")

UK Budget Measures

The Board of UKOG (AIM: UKOG) notes the stimulus to the UK oil and gas industry in yesterday's UK Budget.

Stephen Sanderson, UKOG's CEO, commented today;

"The UK oil industry continues to make a meaningful contribution to the UK economy, but has clearly been under intense pressure, both offshore and onshore, following the recent steep drop in world oil prices. As a recent explorer for new resources onshore, and a developer of existing UK oil fields UKOG welcomes the measures announced yesterday by the Chancellor of the Exchequer to provide much needed medium term stimulus to the industry. The new fiscal regime has a positive impact for all UK producing oil fields and undeveloped discoveries and thus should have a positive impact on UK tax receipts, energy self-reliance and employment. It certainly provides added incentive and commitment for UKOG to become more active in the UK oil and gas sector. "

UKOG benefits directly from two important measures included in the Budget.

1. The reduction in Supplementary Charge tax from 30% to 20%: This reduces the overall tax rate (Corporation Tax plus Supplementary Charge) for newer UK fields from 60% to 50%. Every UK asset owned by UKOG is favourably impacted by this tax reduction, particularly UKOG's existing production at the Horndean and Avington fields. UKOG's potential onshore field developments at Horse Hill, Markwells Wood and Baxters Copse are also rendered more commercially attractive.

2. The introduction of a new offshore "Investment Allowance", exempting 62.5% of future taxable profits from Supplementary Charge: This allowance has a strong impact on the commerciality of any future discovery in UKOG's P1916 licence, offshore Isle of Wight.

UKOG also further benefits indirectly from the favourable impact of the Budget on Angus Energy, where UKOG is a 6% shareholder.

It should be noted that an "Onshore Allowance" was introduced in the UK 2014 Finance Act. This allowance already provides for 75% of onshore field development costs to be offset against Supplementary Charge.

UKOG notes that there is now an inconsistency between UK onshore and offshore oil and gas tax treatment, in that the new offshore Investment Allowance benefits investments, such as infill drilling, in existing offshore fields. UKOG believes that a similar incentive for investment in existing UK onshore fields would provide a similarly beneficial activity stimulus and should be introduced at the earliest opportunity.

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