VGAS.L Regulatory News (VGAS)

19 February 2015

Volga Gas plc

("Volga Gas" or the "Company")

OPERATIONAL UPDATE

Volga Gas plc, the oil and gas exploration and production group operating in the Volga Region of Russia, provides the following operational update:

Drilling operations on VM

Drilling operations are underway on the VM#3 well, which is being partially re-drilled after mechanical difficulties caused operations to be suspended late in 2014. The drilling is operating at a vertical depth of 2,276 metres and is planned to reach a target depth of approximately 2,600 metres.

Meanwhile, Eurasia Drilling is currently completing assembly of a drilling rig on the location of the VM#4 well and will shortly commence drilling of a sidetrack to the well which was originally drilled in 2009.

Both of these wells are expected to contribute to increased production from the VM field by during the second half of 2015.

Production Update

At the start of 2015, the new regime of significantly lower export taxes and significantly higher Mineral Extraction Taxes on Russian oil and condensate was introduced. Changes in the pattern of trade in crude oil and oil products, as the market adjusts to the new regime, have had an impact on independent refineries in the Russian market at a time of seasonally soft domestic demand. This market disruption has had an impact on the ability of purchasers of condensate from Volga Gas to take delivery and subsequently led to the temporary suspension of production at the Company's VM and Dobrinskoye gas fields.

However as of 16 February 2015, liftings of condensate recommenced and production at both fields has resumed. The interruptions have lasted for approximately one month, during which time certain maintenance and well testing operations, required by the regulatory authorities, were conducted. These maintenance and testing operations were planned for later in 2015 but brought forward to make use of the temporary cessation of production.

Sales of oil from the Yuzhny Uzenskoye field have also been subject to some minor disruption by the market conditions but have continued as planned during this period.

Mikhail Ivanov, Chief Executive of Volga Gas, commented:

"The changes to oil and gas taxation and the indirect impact of, among other things, western sanctions imposed on Russia, have made for increased challenges for all oil and gas producing companies in Russia. However, the temporary suspension of production has had no impact on our fields' productive capacity and the Company's robust financial position, with substantial cash balances and no debt, has enabled us to continue with the development of our assets. We have utilised the unplanned down time to bring forward our scheduled maintenance from March into January.

"In the longer term, we intend to investigate additional sales routes for our gas liquids. Our plans for the development of an LPG production capability at the gas plant should enhance our commercial options, including exports of LPG and condensate."

For further information, please contact:

Editors' notes:

Volga Gas is an independent oil and gas exploration and production company operating in the Volga region of Russia. The Company has 100% interests in its four licence areas.

The information contained in this announcement has been reviewed and verified by Mr. Mikhail Ivanov, Director and Chief Executive Officer of Volga Gas plc, for the purposes of the Guidance Note for Mining, Oil and Gas companies issued by the London Stock Exchange in June 2009. Mr. Mikhail Ivanov holds a M.S. Degree in Geophysics from Novosibirsk State University. He also has an MBA degree from Kellogg School of Management (Northwestern University). He is a member of the Society of Petroleum Engineers.

Glossary

bbl Barrel

Bopd Barrels of oil per day

Bpd Barrels per day

Boepd Barrels of oil equivalent per day, in which 6,000 cubic feet of natural gas is equated to one barrel of oil

mmcf/d Millions of standard cubic feet per day