VGAS.L Regulatory News (VGAS)

13 June 2014

VOLGA GAS PLC

Q1 Trading statement and operational update

Volga Gas plc ("Volga Gas" or the "Company"), the oil and gas exploration and production group operating in the Volga Region of Russia, is pleased to provide the following trading statement and operational update for the first quarter of 2014.

Production volumes and sales for Q1

Production between 1 January and 31 March 2014 was approximately 4,512 barrels of oil equivalent per day (boepd), which represents a 52.5% increase on the average production rate for 2013.

Production levels have been maintained following a significant increase in November 2013 when the Company's operating subsidiary, OOO Gaznefteservice ("GNS"), received regulatory approval for the upgrade works on the Dobrinskoye Gas Processing Plant. Production continues to be derived from the wells that were developed prior to 2013.

With steady US dollar equivalent realisations for oil and gas sales in spite of the relative weakness of the Russian Rouble during early 2014, revenues for the three months to 31 March 2014 were approximately US$11.6 million.

Gas plant operation

The Dobrinskoye Gas Processing Plant continues to operate with a throughput of more than 500,000 cubic metres per day (18.7 mmcf/d) of gas.

Following the imminent installation of certain additional minor modules, final approval of the completed upgrade will be sought, which will allow GNS to utilise the plant at full passport capacity of 1.05 million cubic metres per day (37 million cubic feet per day). Pending this, GNS will continue to operate at test rates utilising the current well capacity.

Development drilling

As announced previously, development drilling on the VM field is ongoing. A drilling rig is currently on location drilling the new VM#3 production well. The well has recently reached a depth of 1,210 metres and is being drilled as a deviated well to a true vertical depth of approximately 2,600 metres. The drilling is progressing more slowly than anticipated and is currently expected to be completed during Q3 2014.

Financial position

Volga Gas continues to operate profitably and to generate positive cash flow in line with management expectations. The Group's net cash has risen from $8.0 million at the start of 2014 to reach $14.6 million by 31 May 2014.

At the Company's recent Annual General Meeting, resolutions were passed that will pave the way for the Company to commence distributions to shareholders. Subject to all legal and regulatory requirements and approvals, management expects to recommend payment of a sustainable dividend from profits to be complemented as appropriate through share buy-backs.

Mikhail Ivanov, Chief Executive of Volga Gas, commented:

"We have made good progress in 2014 and look forward to delivering strong growth in revenues and cash flow in 2014 and beyond which will facilitate providing shareholders with tangible returns."

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Editors' notes:

Volga Gas is an independent oil and gas exploration and production company operating in the Volga region of European 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.