VLS.L Regulatory News (VLS)

News release

Velocys plc

("Velocys" or "the Company")

7th July 2016

Business update

Velocys plc (VLS.L), the company at the forefront of smaller scale gas-to-liquids (GTL), is pleased to provide an update to investors. Construction of the ENVIA Energy GTL plant in Oklahoma City, which will act as the commercial reference plant for Velocys' technology, is progressing well. All modular process units, including those incorporating the Velocys reactors, and all other major packaged equipment skids, including the steam methane reformer, cooling towers, landfill gas inlet and syngas compression units have been set in place on site. System integration, piping and electrical work is ongoing; 140-150 personnel are currently working on-site. Photographs of progress on-site are available at www.velocys.com/media_image_library.php.

As previously announced, following the additional equity and debt funding Velocys made available to ENVIA Energy earlier in the year, the Company gained a greater influence in the commissioning, start-up and operations of the plant. Since then, Velocys has been further-engaged to provide an operability review, commissioning planning, operating manuals and training for the project. In this role, Velocys will be supporting the EPC contractor, Ventech, in leading the commissioning and start-up of the plant.

A secondment agreement has been signed by ENVIA and Velocys for a team of experienced Velocys operators and engineers to be on-site serving under the ENVIA Plant Manager during commissioning and start-up until the end of 2016. The Velocys commissioning team has commenced its deployment to the Oklahoma City site.

The Velocys subcontract with Ventech for operations, commissioning and start-up planning and execution and the secondment agreement with ENVIA will generate a total of over $0.7 million of revenue for the Company in the current financial year.

The Company continues to progress the opportunities in its commercial pipeline as outlined in the recent Annual Report. For example, Red Rock Biofuels, which is developing a biomass-to-liquids plant using forestry waste as feedstock in Lakeview, Oregon, USA, continues to make progress on permitting, financing and offtake agreements. All of the jet fuel that will be produced by the plant has been contracted to Southwest Airlines and FedEx.

Additionally, Velocys has completed its part of the engineering study underway for a project being developed by a national gas company in Central Asia that is seeking to develop its stranded gas reserves. Elsewhere, the opportunity with a major fuels player in the US remains active. Progress continues to be made by the third-party project developer, and the air permit for the plant has recently been issued.

In the first half of 2016, the Company carried out further analysis of the wax market in North America, which confirmed that the projected plant economics remain attractive for Ashtabula GTL, the 5,000 barrel per day plant that Velocys has been developing in Ohio, focused on the production of waxes and other speciality products. Given the challenges in raising equity for capital projects of this nature at present and in order to defer costs, Velocys has put its development of Ashtabula on hold, pending reassessment as part of the broad review of the strategy of the business that the Company is currently undertaking.

David Pummell, CEO of Velocys, said:

"The ENVIA plant is the key focus of the team, and excellent progress is being made. Our increased stake and operational role is proving very positive for Velocys and its partners; I am pleased with the team's dedication and expertise and with the progress the plant is making. On other fronts, multiple opportunities are progressing towards firm orders. I look forward to updating shareholders on the ongoing review of strategy and future developments in due course."

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Notes to editors

About Velocys

Velocys is the company at the forefront of smaller scale gas-to-liquids (GTL) that turns natural gas or biomass into premium products such as diesel, jet fuel, waxes and base oils. Smaller scale GTL adds value to shale gas and bio-waste, and makes stranded or flared gas economic - an untapped market of up to 25 million barrels per day.

Velocys technology, protected by several hundred patents in over 30 countries, is specifically designed for smaller scales, combining super-active catalysts with intensified reactor systems. The Company's standardised modular plants are easier to ship and faster to install, at lower risk, even in the most remote or challenging locations. Together with world-class partners, Velocys works flexibly to unlock gas resources of 15,000 to 150,000 mmbtu per day, allowing more companies to take advantage of more opportunities.

Velocys plc is listed on the AIM market of the London Stock Exchange (LSE: VLS). The Company is well capitalised and has a multi-disciplinary staff of around 100 operating from its commercial centre in Houston, Texas, USA and technical facilities near Oxford, UK and Columbus, Ohio, USA. Its commercial reference plant, which will be located adjacent to Waste Management's East Oak landfill site, is under construction.

www.velocys.com

Think Smaller™. Velocys is changing the way fuels are made.