ZOE.L Regulatory News (ZOE)

26 January 2017

Highlands Natural Resources plc ('Highlands' or 'the Company')

Definitive Helios Two Gas Analysis Results

Highlands Natural Resources, the London-listed oil and gas company, is pleased to announce that gas analyses performed at two independent gas laboratories has confirmed the presence of 0.31% to 0.33% helium at the Company's Helios Two Natural Gas and Helium Project in Montana, USA.

Highlights

· Results from two samples strengthen the Board's belief in the Project's helium viability

· The results are similar to the concentrations of helium exploited at other major helium operations including the Hugoton Field in Kansas and Texas, the USA's largest helium resource 

· Optimised testing methodology has led to this more definitive understanding of the helium concentration

· Next steps are aimed at assessing the full-scale gas production rates and economics - focused on drilling a disposal well and accelerating the de-watering process

· To be undertaken when the snow has thawed to create operational efficiencies

· Natural gas already known to be present at Helios Two and apportioned an NPV10 of US$341m by RPS Knowledge Reservoir, LLP

· Testing has also highlighted methane concentrations of 90%

Highlands CEO Robert B. Price said, "I am happy to provide the market with conclusive evidence that helium is present in elevated concentrations at Helios Two. Given the scale of Highlands' 105,000+ acre land holdings in the Helios Two project area, these results are potentially very significant as they may point to a meaningful accumulation of helium as well as an important natural gas field. We are now focused on understanding the commerciality of this and our next step is to drill a disposal well and to accelerate the de-watering process to assess full-scale gas production rates and economics.

"Upon completion of the disposal well and commencement of full-scale de-watering, Highlands' technical teams expect they will be able to verify the commercial potential of de-watering in the Muddy Formation of Helios Two in H2 2017. If full-scale de-watering proves successful, Highlands would be in the position of having substantially de-risked Helios Two from a scientific, technical and operational perspective. At that point, Highlands would accelerate commercial partnerships towards scale-up and full field development."

Further Information

Today's results build on those previously announced on 27 June 2016. Previous testing was conducted on several preliminary gas analyses which were collected using hard plastic sampling tubes and IsoFlasks. These samples were analysed at multiple gas laboratories, and uniformly showed that the preliminary sampling techniques and equipment had allowed for varying degrees of atmospheric contamination and potential helium leak-off. Helium is a very small molecule, and is well known for its ability to escape containment; pressurized gaseous helium is even able to escape through many metal containers.

As a result, Highlands procured laboratory grade steel sampling canisters in January 2017, and collected a series of gas analyses under the instruction of gas analysis professionals. Two such samples were collected and expedited to two separate gas laboratories. Highlands has now received final gas analysis reporting from the two laboratories showing the following results.

These concentrations of methane and helium are in line with Highlands' initial expectations for the Helios Two project, and are similar to the concentrations of helium exploited at other major commercial helium projects including the Hugoton Field in Kansas and Texas. The Hugoton Field is the USA's largest helium resource, and has historically supplied approximately two thirds of the domestic helium supply via infrastructure operated by the Bureau of Land Management. That infrastructure as well as the associated helium reserves are now expected to be decommissioned and depleted by 2021, creating a potentially significant demand for replacement sources of domestic helium in the United States. As a result, helium prices have risen to US$107 per mcf (approximately 3,050% more valuable than methane, which trades for ~US$3.50 per mcf) in the most recent government helium auctions. Private helium transactions are reported to achieve significantly higher prices.

THIS RELEASE CONTAINS INSIDE INFORMATION.

**ENDS**

For further information, please visit www.highlandsnr.com, or contact:

Notes to Editors

Highlands Natural Resources (LSE: HNR.L) is a London-listed natural resources company with a portfolio of high-potential oil, gas and helium assets and technologies. The company's core projects include:

· East Denver Niobrara: a farm-in opportunity for horizontal oil and gas wells targeting the Niobrara shale formation in a well-studied area of the Denver Julesburg Basin.

· DT Ultravert: a re-fracking and parent well protection technology with 20 patents pending in the United States and internationally. Highlands is advancing commercial conversations with a range of oil and gas operators to create revenue-sharing opportunities for DT Ultravert applications.

· Helios Two: a 105,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.