ZOE.L Regulatory News (ZOE)

This announcement contains inside information

19 October 2016

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

DT Ultravert Testing Update

Highlands Natural Resources, the London-listed natural resources company, is pleased to announce that it has concluded its preliminary analysis on data collected over a three week period following the completion of recent testing campaigns for DT Ultravert in the Piceance Basin, Colorado. This analysis suggests a successful initial demonstration of DT Ultravert as a solution for both protecting existing wells (known as 'parent wells') from damage caused by a new threat that has emerged to the industry, known as 'bashing', and enhancing well productivity by facilitating the re-fracking of horizontal wells. Testing of DT Ultravert commenced in September 2016 in cooperation with Laramie Energy ('Laramie'), Schlumberger Limited ('Schlumberger') and Calfrac Well Services Corp. ('Calfrac').

Highlights:

· No reduction observed in the original decline curve in either parent well, indicating that 'bashing' has been successfully avoided

· Desired pressure build-up achieved in both parent wells treated with DT Ultravert, a critical element of a successful diversion process

· Overall, the technical results suggest a successful initial demonstration of DT Ultravert in parent well protection and child well enhancement applications

VP of Engineering Domingo Mata said, "The positive initial results from our first test of DT Ultravert represent an important milestone for Highlands and all stakeholders in this technology. These initial tests answer three key questions: Firstly, that DT Ultravert can achieve significant and sustained down-hole pressure that effectively diverts fluids from depleted areas of the reservoir. Secondly, that DT Ultravert can prevent well bashing. Thirdly, that the application of DT Ultravert can enhance the stimulation of child wells and improve production performance. We believe that the success of this testing and the preliminary conclusions outlined here will boost our ongoing commercialisation efforts for DT Ultravert. We look forward to updating the market with additional data and commercial progress related to DT Ultravert in due course."

Testing Initiatives

On 22 September, 2016, Highlands completed its first test of DT Ultravert in two natural gas wells operated by Laramie Energy ("Laramie") in the Piceance Basin, Colorado. Nitrogen was injected into two parent wells prior to and during fracking operations in neighbouring child wells. Highlands employed a proprietary and patent-pending injection methodology in this trial. Wells in this basin are commonly drilled in close proximity (as dense as one well per ten acres), and bashing has become a concern in the infilling of leased acreage.

Highlands has received and analysed data from Laramie covering a period of approximately three weeks from injection. After assessing the data, Highlands believes that these initial tests were successful, demonstrating parent well protection and productivity enhancement in child wells. In addition, the data obtained also provides essential information for future calibration, optimisation and commercialisation of the DT Ultravert technology.

Initial Conclusions

Building Pressure to Achieve Diversion

The use of DT Ultravert achieved the desired pressure build-up in both parent wells treated before and during fracking operations in nearby child wells. Specifically, DT Ultravert achieved post-injection (overnight) pressure increase of 45% in one well over a five-day period. Sustained overnight pressure increase in the second well reached 47%. Peak pressures (during daytime nitrogen injection) reached more than 2,000 psi in both wells, an increase of 103% compared to the initial well pressure.

The Company believes that these initial results confirm the potential for DT Ultravert to achieve and sustain significant pressure uplift in previously fractured wells. Furthermore, elevated pressures remained even after injection operations ceased at nightfall each day. Boosted pressures enable fluid diversion, which is a critical component of both parent well protection and re-fracking applications for DT Ultravert.

Productivity Enhancement in Child Wells

After 24 days of production, the two child wells showed daily gas production rates that are in line with Laramie's nearby wells completed in "virgin" undepleted rock. These results suggests that DT Ultravert treatment in parent wells succeeded in forcing child well fracture fluids to flow away from depleted regions of the parent wells and instead to fracture new rock with greater reserves and production potential. Highlands believes that this outcome has important positive implications for the economics of child wells drilled in conjunction with parent wells protected by DT Ultravert.

Preventing Bashing on Parent Wells

Both parent wells treated with DT Ultravert sustained no loss in production or "bashing" from child well fracking. This result compares favourably to nearby wells where bashing was observed as a result of offset child well fracturing operations. As mentioned before, both protected parent wells demonstrated natural gas production rates returning to the original decline trajectories, indicating that DT Ultravert successfully protected the parent wells, a primary objective of the technology test.

In addition, both parent wells protected by DT Ultravert resumed pipeline sales after only five days, demonstrating that the injection of nitrogen did not cause a long-term disturbance in the gathering and sales operations of produced gas.

**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:

· 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 100,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.

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