ZOE.L Regulatory News (ZOE)

19 December 2016

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

Extension of East Denver Farm-in Agreement with Renegade

Highlands, the London-listed natural resources company, announces an update in respect to its East Denver oil and gas project in Arapahoe County, Colorado, USA ('the Project').

Highlands has agreed an extension to the timelines set out in its farm-in agreement with Renegade Oil and Gas Company, LLC ('Renegade') which was announced in July 2016.

On 16 December 2016, Highlands announced that it had secured additional farm-in rights that have doubled the Project area, which is now comprised of six 640 acre parcels. Highlands farmed into three of those parcels from Renegade in July this year. The additional three parcels in the new farm in agreement announced on 16 December 2016 directly adjoin this acreage, providing Highlands with the opportunity to drill "extended lateral" horizontal wells of approximately 9,000 feet in lateral length in the Niobrara Shale on two-section spacing units.

In light of the new farm in agreement, Highlands has agreed with Renegade to extend the initial drilling timeline outlined in its original farm-in agreement, announced on 25 July 2016, so that it can refine its drill programme accordingly. Under the terms of the extended agreement, Highlands now has until 1 May 2017 to drill its first well. In exchange for this extension, Highlands has accelerated the second US$250,000 payment set out in the original farm in agreement with Renegade and made this second payment on 16 December 2016 upon signing of the extension. Additionally, Highlands has agreed to pay Renegade US$100,000 upon commencing drilling of the third well on the farm-in acreage. All other terms of the original farm in agreement with Renegade remain the same. The Board believes that these incremental costs to the Company are more than offset by the superior economics of extended lateral wells compared to single-section wells.

Extended lateral wells offer the potential for significantly improved economics compared to horizontal wells drilled on single-section units because well costs do not scale proportionately with expected increased production from longer laterals. The Company views its East Denver extended lateral wells as having robust and financeable economics at today's commodity pricing. Highlands has commissioned an independent Competent Persons Report on the Project and will provide this additional third party economics and engineering guidance in the near term.

As previously announced, this acreage borders on some of the most productive acreage in the Denver Julesburg Basin; nearby horizontal wells with optimized completion techniques produced between 50,000 to 100,000 barrels of oil in their first six months of production. This nearby production, combined with dozens of vertical well penetrations, should enable Highlands to significantly de-risk the East Denver project via data-driven extrapolation of the reservoir and expected well performance.

Highlands CEO Robert B Price said, "This extension, combined with our second farm-in announced on 16 December 2016, enables Highlands to accelerate our ongoing permitting, spacing application and financing processes. Furthermore, Highlands' land position now enables us to drill extended lateral wells in East Denver, which we believe will maximize the potential value of this asset.

"The Highlands team has carefully managed several parallel permitting, spacing, and fundraising processes in recent months to put the company in its current position whereby we believe we have the ideal timeline and rights to drill extended lateral wells with attractive economics at today's commodity pricing. The East Denver project has become a core focus of the Highlands team and, if successful, offers a near-term pathway to positive cash flows and profitability. As such, the East Denver project may be complimentary to our other ongoing efforts including the demonstration of DT Ultravert technology and development of Helios Two. With our land rights and timeline extension in place, Highlands will prioritise the funding and execution of East Denver in the New Year, and is already in discussions with a number of potential industry and financial partners."

**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 105,000+ acre helium and natural gas prospect in SE Montana with drilling and assessment operations ongoing.

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