ZOE.L Regulatory News (ZOE)

6 July 2017

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

Execution of Third Party Financing Agreement for East Denver Project Drill Programme

Highlands, the London-listed natural resources company, is pleased to announce the execution of a joint development agreement (the "Agreement") with Raisa II, LLC, a leading US private oil and gas investment company ("Investor"), which will fund up to US$32.65 million in drilling costs for Highlands' drilling programme of up to 24 wells at its East Denver Niobrara shale oil and gas project in Colorado (the "East Denver Project"). This financing is in line with the Company's strategy to evaluate all funding options for the East Denver Project with a view to commence the drilling programme in the summer of 2017.

Highlights:

· Immediate cash payment to Highlands of US$776,000

· Designed as long-term financing partnership with Investor funding 28.75% of the first 10 wells and 25% of all subsequent wells at East Denver

o Equates to total funding of up to US$32.65 million based on development programme of up to 24 wells assuming US$5 million per well

· Highlands receives a pro rata "carried interest" of 15% on Investor's capital for the first 10 wells

o Investor funds 28.75% of costs in exchange for a 25% working interest

o Highlands keeps the remaining 75% interest in the wells

o Additional permitting is progressing with a view towards enlarging the drilling potential in the near term

· Transaction may be a catalyst for additional potential financings, where negotiations are well-advanced

· Highlands' operational team has prepared the East Denver Project for drilling activity this summer

Highlands' Chairman and CEO Robert Price said, "This is a major financing milestone for Highlands. In light of East Denver's compelling economic and operational opportunity, Highlands is pleased to move the project forward.

"We look forward to partnering with a highly experienced investor in the US energy industry, specifically focused in the development of shale resource plays such as the East Denver Project. In particular, our Investor has a track record of investment in Colorado and specifically the Niobrara formation of the Denver Julesburg Basin. We view the Agreement as a recognition of the value potential of our project, which is now 'drill bit ready' from an operational standpoint. Moreover, our Investor will not only contribute financially but also technically, as we focus on creating value and achieving near-term cash flows while developing the project in an efficient, safe and environmentally responsible manner. The Directors look forward to building a long-term and mutually beneficial relationship as we progress this exciting project together.

"Moving ahead, Highlands maintains significant funding flexibility and we are in advanced negotiations with additional US based oil and gas investment institutions. We believe that today's Agreement positions Highlands for a favorable second half of 2017, and I look forward to updating the market with additional milestones in due course. Highlands views the Agreement as a significant step forward in the development of the East Denver Project, and a further validation of the significant value potential of the Project by some of the most experienced investment professionals in the US energy industry."

Highlands will assign a 25% working interest in the East Denver project to the Investor, including a 25% assignment of the section 15 lease and a 25% interest in any wellbore interests earned under the East Denver farm-in agreements. Further, the Agreement includes an Area of Mutual Interest (AMI) surrounding and including the current East Denver Project lands, wherein the Investor will have the option to fund 25% of any future land acquisitions.

Consistent with Highlands' earlier farm-in agreements, the Company has agreed to commence drilling operations by no later than 1 September 2017 and to continue drilling with no more than 60 days passing between the release of a rig from one well to the commencement of drilling at a subsequent well. Highlands has also agreed to permit the maximum number of wells throughout the Project, to finalize the unitization and other typical proceedings currently in-process with the Colorado Oil and Gas Conservation Commission (COGCC) with an aim to drill 14 or more wells by the end of 2018. Additionally, the Agreement creates a joint technical committee for evaluation and decision making in regards to technical matters concerning the East Denver Project; Highlands is pleased to gain the technical insights offered by our Investor's experienced staff, who bring significant backgrounds in operations, geology, engineering and geophysics.

The combination of an immediate cash payment, pro rata carried interest and cost-sharing is a significant step towards fully funding the East Denver Project and Highlands is in advanced negotiations with other potential funding partners.

Looking ahead, the East Denver project is operationally advanced and ready to commence drilling. The first surface location has been built, and all permits and contractor relationships are in place for the first four wells. Additional permitting is progressing with a view towards enlarging the drilling potential of the East Denver Project in the near term.

THIS RELEASE CONTAINS INSIDE INFORMATION.

**ENDS**

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

Notes to Editors

Highlands (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 one patent granted and additional 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.