ZOE.L Regulatory News (ZOE)

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

First Helios Two Well Drilled and Completed in Montana

Highlands Natural Resources, the London-listed natural resources company, is pleased to announce that the Helios 5-52 16-22 well, which commenced drilling on 18 September 2016 at the Company's natural gas and helium prospect targeting the Muddy Formation in southeast Montana, has been completed.

Summary

· First well at Helios Two has been completed safely and on-schedule with encouraging initial data

· Highlands is now preparing surface facilities for commencement of the de-watering process to test the Muddy Formation for natural gas and helium

· Identified potential secondary resource horizon in the overlying Eagle Formation, where Highlands plans to drill a second evaluation well to assess commercial potential

Highlands CEO Robert B. Price said, "I am very proud of the Highlands team for mobilising and completing the first Helios Two well in a very short period of time. Our team is pleased by initial data coming out of the Muddy Formation, and we look forward to commencing the de-watering process to test this potential natural gas and helium resource. We are also intrigued by the results of our air-drilling effort in the Eagle Formation, and believe this warrants further evaluation through a second vertical well with a completion tailor-made to protect the clay-rich formation. We look forward to providing further updates to the market as appropriate."

Further Information

Muddy Formation

Highlands has drilled and completed the first well (Helios 5-52 16-22) safely and on-schedule at the Helios Two Project. The well commenced drilling on 18 September 2016 and reached 'terminal depth' of 5,300 feet on 26 September 2016. During the drilling process, Highlands completed a suite of modern well logs. At a depth of approximately 4,570 feet, logs indicate a 35-foot thick sandstone with characteristics consistent with a viable de-watering candidate. Specifically, gama, porosity and resistivity logs are consistent with a sandy reservoir saturated with gas-cut brine. While the presence of gas cannot be confirmed by well logs, this log signature matches the reservoir characteristic targeted by Highlands in the Muddy Formation.

Highlands will now complete the installation of surface facilities necessary to commence de-watering. Absent of unforeseen logistical or weather-related delays, Highlands expects to initiate dewatering in October 2016 and will release results of this process as soon as meaningful data is available, including an analysis of any produced gasses.

Eagle Formation

Prior to drilling Helios 5-52 16-22, Highlands' geology team identified a potential secondary resource horizon called the Eagle Formation, which is located approximately 1,500 feet above the Muddy Formation. Previous wells have consistently encountered shows of natural gas in the Eagle Formation, but no wells have yet been produced economically from this formation in the vicinity of the Helios Two project. Highlands hypothesised that the presence of clays in the formation, which swell in the presence of water and drilling mud, had historically blocked production in older wells, which were typically drilled using water-based drilling mud. As a result, Highlands chose to drill the Eagle Formation "on air" (without drilling mud) in order to prevent any damage or "mudding up" of the formation.

Highlands found that the Eagle formation did produce natural gas in sufficient quantities to achieve intermittent surface flares, although without a stimulation treatment the flow rate was "too small to measure" using flow testing equipment. Importantly, Highlands drilled through approximately 800 feet of the formation without encountering significant saturation of water.

Based on these findings, Highlands believes that the Eagle Formation could be a viable candidate for stimulation (also known as fracking) in order to improve flow rates. If Highlands can generate commercial quantities of gas from the stimulated Eagle Formation, the Company could potentially "co-mingle" or combine gas volumes produced from both the Eagle and the Muddy Formations in future wells, which may improve overall project economics.

Highlands intends to permit and drill a second well to specifically test the Eagle Formation with a customised stimulation in order to verify whether the prospect can be commercialised as part of the Helios Two project.

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 focused on the U.S.. 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

· Helios Two: a 100,000+ acre natural gas and helium prospect in SE Montana with drilling and assessment operations on-going

· 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