ZOE.L Regulatory News (ZOE)

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

Helios Two Drilling and Development Update

Highlands Natural Resources, the London-listed natural resources company, provides an update regarding the status of its two wells in southeast Montana, which are part of the Company's Helios Two prospect for natural gas and helium.

Eagle Well Update

Highlands drilled to a total depth of 3,047 feet on the second Helios Two well called Helios 5-52-16-32 ('Eagle Well'). The well was designed to test the Eagle Formation as a potential secondary horizon following compelling initial data from the first Helios Two well called Helios Well 5-52 16-22 ('Muddy Well').

The Highlands team was pleased to observe that the Eagle Well produced a continuous natural gas flare of approximately 3 to 6 feet in height at surface without stimulation or fracking, indicating a potentially significant natural gas resource. Disappointingly, after logging the Eagle Well with a standard logging tool used in open holes, the Company's contractor dropped the tool back into the hole. Despite several retrieval efforts made by the contractor, the logging tool remains unrecovered.

The Board, concerned by a risk of potential natural gas accumulations at surface during retrieval operations, decided to plug and abandon the well with the approval of Montana regulators. On 27 October, 2016 the contractor agreed to provide Highlands with a $75,000 credit on future operations and to bear the costs of plugging the well, which has now been completed.

A second well is now being planned with fracture stimulation treatments as originally intended for the plugged well, and Highlands will update the market with additional details and timing as plans mature.

Muddy Well Update

Following completion of water handling facilities, Highlands has commenced de-watering operations at the Muddy Well. The well is currently producing water at rates in line with Highlands' modeling, which is a positive indication that de-watering the Muddy Formation may be achieved. Highlands will update the market with additional production data and gas analyses as soon as practicable.

Chairman and CEO Robert Price said, "We prioritise the health, safety and environmental considerations of our operations above all else, which is why we elected to plug our Eagle well rather than risk even the smallest chance of a natural gas-related accident at the surface.

"Fortunately, the well's 'all-in' cost is relatively low in comparison to Highlands' strong balance sheet following the exercise of 30 million warrants, which brought £7.5 million into Highlands' accounts over the past several months. Highlands remains fully capitalised to carry out its various core projects including de-watering the Muddy Formation, accelerating the commercialisation of DT Ultravert, drilling a replacement Eagle Well, and developing our East Denver Niobrara prospect.

"Positively, we have taken an important step forward on the de-watering of our primary target, the Muddy Formation, and hope to achieve natural gas and helium production as a result of de-watering our initial Helios Two well. The continuous flare observed in the Eagle Well is a further indication of prospective resources under our 102,000+ acre position in southeast Montana."

This announcement 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:

· 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.