ZOL.L Regulatory News (ZOL)

Embargoed: 7:00a.m. 23 May 2014

Zoltav Resources Inc.

("Zoltav" or the "Company")

Proposed Acquisition, Subscription, Restoration of Trading on AIM and

Notice of Annual General Meeting

On 16 December 2013 Zoltav, the CIS-focused oil and gas company, announced that it had entered into a conditional agreement with Bandbear Limited ("Bandbear") to acquire the entire issued share capital of Royal Atlantic Energy (Cyprus) Limited ("Royal Atlantic Energy") for a total consideration of US$180 million (the "Acquisition"). The consideration agreed included (1) the issue of 26,562,500 new Ordinary Shares to Bandbear at an effective price of US$1.60 (100 pence) per share (equivalent to US$42.5 million); (2) the payment of US$77.5 million in cash; and (3) the assumption of a new debt facility, draw down in an amount of approximately US$60 million. The Company and Bandbear agreed as a term of the Acquisition that Diall Alliance, Royal Atlantic Energy's wholly owned operating subsidiary, should be allowed to refinance those intercompany loans due from it to Bandbear from the proceeds of the new debt facility. Accordingly, on 4 April 2014, Diall Alliance put in place the Sberbank Facility from which US$59.84 million has been drawn down to date all of which has been used to reduce the outstanding intercompany loans. Zoltav will assume this facility on completion of the Acquisition. On 22 May 2014 the Company and Bandbear agreed to vary the terms of the Acquisition such that in addition to assuming the Sberbank Facility, Bandbear will be issued the Consideration Shares (equivalent to US$61.22 million) and paid US$58.94 million in cash giving a total consideration of US$180 million).

The Company is pleased to announce that, having now published an AIM admission document ("Admission Document"), it is seeking Shareholder approval to proceed with the Acquisition, a Subscription to raise US$65.95 million in cash (the "Subscription") and re-admission of the Enlarged Group to trading on AIM.

Highlights

· Acquisition delivers 100% ownership of the Bortovoy Licence in the Saratov Oblast of the Russian Federation - 3,215 square kilometre area containing a number of productive gas fields, a processing plant and significant exploration prospectivity

· Bortovoy Licence contains Proven and Probable Reserves of 137.4 million barrels of oil equivalent (mmboe) and produced 2.8 mmboe in 2013

· Considerable upside potential from additional prospects within the Bortovoy Licence area and scope for increased production through the construction of additional facilities

· Conditional agreement with ARA Capital, the Company's largest shareholder, Crediton Invest and Matteson Overseas to subscribe for US$45.615 million, US$10.166 million and US$10.166 million respectively of new Ordinary Shares at US$1.60 (100 pence) per share to fund the payment of the cash consideration of the Acquisition (US$58.94 million) and the balance to provide working capital

· The Company's ordinary shares will be restored to trading on AIM today at 8:00 a.m.

Royal Atlantic Energy

Diall Alliance holds the Bortovoy Licence, a 3,215 km2 licence containing a number of gas fields in the West and East of the Bortovoy Licence area and a gas processing plant located in the West of the Bortovoy Licence area. The Bortovoy Licence, located in the Saratov Oblast of the Russian Federation, has proven plus probable reserves of 21.2 billion cubic metres (approximately 0.75 trillion cubic feet) of gas and 3.9 million barrels of oil and condensate (a total of 137.4 mmboe (based on a gas conversion factor of 1,000 cubic metres = 158.8 barrels)) and in 2013 produced 392.6 million cubic metres (approximately 13.9 billion cubic feet) of gas and 0.3 million barrels of condensate and oil (a total of 2.8 million barrels of oil equivalent). Zoltav believes there is considerable upside potential from a number of prospects within the Bortovoy Licence area and scope for increased production through the construction of additional facilities. The Bortovoy Licence came into effect upon its registration by the Ministry for Natural Resources of the Russian Federation on 13 January 2000, and is valid until 12 January 2025 (inclusive).

The near term strategy in respect of the Bortovoy Licence is to utilise the cash flows from existing operations to fund the further development of the Karpenskoye field and the tie in of the Zhdanovskoye field to the Western Plant. This includes the drilling of Well 100 on the Karpenskoye field which is expected to spud this month and the hook-up of the Zhdanovskoye field which is expected to be operational by the end of 2014 ensuring that the Western Plant is operating at full capacity of approximately 1.4 million cubic metres per day (49.4 million cubic feet per day) by 2015. In addition the Directors intend to undertake further capex on the Western Plant to improve its performance and reduce operating costs. It is currently planned to drill a further well on the Zhdanovskoye field in mid-2015, although this will be finally determined after studying the Zhdanovskoye well performance.

It is the Director's intention to develop an exploration plan during the course of 2014 which will allow a feasibility study to be undertaken during the course of 2015 with a view to building a second gas plant in the East of the Bortovoy Licence.

Consideration

The total consideration of US$180 million is to be satisfied through the issue of 38,263,095 new Ordinary Shares at an effective price of US$1.60 (100 pence) per share (equivalent to US$61.22 million); the payment of US$58.94 million in cash and the assumption of US$59.84 million of bank debt.

Subscription

In order to satisfy the cash consideration payable to Bandbear, the Company has entered into Subscription Agreements with ARA Capital, Crediton Invest and Matteson overseas pursuant to which these parties have agreed to subscribe in aggregate for $65,946,418 of Ordinary Shares at a price of US$1.60 (100 pence) per share.

The Subscription is conditional upon completion of the Acquisition.

Annual General Meeting

An Admission Document giving details of the Proposals and incorporating a notice convening the Annual General Meeting will be posted to Shareholders today and will be available on the Company's website www.zoltav.com with effect from 7:00 a.m. today.

Consequently, the Company's ordinary shares will be restored to trading on AIM today at 8:00 a.m.

The Annual General Meeting will be held at Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey at 10.30 a.m. on 17 June 2014.

The Proposals are conditional, inter alia, on the passing of the Resolutions and on Admission. It is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence on AIM on 18 June 2014.

Symon Drake-Brockman, Executive Chairman, said:

"The Acquisition of Royal Atlantic Energy will deliver Zoltav's first producing hydrocarbon assets. The Bortovoy Licence is attractive not only because of its existing gas output and favourable location but also because of the significant upside that the construction of additional processing facilities would create and the opportunities to exploit numerous undeveloped fields within the Licence.

"We welcome the financial support for the Acquisition of ARA Capital, the Company's largest shareholder, and that of two new investors through participation in the Subscription as we continue to pursue the Company's ambition of building a sizeable CIS-focused upstream business."

Expected timetable of principal events

Note: the above dates could change and the revised times and dates would be notified to Shareholders by means of an announcement through a Regulatory Information Service

Capitalised terms used but not defined in this announcement have the same meaning as given to them in the Admission Document.

Contacts:

Proposed Acquisition of Royal Atlantic Energy (Cyprus) Limited and certain associated companies

Subscription for 41,216,511 Ordinary Shares at US$1.60 per

Ordinary Share to raise US$65.95 million

Admission to trading on AIM

Notice of Annual General Meeting

Introduction

The Company announced on 16 December 2013 that it had entered into a conditional agreement with Bandbear to acquire the entire issued share capital of Royal Atlantic Energy for a total consideration of US$180 million. The consideration agreed included (1) the issue of 26,562,500 new Ordinary Shares to Bandbear at an effective price of US$1.60 (100 pence) per share (equivalent to US$42.5 million); (2) the payment of US$77.5 million in cash; and (3) the assumption of a new debt facility, drawn down in an amount of approximately US$60 million. The Company and Bandbear agreed as a term of the Acquisition that Diall Alliance, Royal Atlantic Energy's wholly owned operating subsidiary, should be allowed to refinance those intercompany loans due from it to Bandbear from the proceeds of the new debt facility. Accordingly, on 4 April 2014, Diall Alliance put in place the Sberbank Facility from which US$59.84 million has been drawn down to date all of which has been used to reduce the outstanding intercompany loans. Zoltav will assume this facility on completion of the Acquisition. On 22 May 2014 the Company and Bandbear agreed to vary the terms of the Acquisition such that in addition to assuming the Sberbank Facility, Bandbear will be issued the Consideration Shares (equivalent to US$61.22 million) and paid US$58.94 million in cash giving a total consideration of US$180 million. Further details of the terms of the Acquisition and the Subscription are set out below under the headings "Structure of the Acquisition" and "Details of the Subscription, the Sberbank Facility and use of proceeds", respectively.

Diall Alliance holds the Bortovoy Licence, a 3,215 km2 licence containing a number of gas fields in the West and East of the Bortovoy Licence area and a gas processing plant located in the West of the Bortovoy Licence area. The Bortovoy Licence, located in the Saratov Oblast of the Russian Federation, has proven plus probable reserves of 21.2 bcm (approximately 0.75 tcf) of gas and 3.9 mm bbls of oil and condensate (a total of 137.4 mmboe (based on a gas conversion factor of 1,000 m3 = 158.8 bbls)) and in 2013 produced 392.6 mm m3 (approximately 13.9 bcf) of gas and 0.3 mm bbls of condensate and oil in 2013 (a total of 2.8 mmboe). Zoltav believes there is considerable upside potential from a number of prospects within the Bortovoy Licence area and scope for increased production through the construction of additional facilities. The Bortovoy Licence came into effect upon its registration by the Ministry for Natural Resources of the Russian Federation on 13 January 2000, and is valid until 12 January 2025 (inclusive). Further information on Royal Atlantic Energy is set out below.

In order to satisfy the cash consideration payable to Bandbear and to provide the Enlarged Group with an additional US$7 million of working capital, the Company has entered into the Subscription Agreements with ARA Capital, the Company's largest shareholder, Crediton Invest and Matteson Overseas, pursuant to which these parties have agreed to subscribe for US$45.615 million, US$10.166 million and US$10.166 million, respectively, for Ordinary Shares at the Subscription Price of US$1.60 per share (equivalent to £1.00 at the agreed exchange rate in the Subscription Agreements).

The Acquisition will result in a fundamental change in the business of the Company due to the size of the Acquisition relative to the current size of the Company and will consequently constitute a reverse takeover under the AIM Rules. As a result, Shareholder approval is being sought for the Proposals at the Annual General Meeting. Irrevocable undertakings to vote in favour of the Resolutions (excluding the Subscription Resolution and the Acquisition Resolution) have been obtained from certain existing Shareholders and Directors in respect of their respective beneficial shareholdings, amounting to, in aggregate, 51,860,626 Ordinary Shares, representing 84.0 per cent. of the Existing Share Capital.

Due to its shareholding in Zoltav, Bandbear is a 'related party' as defined by the AIM Rules for Companies. Further, the Acquisition is a related party transaction for the purposes of AIM Rule 13. The Directors consider, having consulted with SCC, the Company's Nominated Adviser, that the terms of the Acquisition are fair and reasonable insofar as the Company's Shareholders are concerned. Bandbear has elected to abstain from voting on the Acquisition Resolution.

Due to its shareholding in Zoltav, ARA Capital is a 'related party' as defined by the AIM Rules for Companies. Further, the ARA Subscription is a related party transaction for the purposes of AIM Rule 13. The Directors consider, having consulted with SCC, the Company's Nominated Adviser, that the terms of the ARA Subscription are fair and reasonable insofar as the Company's Shareholders are concerned. ARA Capital has elected to abstain from voting on the Subscription Resolution.

The Proposals are conditional, inter alia, on the passing of the Resolutions and on Admission. It is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence on AIM on 18 June 2014.

Information on Diall Alliance

Introduction and background

Zoltav is acquiring Royal Atlantic Energy and its operating subsidiary Diall Alliance. Diall Alliance is an upstream gas and oil exploration, development and production company in the Saratov region of South Western Russia. In June 2006, Vostok Energy (a UK incorporated company now in liquidation) acquired Diall Alliance, the holder of the Bortovoy Licence, via the acquisition of Diall Alliance's parent company, Royal Atlantic Energy, from a group of companies represented by a significant shareholder, Sergey Alafinov. The Bortovoy Licence area is the principal asset of Diall Alliance, with an area covering over 3,215km2 along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS.

At the time of Vostok Energy's acquisition of Diall Alliance, the Bortovoy Licence area had more than 130 previously drilled wells, mainly drilled during the Soviet period. Historically, production efforts had focused on oil rather than gas because oil production was easier and less capital intensive than processing gas. In addition, the regulated price for domestic gas in Russia was relatively low. However, the increasing demand in Russia for the domestic consumption and export of gas, together with the Russian Government's stated commitment to liberalise industrial gas prices in Russia, led Diall Alliance to conclude that the development of the gas reserves on the Bortovoy Licence area would be more profitable than maintaining a narrow commercial focus on oil production.

From mid-2008 to the end of 2010, Diall Alliance was in a refurbishment and build-out phase as it shifted its primary focus from oil to the production of gas with associated oil and gas condensate production, as explained in more detail below. Start-up of the Western Plant commenced in November 2010. Following an initial period of trial production and sales, Diall Alliance has been producing gas and condensate from the Western Fields commercially since January 2011. The Western Plant has been operating at close to full capacity from September 2011, achieving production at 72 per cent. of its operating capacity on average during 2011. The implementation of better operating procedures based on an improved understanding of the operating parametres of the Western Plant resulting in it operating at 95 per cent. of its operating capacity on average during 2012. Production dropped in 2013 to 84 per cent., due to a lack of capital available to invest in field development and modifications to the Western Plant.

The Directors intend to ensure that the Western Plant operates at full capacity. To achieve this Diall Alliance will drill a further production well, Karpenskoye 100, on the Karpenskoye field and to hook up three existing wells on the Zhdanovskoye field to the Western Plant. The Zhdanovskoye hook-up is expected to be completed by the end of 2014 ensuring that the Western Plant is operating at full capacity of approximately 1.4 mm m3/d (49.4 mmcfd) by 2015. It is currently planned to drill a further well on the Zhdanovskoye field in mid-2015, although this will be finally determined after studying the Zhdanovskoye well performance.

DeGolyer & MacNaughton have identified 21.2 bcm (0.75 tcf) of Proven plus Probable Reserves and a further 26.2 bcm (0.9 tcf) of Prospective Resources in the Bortovoy Licence. The Directors intend to formulate a plan to further appraise and explore these reserves and resources with the intention of monetising them.

Since Bandbear completed its purchase of Royal Atlantic Energy, Zoltav's team has been reviewing the previous work undertaken by Vostok Energy's (Diall Alliance's previous parent company) exploration team over the Eastern Fields of the Bortovoy Licence. It is the Directors' intention to develop an exploration plan during the course of 2014 which will allow a feasibility study to be undertaken during the course of 2015 with a view to building a second gas plant in the East of the Bortovoy Licence.

Summary historical financial information on Royal Atlantic Energy

Set out below is a summary of the combined audited results of Diall Alliance and Royal Atlantic Energy for the years ended 31 December 2011, 31 December 2012 and 31 December 2013.

The Bortovoy Licence

Location

Diall Alliance holds the Bortovoy Licence, which is located on the northern margin of the Pre-Caspian basin, which hosts a number of other well-known large gas and oil fields. The area is an established oil region with more than 100 issued exploration and production licences. The licence area is commercially divided into two distinct areas: the more developed Western Fields, on which the Western Plant is located and commercial production has already commenced; and the Eastern Fields, which the Enlarged Group intends to develop further.

The Bortovoy Licence area is bisected by Gazprom's CAC trunkline, which has enabled Diall Alliance to tie in its gas processing plant to Russia's gas distribution network via a 22km pipeline. Diall Alliance's gas is sold to Gazprom at the tie-in point to the Gazprom CAC trunkline. Oil and condensate produced by Diall Alliance is sold at a loading facility at the Western Plant.

History and prospectivity

The land covered by the Bortovoy Licence area was owned during Soviet times by the Russian Government and extensive geological exploration work aimed at finding large deposits of hydrocarbons was conducted across the entire region starting in the 1930s. However, after the first gas discoveries in the early 1940s, the Saratov region became increasingly overshadowed by much larger hydrocarbon finds in neighbouring regions. With primary exploration focus shifting towards oil in Western Siberia, the Saratov region saw very little activity from the 1970s to recent times. Nonetheless, as a result of the earlier exploration work, the Bortovoy Licence area had more than 130 legacy wells which had been drilled over the past 40 years and more than 1,000 km of 2D seismic geophysical data when Vostok Energy acquired Diall Alliance in 2006.

The acreage that now forms the Bortovoy Licence area was won in a government auction by Diall Alliance in 1999. Diall Alliance proceeded with the exploration and production of oil and condensate with commercial production of oil and condensate commencing in 2003. At the time, the known and potential gas reserves in the Bortovoy Licence area were perceived to represent limited commercial value due to the level of domestic gas prices in Russia and the need for capital intensive processing facilities. As a result, these gas reserves were not developed further by Diall Alliance prior to its acquisition by the Enlarged Group.

At the time of its acquisition by Vostok Energy in June 2006, Diall Alliance was producing on average 50 bbl/day of oil and condensate. In mid-2007, in addition to obtaining encouraging results from well re-entries and the re-processing and interpretation of seismic data, Vostok Energy conducted a trial production of oil at three Western Fields (Karpenskoye, Zhdanovskoye and Mokrousovskoye) in order to ascertain the long-term productivity of the existing wells. During this trial period, Vostok Energy was able to achieve average liquid production rates of over 300 bbl/d. In conjunction with this oil and condensate production, however, a significant quantity of the associated gas was flared, as Vostok Energy did not have the necessary facilities to process this gas for transportation and sale. The increasing demand in Russia for gas, together with the Russian Government's stated commitment to liberalise industrial gas prices in Russia, which resulted in a continued increase in Russian domestic gas prices, led Vostok Energy to shift its focus from oil production to gas development and production. Vostok Energy acquired a gas processing plant from Chevron in 2007, which was refurbished, re-engineered, shipped to Saratov and re-assembled on the Karpenskoye Field. In mid-2008, Vostok Energydecided to suspend oil and condensate production in order to avoid the adverse economic and environmental consequences of flaring the gas while it established the necessary facilities and infrastructure to produce gas on a commercial basis. Start-up of the Western Plant commenced in November 2010 and, following an initial period of trial production and sales, Diall Alliance began producing gas and condensate from the Western Fields commercially in January 2011 and also recommenced the production and sale of oil in May 2011.

In 2010, when project documentation was finalised and the construction of the Western Plant was close to completion, Gazprom changed the gas quality requirements for gas injected into the Gazprom pipeline system. These changes were primarily related to the dew point level. In order to alleviate the ambient temperature issue, reserve cooling units were installed on the Western Plant for use when the ambient temperature approached and exceeded 25°C. Notwithstanding, there have been gas quality issues in periods of high ambient temperature.

Reserves and Resources

Reserves and Resources of the Bortovoy Licence

Source: DeGolyer & MacNaughton

Notes:

1. Probable and possible reserves have not been risk adjusted to make them comparable to proved reserves.

2. Diall Alliance has an ownership interest of 100 per cent. in the evaluated fields; therefore, net reserves equal gross reserves.

Source: DeGolyer & MacNaughton

Notes:

1. Application of any risk factor to contingent resources quantities does not equate contingent resources with reserves, no risk factor has therefore been included.

2. There is no certainty that it will be commercially viable to produce any portion of the contingent resources evaluated herein.

3. Diall Alliance has an ownership interest of 100 percent in the Bortovoy licence; therefore, net contingent resources equal gross contingent resources.

4. All contingent resources in the Admission Document have an economic status of Marginal.

Source: DeGolyer & MacNaughton

Notes:

1. Low, best, high, and mean estimates follow the PRMS guidelines for prospective resources.

2. Low, best, high, and mean estimates in this table are P90, P50, P10, and mean respectively.

3. Pg is defined as the probability of discovering reservoirs which flow petroleum at a measurable rate.

4. Pg has been rounded for presentation purposes. Multiplication using this presented Pg may yield imprecise results. Dividing the Pg-adjusted mean estimate by the mean estimate yields the precise Pg.

5. Application of any geological and economic chance factor does not equate prospective resources to contingent resources or reserves, no risk factor has therefore been included.

6. Recovery efficiency is applied to prospective resources in this table.

7. Arithmetic summation of probabilistic estimates produces invalid results except for the mean estimate.

Arithmetic summation of probabilistic estimates is presented in this table in compliance with PRMS guidelines.

8. Summations may vary from those shown here due to rounding.

9. There is no certainty that any portion of the prospective resources estimated herein will be discovered.

If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources evaluated.

10. The range in Pmean for the statistical aggregate Pg-adjusted mean estimate for liquids is 0.04 to 0.06.

11. The range in Pmean for the statistical aggregate Pg-adjusted mean estimate for gas is 0.07 to 0.10.

The Western Fields

There are four established gas and oil fields in the Western Fields: the Krasnokutskoye field; the Zhdanovskoye field; the Karpenskoye field; and the Mokrousovskoye field.

The Krasnokutskoye field

The Krasnokutskoye gas field is located in the north-west area of the shelf edge of the North Caspian Basin and it is at the westernmost end of the Bortovoy licence.

The Krasnokutskoye field was discovered in 1973 by well 41 drilled in the north-eastern part of the Krasnokutsky prospect. Well 41 tested gas at the absolute open flow rate of 141.9 mm m3/d) and water at 21.3 m3/d during the commingled test in the intervals of 1,570.0-1,579.0 metres and 1,581.0-1,584.0 metres.

The Krasnokutskoye field is currently not in production. There are three gas reservoirs on the field, K-II, K-III, and D3tm-ps. There is a defined development plan for two gas reservoirs, K-II and K-III.

These reservoirs will be developed as a single production object.

Source: DeGolyer & MacNaughton

The Zhdanovskoye field

The Zhdanovskoye field is located in the western part of the Bortovoy Licence approximately 18km east-northeast of the Krasnokutskoye field.

From the viewpoint of regional tectonics, Zhdanovskoye is located on the Saratovsky exterior of the shelf-edge in the North Caspian Basin and is associated with a local uplift of the Moskovian-Lower Permian marginal (barrier) reef.

The Zhdanovskoye field is currently not in production. There are two reservoirs on the field (the K-I and K-II) that will be developed as two separate production targets according to the current development plan.

The field is currently being hooked-up to the Western Plant and is expected to be operational in early 2015.

Source: DeGolyer & MacNaughton

The Karpenskoye field

The Karpenskoye field is approximately 15km east-northeast of the Zhdanovskoye field.

The Karpenskoye field was discovered in 1972 by well 13, which tested gas at the rate of 11.9 mm3/d from the interval of 1,660 to 1,680 metres and oil at the rate of 35.9 bbl/d. There are 38 wells drilled in the field, out of which 15 are abandoned.

There are four accumulations of hydrocarbons identified in the field within the Lower Permian Artinskian carbonates (К1, К2-1, К2-2, and К3): a gas and condensate accumulation with oil rim in the К1, a gas and condensate accumulation in the К2-2, and oil accumulations in the К2-1 and the К3. All the productive zones are porous-cavernous-fractured reservoirs.

The principal K1 reservoir is an elongated four-way closure with a trapping fault on the southern flank. The gas cap reaches a height above the gas/oil contact (GOC) of 45 metres with a maximum net effective thickness of nearly 23 metres, while the oil rim only attains a maximum net effective thickness of 4 metres. The gas accumulation was penetrated by 12 wells, out of which 11 wells are producing. The oil rim was penetrated by seven wells, out of which four wells are producing.

The Karpenskoye field has been in production since 2010. There are three oil development objects in the field, K1, K2-1, and K3, and two gas-condensate development objects, K1GC and K2-2. All of the reservoirs are currently on production except for the K3 reservoir.

The field is currently producing from five oil wells and seven gas-condensate wells under natural depletion. The average field production rate in January 2014 was 590 barrels per day (bbl/d) of oil and condensate and 1.2 mm m3/d (41.1 mmcfd) of gas. Proved recovery factor in the K1 oil rim was estimated to be 17.8 percent based on the performance of the currently producing wells.

Average daily well yields from Karpenskoe field are currently declining, and as a result, the volume of production in 2013 decreased by 11% for natural gas and condensate, and by 20% for crude oil. In addition to lower well yields, Diall Alliance has faced higher content of water in hydrocarbons (above 90% for crude oil in late 2013), which required the construction of an additional water removal unit at the Western Plant. The declining volumes and increased water cut are considered to be as a result of natural field decline. The decline in volumes resulted in higher costs per unit of production in 2013 (US$61 per mcm of gas equivalent) as compared to 2012 (US$ 53 per mcm of gas equivalent).

Source: DeGolyer & MacNaughton

East Karpenskoye field

The field is located 10km east-northeast of the Karpenskoye field along the trend of the Lower Permian shelf edge. Several wells have been drilled in the minor domes of the Mokrousovskaya, Dolinnaya, and Karpenskaya areas.

The East Karpenskoye field has five wells with shows of hydrocarbons. Wells 1MK, 2MK, 3MK, 46DL, and 37KR are gas saturated, and wells 36KR and 38KR are wet. All wells have been abandoned.

The field has one gas reservoir, the Lower Permian Filippovsky (P1fl) carbonate.

Source: DeGolyer & MacNaughton

The Mokrousovskoye field

The Mokrousovskoye field is located approximately 20km east-northeast of the East Karpenskoye field. The field is along the trend of the Lower Permian shelf edge of the North Caspian Basin. It is a fault-bounded, elongated anticline, complicated by two domes divided by a small trough. Gas reservoirs are found within Lower Permian Filippov carbonates.

The Mokrousovskoye field was discovered in 1974 by well 48, which tested an insignificant gas show. Productivity was confirmed by the drilling of exploration wells 82, 85, and 88, which tested commercial gas rates. There were 13 wells in total drilled in the field. All wells have been abandoned, except for wells 82, 85, and 88, which are suspended.

The Mokrousovskoye field is currently not in production.

Source: DeGolyer & MacNaughton

The Directors believe that the existing Western Fields should provide sufficient gas to maintain operations at the Western Plant at full capacity until 2022.

The Eastern Fields

There are five gas and oil fields in the Eastern Fields, as illustrated by the map in Figure 3 above: the Pavlovskoye field, the Kochkurovskoye field, the West Lipovskoye field, the Lipovskoye field, and the Nepryakhinskaya field. The Eastern Fields are yet to be developed.

The Pavlovskoye field

The Pavlovskoye field is located approximately 80km east-northeast of the Mokrousovskoye field along the trend of the Lower Permian shelf edge of the North Caspian Basin.

Structurally, Pavlovskoye is an elongated anticlinal feature 12km by 3km in size and approximately 100 metres of vertical closure, complicated by two dome-like highs, 6.5km by 2.2km and 3.7 by 2.3km with vertical closures of 35 metres and 47 metres, respectively.

Commercial gas in Pavlovskoye was identified in the Filippovsky-Upper Artinskian and Lower Artinskian-Sakmarian reservoirs of the Lower Permian. The Filippovsky-Upper Artinskian (P1fl) reservoir is composed of interbedded dolomites and anhydrites, and the Lower Artinskian-Sakmarian (P1ar) reservoir consists of massive secondary dolomites. The two are capped by Kungurian salt and are hydraulically connected.

In all, there are 11 wells in the field, 9 of which penetrated the Lower Permian, while well 25 penetrated Lower Carboniferous, and well 18, Middle Devonian sediments. As of January 1, 2011, seven wells were suspended, three wells had been abandoned for geological reasons, and one well abandoned because of a mechanical failure.

The Pavlovskoye field is currently not in production.

Source: DeGolyer & MacNaughton

The Kochkurovskoye field

The Kochkurovskoye field is located approximately 22km east-northeast of the Pavlovskoye field along the trend of the Lower Permian shelf edge of the North Caspian Basin. The Kochkurovskoye dome was identified in 1984 as a result of reinterpreting 2-D seismic shot in 1974-1979. The discovery was made in 2008 when the appraisal/exploration well 1 Kochkurovskaya tested commercial flows of hydrocarbons from the Lower Permian on the top of the East Dome of the Kochkurovskaya anticline. To date, this is the only well in the field that penetrates oil and gas accumulations. Upon completion and testing, this well flow tested gas from a Lower Permian reservoir interval at rates of up to 0.2 mm m3/d (0.7 mmcfd), and low gravity oil/condensate at rates of up to 190 bpd with gas of up to 0.1 mm m3/d (0.3 mmcfd) per day from a stratigraphically higher Lower Permian reservoir interval.

Source: DeGolyer & MacNaughton

The West Lipovskoye field

The West Lipovskoye field is located approximately 22km East of the Kochkurovskoye field along the trend of the Lower Permian shelf edge of the North Caspian Basin. The field's structure, based on 3-D seismic shot in 2009-2010, is an elongated anticlinal closure. West Lipovskoye was discovered in 1984 by well 5 Timoninskaya, which tested gas at 0.3 mm m3/d (1 mmcfd) from the interval of 1,739-1,761 metres. The well has since been suspended.

The West Lipovskoye field is currently not in production.

Source: DeGolyer & MacNaughton

The Lipovskoye field

The Lipovskoye field is located approximately 8km east of the West Lipovskoye field along the trend of the Lower Permian shelf edge of the North Caspian Basin. The Lipovskoye gas field is located in the Ozinki District of the Saratov Oblast 22km northwest of the Ozinki municipality and railway station on the Pre-Volga Railroad.

The Lipovskoye field was discovered in 1982 by appraisal well 2. As of March 1, 2014, Lipovskoye had five wells drilled: two appraisal wells (2 and 4) and three exploration wells (5, 6, and 7) of which four are suspended (2, 4, 5, and 6), and one well (7) is abandoned.

The Lipovskoye field is currently not in production.

Source: DeGolyer & MacNaughton

The Nepryakhinskoye Field

The Nepryakhinskoye field is located approximately 22km east of the Lipovskoye field along the trend of the Devonian shelf edge of the North Caspian Basin. This field is at the eastern limit of the Bortovoy licence.

The Devonian Nepryakhinskoye faulted anticline has been identified by 2-D (2007) and 3-D (2008 to 2009) seismic. The structure is trapped on the north flank by an east/west-trending down-to-the south fault. Four productive reservoirs have been identified in the Lower to Middle Devonian sediments

Commercial gas for two out of the four reservoirs (Biysky and Koyvensky) was confirmed in 2011 by successful well tests.

The Nepriyakhinskoye field is currently not in production. There are four reservoirs in the field, but there is a defined development plan for only Biysky and Koyvensky out of the four gas reservoirs.

Source: DeGolyer & MacNaughton

The Western Plant

Diall Alliance is currently producing from the Karpenskoye field, where 11 producing wells are located. The Karpenskoe field is separated into two parts. The Eastern part, where only gas wells are located, is connected directly to the Western Plant through its own internal gathering system. The Southern part, where oil and gas wells are located, is connected to a gas preparation plant, where gas is separated from oil and condensate and is subsequently transferred to the Western Plant through two different pipelines. The Western Plant was commissioned in 2010 and reached full capacity by March 2011. The annual design capacity of the plant is 0.5 bcm (17.65 bcf) of gas, 146 million barrels of condensate, and 958.1 million barrels of oil. The plant is currently operating below capacity. Once on production, the Zhdanovskoye, Krasnokutskoye, East Karpenskoye, and Mokrousovskoye fields will also contribute to filling the Western Gas Plant's total capacity.

The Company currently sells the natural gas produced by the Western Plant to Gazprom, in compliance with the Russian Gosstandart (GOST) standard for entry to the Gazprom pipeline system. The project documentation of the Western Plant is currently being updated to comply with Russian regulations. In addition Diall Alliance intends to undertake further upgrades of the Western Plant to ensure ongoing compliance with GOST standards. The plant includes dehydration and de-sulphurization units as well a sulphur pellet facility, which allows for sulphur sales.

The Western Gas Plant is connected to a metering facility via a pipeline on the Gazprom-owned and operated Central Asia Centre gas trunkline, which is located approximately 22km from the plant. The connecting pipeline has an annual capacity of [0.6 billion m3 (21.1 bcf) per year. The condensate and oil are sold via truck loading facilities at the Western Gas Plant.

Sales of Natural Gas

Diall Alliance sells natural gas at a discount to end user gas prices in the Saratov region as set by the tariffs regulator (23-24% in 2012-2013). Diall Alliance is heavily reliant on Gazprom, which is currently its only natural gas buyer. Gazprom consistently provides over 70% of Diall Alliance's total revenue. Like most of other independent natural gas producers, Diall Alliance does not possess the necessary transportation infrastructure to deliver natural gas directly to other customers.

Diall Alliance sells its gas through an agreement entered into with Gazprom for a 5-year period, which will expire at the end of 2015. Diall Alliance and Gazprom have started negotiations around a new 5-year contract. The gas price to Gazprom is established monthly in Rubles, based on end user gas price in Saratov region with a discount. Diall Alliance has entered into negotiations with Gazprom to reduce the discount to the Federally mandated tariff it receives for gas sold from the Western Plant.

Diall Alliance started production and sales to Gazprom in December 2010. In May - August of 2011, the Group experienced problems with the amine sweetening unit on the Western Plant and production volumes consequently dropped significantly during the period. After September 2011, the gas plant started to operate at a near-full capacity. A volume decrease in May and October 2012 was due to a planned maintenance outage for the gas processing plant. Low sales volume in 2013 occurred due to a decrease in average well yield. This caused a significant drop of natural gas extraction volume and resulted in a 12% drop in sales volume for 2013. In 2013, revenue remained stable largely due to a 12% increase in average price. In July 2012 and 2013, the Federal Tariff Service substantially increased consumer gas prices and Diall Alliance's selling price increased proportionately. In 2012, Gazprom added a clause into the agreement with Diall Alliance, where volume of supply was established and any excess was purchased at a discount price, with the discount set by agreement between the parties each month. However, in 2012-2013, the discount rate provided by Diall Alliance to Gazprom stabilized at 23-24%.

Diall Alliance did not receive payments from Gazprom in September and October 2013 for gas delivered into the CAC trunkline, due to a dispute regarding the quality of gas delivered by Diall Alliance. This caused a corresponding increase in Diall Alliance's accounts receivable and in turn significantly reduced cash flow. In November and December 2013 Gazprom settled the outstanding liability for these months and has subsequently been making timely payments in line with its contractual obligations

Sales of Crude Oil and Condensate

Diall Alliance commenced its oil sales in May 2011, when well 12D came onstream. The level of sales was relatively low at this time as only one well was in operation.

In 2012, Diall Alliance more than doubled its oil sales through completion of an oil gathering facility and bringing three additional wells on stream - 5D, 13 and 18. During 2013, sales volume dropped as a result of a decreased production due to a natural decline in well yields.

Work programme for the Bortovoy Licence following Admission until December 2015

The near term strategy for the Enlarged Group in respect of the Bortovoy Licence is to utilise the cash flows from existing operations to fund the further development of the Karpenskoye field and the tie in of the Zhdanovskoye field to the Western Plant. This includes the drilling of Well 100 on the Karpenskoye field which is expected to spud in May 2014 and the hook-up of the Zhdanovskoye field which is expected to be operational by the end of 2014 ensuring that the Western Plant is operating at full capacity of approximately 1.4 mm m3/d (49.4 mmcfd) by 2015. In addition the Directors intend to undertake further capex on the Western Plant to improve its performance and reduce operating costs. It is currently planned to drill a further well on the Zhdanovskoye field in mid-2015, although this will be finally determined after studying the Zhdanovskoye well performance.

It is the Directors' intention to develop an exploration plan during the course of 2014 which will allow a feasibility study to be undertaken during the course of 2015 with a view to building a second gas plant in the East of the Bortovoy Licence.

Taking into account the expected improved performance of the Western Plant, drilling Well 100, hooking up the Zhdanovskoye field and further exploration of the Eastern Fields, the Directors believe there is significant opportunity to increase production from the Bortovoy Licence.

Infrastructure and routes to market

The Bortovoy Licence area benefits from well-developed infrastructure. The CAC trunkline runs through the licence area and transports gas from neighbouring Kazakhstan and Turkmenistan as well as Russian gas to markets to the West of Russia and providing gas to local industry. Infrastructure, including a pipeline gathering system, road infrastructure and a power line system has been constructed by Diall Alliance on the Western Fields. Access to the Western Plant is mostly via federal highways (dual carriage) with the last leg of the journey on a metaled (single carriage) road that leads directly to the Western Plant and crosses the Karpenskoye field. There is also a railway close to the licence area that runs parallel to the federal highway, the closest station to the licence area is Ozinki which is less than 30km from the Western Plant. The Directors intend that this railway line will be used to bring in the majority of the heavy equipment and materials required on the licence area, including drill rigs. There is grid power on the Bortovoy Licence, but the Western Plant itself generates its own power through the utilisation of its own gas resources.

In October 2010, Diall Alliance completed the tie-in of the Western Plant to the CAC trunkline via a company owned 22 km pipeline.

Strategy of the Enlarged Group

The Board's strategy is for the Enlarged Group to become a significant oil and gas exploration and production company through the acquisition of a portfolio of oil and gas properties in the CIS. The Directors plan that over time the Company will acquire a portfolio that will include assets at various stages of development. The Board will continue to review opportunities across the CIS although it currently expects that a majority of the opportunities will be in the Russian Federation.

The Board intends to augment the current management team. Future appointments to the Board and/or management team, if any, are likely to be dependent upon the Board's ability to execute its acquisition strategy.

From an operational perspective the focus of Zoltav will be on ensuring that the Western Plant operates at full capacity whilst concurrently developing an exploration strategy for the Eastern Fields of the licence and further appraisal of the Koltogorskoye Field with the aim of bringing the field into production and developing partnerships to develop the Bazhenov discovery on the Koltogor Exploration Licence No. 10.

Structure of the Acquisition

Under the terms of the Acquisition Agreement (as amended), the Company has conditionally agreed to acquire the entire issued share capital of Royal Atlantic Energy and its wholly-owned licence holding subsidiary, Diall Alliance, together with Diall Alliance's management company, Vostok Energy LLC from Bandbear together with the assignment of the benefit of the Royal Atlantic Energy Receivable and the Diall Receivable, for a consideration to be satisfied by the issue of the Consideration Shares, representing approximately 27.1 per cent. of the Enlarged Share Capital together with a cash payment of US$58.94 million. The Company will also assume the outstanding debt and obligations of Diall Alliance pursuant to the Sberbank Facility.

The Company received approval from the Russian antitrust authorities on 30 April 2014 for the acquisition by Zoltav of control over Diall Alliance through purchasing Royal Atlantic Energy and for the direct acquisition of Vostok Energy LLC.

Due to its shareholding in Zoltav, Bandbear is a 'related party' as defined by the AIM Rules for Companies. Further, the Acquisition is a related party transaction for the purposes of AIM Rule 13. The Directors consider, having consulted with SCC, the Company's Nominated Adviser, that the terms of the Acquisition are fair and reasonable insofar as the Company's Shareholders are concerned.

The Acquisition Agreement is conditional, inter alia, on the passing of the Acquisition Resolution proposed at the Annual General Meeting to approve the Acquisition and Admission.

Details of the Subscription, the Sberbank Facility and use of proceeds

The Company is raising a total of US$65.95 million through the issue of a total of 41,216,511 Ordinary Shares at the Subscription Price. The Company has entered into the Subscription Agreements with ARA Capital, the Company's largest shareholder, Crediton Invest and Matteson Overseas pursuant to which they have agreed to subscribe US$45.615 million for 28,509,375 Subscription Shares, US$10.166 million for 6,353,568 Subscription Shares and US$10.166 million for 6,353,568 Subscription Shares respectively, all at the Subscription Price. An exchange rate of US$1.60: £1.00 was agreed in the Subscription Agreements. The Subscription Shares will represent approximately 29.2 per cent. of the Enlarged Share Capital on Admission. The Subscription Shares will rank pari passu in all respects with the Ordinary Shares including the rights to all dividend and other distributions declared, made or paid following Admission and will be issued fully paid.

The proceeds of the Subscription will be used to fund the payment of the cash consideration of approximately US$58.94 million payable to Bandbear on completion of the Acquisition while the balance of US$7 million (along with the Company's existing cash) will be used to fund exploration activities on the Eastern Fields and on the Koltogor Licences.

The Subscription is conditional upon completion of the Acquisition.

Due to its shareholding in Zoltav, ARA Capital is a 'related party' as defined by the AIM Rules for Companies. Further, the ARA Subscription is a related party transaction for the purposes of AIM Rule 13. The Directors consider, having consulted with SCC, that the terms of the ARA Subscription are fair and reasonable insofar as the Company's Shareholders are concerned.

Lock-in and orderly market arrangements

As the Company has not been independent and revenue earning for the last two years, as required by the AIM Rules for Companies, the Directors and certain shareholders have entered into lock-in deeds in accordance with Rule 7 of the AIM Rules.

ARA Capital (which will hold an aggregate of 56,243,076 Ordinary Shares representing approximately 39.83 per cent. of the Enlarged Share Capital at Admission) has entered into a lock-in deed pursuant to which it has undertaken to not (and to use its reasonable endeavours to procure that any person with whom it is connected will not) dispose of any interest in Ordinary Shares held by it or persons connected to it for a period of one year from Admission, save in those circumstances permitted by Rule 7 of the AIM Rules.

Bandbear (which will hold an aggregate of 56,243,076 Ordinary Shares representing approximately 39.83 per cent. of the Enlarged Share Capital at Admission) has entered into a lock-in deed pursuant to which it has undertaken to not (and will procure, insofar as it is able, that any of its associates will not) dispose of any interest in Ordinary Shares held by it or its associates for a period of one year from Admission, save in those circumstances permitted by Rule 7 of the AIM Rules.

Mr Sokolov and Mr Kamyshev (who will respectively hold 2,271,155 and 3,406,734 Ordinary Shares, together representing approximately 4.02 per cent. of the Enlarged Share Capital at Admission) have each separately entered into lock-in deeds pursuant to which they have each undertaken that they will not (and will procure, insofar as they are able, that any of their associates will not) dispose of any interest in Ordinary Shares held by them or their associates for a period of one year from Admission, save in those circumstances permitted by Rule 7 of the AIM Rules. In addition, under the terms of their service contracts, during the term of their employment, Mr Sokolov and Mr Kamyshev have each undertaken not to sell any of the Ordinary Shares they received in consideration for the sale of CenGeo Holdings before 1 January 2015. Thereafter, but prior to 31 March 2016, they may each sell up to 25 per cent. of the Ordinary Shares they received in consideration for the sale of CenGeo Holdings and may each sell a further 25 per cent. of such Ordinary Shares after 1 April 2016. Following the cessation of their employment both Mr Sokolov and Mr Kamyshev will be able to dispose of the Ordinary Shares they received in consideration for the sale of CenGeo Holdings at their discretion.

The Directors (who will hold an aggregate of 469,055 Ordinary Shares representing approximately 0.33 per cent. of the Enlarged Share Capital at Admission) have each entered into a lock-in deed pursuant to which they have each undertaken that they will not (and to use their respective reasonable endeavours to procure that any person with whom they are connected will not) dispose of any interest in Ordinary Shares held by them or persons connected to them for a period of one year from Admission, save in those circumstances permitted by Rule 7 of the AIM Rules.

Admission, CREST and Depositary Interests

Application will be made to the London Stock Exchange for all of the Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence at 8.00 a.m. on 18 June 2014.

The Ordinary Shares are in registered form. Securities issued by non-UK registered companies such as the Company cannot be held or transferred in the CREST system. CREST is a computerised paperless share transfer and settlement facility enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by written instrument in accordance with the CREST Regulations. To enable investors to settle such securities through the CREST system, a depositary or custodian can hold the relevant securities and issue dematerialised depositary interests representing the underlying securities which are held on trust for the holders of the depositary interests. Application will be made for the DIs in respect of the underlying Ordinary Shares to be admitted to CREST with effect from Admission. Holders of Ordinary Shares in certificated form who wish to hold DIs through the CREST system may be able to do so and should contact the Registrar.

CREST is a voluntary system and Shareholders who wish to receive and retain share certificates will be able to do so.

Annual General Meeting

Set out in the Admission Document is a notice convening the Annual General Meeting to be held at Ogier House, The Esplanade, St Helier, JE4 9WG, Jersey at 10.30 a.m. on 17 June 2014.

Irrevocable undertakings to approve the Proposals

Each of those Directors who hold Shares has irrevocably undertaken to vote in favour of the Resolutions (other than those relating to their re-election) to be proposed at the Annual General Meeting, in respect of their beneficial holdings totalling 469,055 Existing Ordinary Shares in aggregate, which represent approximately 0.76 per cent. of the Existing Share Capital.

ARA Capital has irrevocably undertaken to vote in favour of the Resolutions (excluding the Subscription Resolution) to be proposed at the Annual General Meeting, in respect of its holding totalling 27,733,701 Existing Ordinary Shares in aggregate, which represents approximately 44.94 per cent. of the Existing Share Capital.

Bandbear has irrevocably undertaken to vote in favour of the Resolutions (excluding the Acquisition Resolution) to be proposed at the Annual General Meeting, in respect of its holding totalling 17,979,981 Existing Ordinary Shares in aggregate, which represents approximately 29.14 per cent. of the Existing Share Capital.

In addition the Company has received irrevocable undertakings to vote in favour of the Resolutions to be proposed at the Annual General Meeting, in respect of holdings totalling 5,677,889 Existing Ordinary Shares in aggregate, which represent approximately 9.20 per cent. of the Existing Share Capital.

The Company has therefore received irrevocable undertakings to vote in favour of the Resolutions (excluding the Subscription Resolution and the Acquisition Resolution) to be proposed at the Annual General Meeting, in respect of holdings totalling 51,860,626 Existing Ordinary Shares in aggregate, which represent approximately 84.04 per cent. of the Existing Share Capital.

The Company has received irrevocable undertakings to vote in favour of the Acquisition Resolution to be proposed at the Annual General Meeting, in respect of holdings totalling 33,880,645 Existing Ordinary Shares in aggregate, which represent approximately 54.90 per cent. of the Existing Share Capital.

The Company has received irrevocable undertakings to vote in favour of the Subscription Resolution to be proposed at the Annual General Meeting, in respect of holdings totalling 24,126,925 Existing Ordinary Shares in aggregate, which represent approximately 39.10 per cent. of the Existing Share Capital.

Ends.