ZOL.L Regulatory News (ZOL)

30 June 2020

Zoltav Resources Inc.

("Zoltav" or the "Company")

Corporate & Operational Update

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, provides a corporate and operational update about its operations at the Bortovoy Licence, Saratov.

Production - West Bortovoy

Natural production decline from existing well stock on the West Bortovoy fields continued at steeper rate in 2019 than in preceding periods. Total gas production in 2019 was approximately 26 percent lower than in 2018, while total oil and condensate production in 2019 was approximately 18 percent lower than in 2018.

2019 total production summary:

Total revenues in 2019 were approximately RUB 1.2 billion (2018: RUB 1.6 billion).

The Western Gas Plant continued to operate efficiently with no shutdowns. Operations at the plant have continued throughout the COVID-19 pandemic without interruption. The Company has introduced measures to mitigate the risk of infection at its operations including additional cleaning and personal protective equipment.

The development drilling programme aimed at reversing the production decline in the western fields has to date seen a total of four side-track wells being drilled. Two wells on the Zhdanovskoye field have been successful and are now contributing to gas production; while two wells on the Karpenskoye field have been unsuccessful and will require additional investment in order to have the potential to be put into production in the future.

Average daily gas production in the first half of 2020, including the contributions from the two Zhdanovskoye side-track wells, has been approximately 26.8 mmcf/d (0.76 mmcm/d) (2019: 24.5 mmcf/d or 0.69 mmcm/d). However, the development drilling programme has not yet generated sufficient additional production to sustainably reverse the declining production profile across the full current year.

A standalone vertical well is currently being drilled on the Zhdanovskoye field which management projects will, when put on production later this summer, together with a 7.2 km looping pipe, be sufficient to sustain total production across 2020 at the same rate as 2019.

Development strategy - East Bortovoy

As previously announced on 30 September 2019, the Company has been conducting a feasibility study on the East Bortovoy fields. The Company has expended approximately RUB 550 million towards this feasibility study, including the well re-entry programme and pipeline design. This includes substantial budget overrun due mainly to the technical condition encountered in Nepriyakhinskoye Well 1 (as announced on 30 September 2019) and the requirement to undertake further well re-entries on the Pavlovskoye field in order to gain additional confidence over the project's future production profile. This has resulted in a significant delay to the feasibility study and to the independent technical analysis necessary to procure project financing.

Well operations and technical due diligence are ongoing to complete this work and therefore allow the technical analysis to be completed within approximately three months.

Significant progress has been made on other aspects of project development including pipeline design, procurement strategy, well design and gas plant capacity extension. Management have held preliminary discussions with a number of prospective providers of project finance, including around any future equity contribution to the project which would be required to secure such project finance.

The East Bortovoy project is currently being reviewed by independent technical consultants. A project final investment decision is subject to technical due diligence results, successful negotiations of binding terms for project finance from major Russian banks and the ability to secure a necessary equity contribution to support the project finance.

Working capital update

A number of factors, including the production decline, development drilling, feasibility study and the hiring of additional technical and geological personnel, combined to place significant pressure on working capital in 2019 and 2020. However, the Company is in the advanced stages of negotiating a finance facility with one of its substantial shareholders. Zoltav anticipates formalising the finance facility in the near future and will provide further information once it has been completed.

Cash at 30 June 2020 is approximately RUB 30.1 million.

Final Results for 2019

As previously announced on 25 June 2020, the Company and its auditors require additional time to complete the audit given the COVID-19 pandemic and the associated travel restrictions and delays in fulfilling audit requests as a result of the finance function operating remotely. Accordingly, the Company has received an extension to its filing deadline for its Final Results from 30 June 2020 to 30 September 2020.

Enquiries:

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

About Zoltav

Zoltav is an oil and gas exploration and production company focused on Russia.

Zoltav holds the Bortovoy Licence in the Saratov region of South Western Russia, a 3,215 sq km area along the northern margin of the Pre-Caspian basin, one of the largest hydrocarbon basins in the CIS.

The Bortovoy Licence contains a number of productive gas fields in the west of the Licence, a processing plant and significant exploration prospectivity. It holds proven plus probable reserves under the Society of Petroleum Engineers' Petroleum Resources Management System of 750 bcf of gas and 3.8 mmbbls of oil and condensate.

In 2018, Zoltav produced 12.0 bcf (341 mmcm) of gas or 2.0 mmboe (274 mtoe) and 66,558 bbls (7,715 t) of oil and condensate.

The Company is currently evaluating strategies to commercialise the eastern fields of the Bortovoy Licence.

For further information on Zoltav, or to sign up for our news alert service, visit: www.zoltav.com.

Glossary