ZOL.L Regulatory News (ZOL)

11 October 2017

Zoltav Resources Inc.

("Zoltav" or the "Company")

Operational Update

Zoltav (AIM: ZOL), the Russia-focused oil and gas exploration and production company, provides an update on operations on the Bortovoy Licence, Saratov.

In Zoltav's half-year report published on 26 September 2017, the Company stated that it was re-evaluating the forward drilling programme for the Permian Basin in the Western Fields in order to plan new and improved geological drill targets for keeping the Western Gas Processing Plant at full operating capacity over the mid to long term. In the short term, the Company stated that the Western Gas Processing Plant would be returned to full operating capacity by year-end through a drilling programme focused on delivering additional gas production from sidetrack wells on existing well stock.

The first of these sidetracks, Zhdanovskoye Well 30, due to be operational during Q4 2017, was drilled and has been unsuccessful. Management believes this is due the geology becoming more difficult than previously thought, with reservoir thickness varying significantly and the ability to rely only upon low-quality historic 3D seismic data.

The result of Zhdanovskoye Well 30 has caused management to re-evaluate further the risk profiles of the proposed Permian Basin well programme and postpone all planned drilling on this structure until the interpretation of higher quality 3D seismic is completed, and additional 3D seismic is acquired, throughout 2018.

As previously announced, Zoltav believes that there is potential to yield substantial additional reserves and production in the deeper Devonian structure and management will now divert any surplus planned capex for the remainder of 2017 and 2018 to understanding the potential of the deeper Devonian structure.

The ongoing seismic programme acquired earlier this year involves interpretation of the 180 sq km of 3D seismic over the Devonian structure in the North Mokrousovskoye field and is expected to be completed by March 2018. An additional 507 sq km of 3D seismic on the Western Fields is now also planned to be acquired and processed during 2018. The proposed Devonian drilling activities in 2018 involve a re-entry into a Soviet era Devonian well, Krasnokutskoye Well 14, in order to further assess the development potential of the deeper Devonian structure. To support the Company's Devonian development strategy, during 2018 the Company intends to expand its upstream team with additional hires with significant geological and technical experience in Devonian structures.

The short term impact of suspending the drilling of further sidetrack wells in the Permian Basin is that production throughput into the Western Gas Processing Plant will decline until the results of the proposed seismic programme allows new producing well targets to be identified and drilled. Management expects gas production in 2018 to be between 20% and 35% lower than 2017. Further updates will be provided on the likely timing of plans to drill new sidetrack wells in the Western Fields when formulated.

Eduard Sleyn, Chief Executive Officer, commented:

"We continue to believe there are substantial additional reserves in the Permian Basin that can deliver gas production volumes that will keep the Western Gas Processing Plant at full capacity for at least a decade. While the short-term impact of reduced gas production levels is disappointing, we believe the proposed acquisition and interpretation of new, modern 3D seismic data will allow us to identify and drill wells in this reservoir with greater accuracy and therefore to apply capex more efficiently.

We also believe there is substantial potential in the deeper Devonian structure and we are looking forward to re-entering a well to assess the development potential of the deeper Devonian, and expanding our upstream team with additional hires with significant geological and technical experience, in 2018."

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.

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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 square kilometre 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, a processing plant and significant exploration prospectivity. It holds Proved plus Probable reserves of 750 bcf (21.3 bcm) of gas and 3.8 mmbbls (484 mT) of oil and condensate. In 2016, the Bortovoy Licence produced approximately 3.3 mmboe (450 mToe).

Zoltav also holds the Koltogor E&P Licence, a 528 square kilometre area in the Khantiy-Mansisk Autonomous Okrug of Western Siberia, one of Russian's most prolific oil producing regions. The Koltogor E&P Licence contains the Koltogor oil field with Proved plus Probable reserves of 79.2 mmboe (10.8 mToe). Additionally, Zoltav holds Koltogor E&P Licence 10, a 167 square kilometre area due west of the Koltogor E&P Licence, containing the West Koltogor oil field.

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