Business Update

Corac Group plc

("Corac" or the "Company")

Business Update

Corac is pleased to announce that it has made significant progress across its portfolio of development programs over the last six months and continues to identify and review opportunities with major global industrial players.

Corac's DGC project with its North American partner remains on track with the detailed design stage nearing completion and many of the components are now with suppliers for manufacture. The final stage of the development phase, consisting of assembly and testing at Corac's test facilities, is still forecast to be completed in the second half of the year.

The OMV Austria Exploration & Production GmbH feasibility study is progressing as planned. The well analysis work has been completed and Corac is now moving into the front end engineering design stage. We expect completion of the study in the third quarter 2011.

Discussions are now underway with our MoU partner, a global market leader in the compressed air industry, signed on 28 March 2011. The first phase of the collaboration was for our partner to survey its customer base to identify potential applications for Corac's high speed no oil compressors. Key areas that have been surveyed are water treatment, pneumatic conveying and turbo boosting of conventional compressors. We are jointly reviewing this customer research with a view to identifying specific product development programs leading to field trials in these application areas.

During Corac's recent work at Spadeadam on the integrated DGC system for ENI, we identified an opportunity to improve the long term stability of the application. As a result, the DGC is undergoing further analysis and improvements in the final assembly process that will address the reliability risks in the high power connections. Our ENI project management team is now in discussion with ENI regarding final qualification for acceptance and handover.

Changes in engineering management and recruitment within the teams have brought new methods and experience from a wide range of industries, such as aerospace and business electronics. This more robust production engineering capability has had a positive impact on our approach to system implementation with greater focus on quality and reliability. These improvements will have beneficial effects on our design approach across the full range of our technology applications and the wider DGC development program.

Over the last few months, Corac has taken substantial steps to strengthen the Company's position in line with the stated strategy to build a broader platform of applications using Corac's technology. The announcement earlier this week of the development partnership with Saudi Aramco adds further credibility to the Directors' belief that Corac's compressor technology, combined with the capability and expertise within the business can be applied to create commercial applications to realise value for shareholders. The Company has significantly progressed its technology offering and become of greater interest to global development partners and potential end users both within and outside the oil and gas sector.

Julian Reed, Chief Technology Officer, commented;

"The core technology used within the DGC has been proven and this is the first time that we have seen tangible evidence of the technology functioning as an integrated system. The improvements in Corac's approach to technology development together with greater capability within the engineering teams, provides a broader platform to explore other innovative opportunities that we are now actively reviewing with major industrial businesses."

Editors Notes

Corac is an innovative research and development group, specialising in compressor and power electronics technology, developing patented applications and creating value for end customers.

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