Group update

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

1 November 2018

Urals Energy Public Company Limited

("Urals Energy", the "Company" or the "Group")

Group update

Further to the Company's recent announcements (made on 23 October 2018, 15 October 2018 and 10 October 2018), the board of Urals Energy (the "Board"), the independent exploration and production company with operations in Russia, provides the following updates.

Tanker update

The tanker is currently at Kolguev Island, and preparations for loading are in hand. The Board anticipates that loading should commence shortly, assuming no change to the current weather conditions, and that the Group will now likely receive the proceeds from this shipment in the second half of November 2018.

At current Brent DTD prices, the board anticipates that the net proceeds of the tanker shipment (after, inter alia, export duty payments and tanker charges etc.) will be broadly in the region of US$7.5 million. After repayment of the current pre-export finance loan (which was announced on 10 September 2018), the cash receipt by the Group will be in the region of US$2.5 million. This is a provisional estimate, which assumes that the tanker is fully loaded and also makes a number of assumptions regarding the timing of the shipment and Brent DTD prices for the 6th to 10th days following the date of the bill of lading. After accounting for operational costs and the accumulated Mineral Extraction Tax for Arcticneft (as announced on 23 October 2018), the net cash available to the Group from the tanker shipment is likely to be minimal or marginally negative.

Accountants' review

As indicated in the Company's announcement of 23 October 2018, the Board is appointing an independent firm of accountants to perform: (i) a review of any transactions by its 98.56% owned subsidiary, JSC Petrosakh, since 30 June 2018 that are outside of the ordinary course of business; and (ii) a short term working capital review.

The Board has been working with the UK and Russian divisions of a firm of accountants (the "Accountants"), in order to progress these reviews, although it has taken longer than anticipated to agree an appropriate scope of works and for the Accountants' fieldwork to commence. The Board believes that the review of JSC Petrosakh's transactions outside of the ordinary course of business should be undertaken by the Accountants' Russian office, while the short-term working capital review, which will examine the forward-looking period to 30 June 2019, should be performed by the Accountants' UK office.

The Board cannot exclude the possibility that further unauthorised transactions which are outside of the ordinary course of business (in addition to those described in the Company's announcement of 15 October 2018) will emerge from the review which is being undertaken. However, the rules for corporate governance have been reinforced to prevent further unauthorised transactions.

Working capital

Once the first part of the Accountant's review is complete, which should identify the scale of any unauthorised transactions outside of the ordinary course of business, further discussions can proceed in respect of options to reverse the transactions, which were authorised by Mr Kononov, and/or the return of a certain amount of working capital from the Kholmsk commercial seaport. The Board will reserve the right to take any actions to protect the interests of shareholders and creditors.

As noted in the Company's announcement of 23 October 2018, the Group's working capital position is highly constrained and remains subject to a number of variables and the Board believes that the Accountants' review is an essential step in determining the financial requirements of the Group. The Board believes that the Group will continue to face a working capital deficit of at least approximately US$3 million in the coming months, unless the unauthorised transactions referred to above are reversed. At present, the Group's banks remain supportive.

Further announcements will be made as appropriate.

- Ends -

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