(PTR) Petroneft Resources

PetroNeft Resources plc

("PetroNeft")

Operations Update

PetroNeft Resources plc (AIM: PTR), the owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce an update on its operations.

Highlights:

·     10 well hydraulic fracturing programme completed

o  Wells now being brought back online and cleaning-up

o  Initial results encouraging

·     Additional five well hydraulic fracturing programme planned on Pads 1 and 2 in January / February 2012

·     Cheremshanskaya No. 3 well testing progressing successfully

o  Lower Jurassic J14 interval achieves natural flow

o  Primary Upper Jurassic J1-3 interval may contain 7.0 metres of net oil pay

·     Arbuzovskoye Development Programme Approved by Russian Government

·     Ledovoye exploration well spudded on 5 December

Licence 61 - Lineynoye Hydraulic fracturing programme

In November 2011 we carried out a hydraulic fracturing programme using a heli-frac crew on 10 new production wells on Pad 2 at the Lineynoye oil field. The fracture stimulation programme went according to schedule and wells are currently being brought into production.  Initial indications are encouraging, however, it will take several more weeks to bring all of the wells online and allow them to clean up and achieve a sustainable rate.

Five additional wells, two on Pad 2 and three on Pad 1, will be fracture stimulated during January and February 2012 when a frac crew can mobilised to the field by winter road.

Current field production is about 2,500 bopd. Assuming the wells already brought back online maintain the expected rate of post-frac clean up achieved and the remaining wells come on at anticipated rates, production is expected to reach the guided target of 4,000 to 5,000 bopd by the end of Q1 2012. 

Licence 61 - Arbuzovskoye Pilot Development Programme

The Pilot Production Design for the Arbuzovskoye oil field was approved by the Russian State Central Development Committee in November 2011.  Procurement of the long lead items to construct a 10 km pipeline from the Lineynoye facilities to Arbuzovskoye and drill up to 14 new production wells in 2012 is already underway and pipeline production is expected to commence in 2H 2012. Arbuzovskoye contains 2P reserves of 13.2m barrels of oil according to independent reserve auditors Ryder Scott.

Licence 67 - Cheremshanskaya No. 3 well

Testing of the Lower Jurassic J14 interval which contains 8.6 metres of net pay has been completed.  The well flowed naturally to the surface at a rate of 6 m3/d (38 bfpd), consisting of a light, high quality, low viscosity oil with an API gravity of 50 degrees, gas and water.  This is understood to be the first natural flow ever achieved from this Lower Jurassic interval in the Tomsk Oblast. Sustained  production has been achieved from this interval in other fields in this region following fracture stimulation.

The next phase of testing will focus on the primary Upper Jurassic J1-3 interval. The initial log interpretation indicated this interval to be water bearing, however, additional log and core interpretation indicates that it may contain up to 7.0 metres of net oil pay.  The plan is to isolate the interval from the rest of the Upper Jurassic interval (J1-1 and J1-2) which have been interpreted to be oil bearing, and to get an independent test of the true saturation of this J1-3 interval.

Licence 67 - Ledovaya No. 2a well

The 2a well was spudded on 5 December 2011. The well is targeting oil in both the Lower Cretaceous and Upper Jurassic intervals. It is expected that the well will take approximately four to six weeks to drill to the target depth.

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

"We are pleased that the 10-well heli-frac operation at Pad 2 on the Lineynoye oil field has been completed and that all wells brought online so far are successfully producing oil while continuing to clean-up with encouraging initial indications. This, combined with the approval of the Arbuzovskoye Pilot Production Project, will ensure the continuation of our production growth in 2012 and beyond.

We are also delighted that testing of Cheremshanskaya has demonstrated the first natural flow of light oil ever recorded in the Lower Jurassic interval in the Tomsk Oblast.  The focus of the testing programme now moves to the Upper Jurassic J1-3 interval where additional studies indicate that the interval may also be oil bearing."

For further information, contact:

The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 35 years experience in oil and gas exploration and development.

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement. No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period.

Glossary

PetroNeft Resources plc

("PetroNeft" or the "Company")

Discovery of New Oil and Gas/Oil Pools at Cheremshanskaya

PetroNeft Resources plc (AIM: PTR), the owner and operator of Licences 61 and 67, Tomsk Oblast, Russian Federation, is pleased to announce the discovery of a new oil field in Licence 67 at Cheremshanskaya.

Highlights:

·     Cheremshankaya No. 3 well discovers two hydrocarbon pools

o  Oil discovery in main Upper Jurassic target

o  Gas/oil discovery in Lower Jurassic target

o  Successful open hole inflow test on both intervals

·     Development drilling at Lineynoye continues to push field boundary further north

·     The hydraulic fracturing programme at Lineynoye to commence shortly

Licence 67 - Cheremshanskaya No. 3

The Cheremshanskaya No. 3 well located on the Cheremshanskaya Prospect in Licence 67 was spudded on 28 August and has been drilled to its planned total depth of 3,100 m MD.  The well was drilled adjacent to the Cheremshanksaya No. 1 well which was drilled in 1962 and was targeting potential "missed pay" in the Upper, Middle and Lower Jurassic intervals. 

Preliminary analysis of the core, log and open hole test data indicates that two new hydrocarbon pools have been discovered by the well, one in the Upper Jurassic J1 interval and another in the Lower Jurassic J14 interval. There were no hydrocarbon indicators encountered at the Middle Jurassic J13 interval. Additional testing is required to determine the commerciality of the hydrocarbon intervals including potential productive flow rates and fluid composition, which will each be key elements of development planning. Production casing is now being run and cemented in the well.  Once this has been completed, the main drilling rig will be moved and a workover rig will then carry out an extensive step rate drill stem testing programme.  This process will likely be completed in late 2011.

The Cheremshanskaya No. 3 well is located about 6 km south of the Lomovoye Field which has been developed by Tomskneft (Rosneft).  The well is situated near to an all weather road and is accessible year round which would allow early commencement of year round production by trucking oil to market.

Upper Jurassic J1 interval

The primary objective Upper Jurassic J1 interval shows potential net oil saturation of 2.9 m in the J1-1 and J1-2 intervals.  The J1-3 interval has 8.1 metres of net reservoir but the initial log interpretation indicates it is likely to be water saturated despite the presence of hydrocarbon indications in the core in the upper part of the interval.  A short open hole test over the J1 interval produced an inflow of drilling mud filtrate and small amounts of oil at a rate of 72.5 bfpd.  No formation water was produced during the test. 

Lower Jurassic J14 interval

The Lower Jurassic J14 interval shows potential net gas/oil saturation of 8.6 m.  A short open hole test over this interval confirmed gas and oil inflow but the gas rate could not be measured because of the nature of the test. 

Once production casing has been run and cemented in the well, the main drilling rig will then be moved to the Ledovaya 2a location. 

Licence 61 Development Drilling programme

Two further successful development wells have been drilled from Pad 2 at the Lineynoye oil field.  Lineynoye 210 was drilled along the western edge of the J1-2 channel system and initial analysis indicates the well contained 4.0 m of net oil pay. The intention is that after a period of production the well will be converted to a water injector for field pressure maintenance.  It is expected to be an excellent injector after fracture stimulation. 

The Lineynoye 212 well was drilled as the north-easternmost well in the field, near to the structural saddle between Lineynoye and the Emtorskaya high to the north.  The well encountered 2.1 m of net oil pay in the J1-1 sandstone and confirmed the oil water contact at -2,435 m TVD.  The J1-2 interval in this well contained over 21 m of sandstone but it is located below the oil water contact.  The well can initially be used as an oil producer but eventually it will be converted to a water injector for pressure maintenance in this portion of the field. 

The Pad 2 drilling results indicate that the field wide oil water contact (owc) is at least 5 metres deeper on the structure than originally interpreted,  providing further evidence that the Lineynoye field extends much further north than previously estimated, possibly connecting the structures of the Emtorskaya high to Lineynoye.  A thick channel sand sequence in the J1-2 interval in well 212 indicates that this system extends to the north and should be present along the eastern flank of the Emtorskaya High.  This will be a priority area for future exploration/delineation and development.

The hydraulic fracturing programme at Lineynoye is due to commence shortly. The service company has demobilised its equipment from the previous site and is in the process of moving to the Lineynoye oil field. An update on the results of the programme will be provided in early December.

Dennis Francis, Chief Executive Officer of PetroNeft Resources plc commented:

"We are pleased to announce another new discovery at Cheremshanskaya.  Initial results are encouraging, however, the field will require further detailed testing and delineation to determine its ultimate size and productivity.  The field is located in an area of well developed infrastructure so it may be possible to fast track pilot production once we complete the testing programme.

It has been a year of substantial progress on the exploration front with the very significant oil discovery at Sibkrayevskaya and follow-up discoveries at North Varyakhskaya and Cheremshanskaya.  We look forward to completion of the final well in our exploration/delineation programme at Ledovoye."  

For further information, contact:

The information contained in this announcement has been reviewed and verified by Mr. Dennis Francis, Director and Chief Executive Officer of PetroNeft, for the purposes of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in March 2006. Mr. Francis holds a B.S. Degree in Geophysical Engineering and a M.S. Degree in Geology from the Colorado School of Mines. He has also graduated from the Harvard University Program for Management Development. He is a member of the American Association of Petroleum Geologists and the Society of Exploration Geophysicists. He has over 35 years experience in oil and gas exploration and development.

Forward Looking Statements

This announcement contains forward-looking statements. These statements relate to the Company's future prospects, developments and business strategies. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'potential', 'estimate', 'expect', 'may', 'will' or the negative of those, variations or comparable expressions, including references to assumptions.

The forward-looking statements in this announcement are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These forward-looking statements speak only as at the date of this announcement. No statement in this announcement is intended to constitute a profit forecast or profit estimate for any period.

Glossary