The Board of Urals Energy, the independent exploration and production company with operations in Russia, provides the following update in respect of its drilling activities at South Dagi. 

Further to the Company's announcement on 10 September 2018, the Board views the initial results of the analysis of core samples taken from its first exploratory well - Well No 1, as being promising and considers that these results provide indications of a potentially significant discovery. The analysis of the core samples taken from 950 to 1,500 meters of Well No 1 shows that in nine horizons there are shows of hydrocarbons with good porosity, with total net pay of 154 meters.

However, the full testing of Well No 1, which is required to confirm its significance, will be delayed for at least two months, due to a collector pipe becoming stuck in the well below 1,100 meters during the completion process. Removing this pipe will require special equipment that is manufactured and available in Russia, which is required to be brought to the Island. The recovery work will then be carried out by the Group's own work over rig, so that the Group's new rig can be moved from Well No 1 to an already prepared site for our second exploratory well, Well No 2.

In the meantime, the work over rig will re-enter Well No 12, to establish this well as a water injection well, which will be linked to the earlier Well No 7, the results of which were announced on 19 June 2018. Well No 7 has been producing 225 bbls/day from horizons mirroring those of Well No 1. Well No 7 has also produced significant water, which had to be separated at our Petrosak refinery. The Company's intention is to set up a water separation plant at South Dagi, and re-inject the water into Well No 12 once the work over is complete. In the meantime, Well No 7 has been shut in.