Urals Energy Divests Producing Subsidiary in Russia

Urals Energy has reported the divestiture of Chepetskoye NGDU, its producing subsidiary located in the Udmurtia Republic of Russia.

Chepetskoye NGDU has been sold to a private third party buyer for an aggregate consideration equal to RUR 170.9 million (or US $5.2 million as of January 28, 2009 -- the reference date of the transaction terms and conditions). This consideration will be offset against an outstanding liability of the Company to the buyer which relates to a trade facility agreement between the Company and the buyer involving sales of domestic crude oil.

The Company retains an option to buy-back the asset within a one year time-frame for the same consideration and will only do so should the Directors consider this to be value enhancing for shareholders on a short term basis and in the context of the Company's intention to dispose of all its remaining assets.

The Chepetskoye NGDU's total proved and probable reserves, according to the Company's most recent reserve report by DeGolyer & MacNaughton, are 19.5 million barrels of oil for the three fields owned by Chepetskoye NGDU, of which 3.1 million barrels relates to the Zotovskoye field where production was suspended as of 1 August 2008 following a Rosnedra order triggered by the reservoir pressure decrease below the permissible level. At this time certain reservoir pressure maintenance measures are being undertaken at Zotovskoye.

Over the last quarter of 2008 and the first month of 2009, operating expenses at Chepetskoye NGDU exceeded the value of sales as a result of the steep decline in the crude oil price and other factors.


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