Urals Bumps Up Production at Petrosakh

Urals Energy provided an operational update on activities at its Petrosakh license.

As announced on April 12, 2010, Urals Energy has successfully reperforated well #34 and has now completed installation of a higher diameter rod pump. As a result, production from the well has increased to 141 bopd (previously 87 bopd) after the first day of production with further potential to increase following a decrease of water cut. The Company's overall production at Petrosakh is now stabilizing at 1,577 bopd.

The Company intends to carry out the same completion on well #47, where the rod pump is expected to be delivered at the end of May 2010. Since completing the workover on well #47 production has continued to increase with constantly decreasing water cut.

Ural Energy also announced that the high octane gasoline on Petrosakh, which the Company has recently produced, was certified by the Russian State regulatory bodies and is of a higher quality than State Norms for some parameters. This is due to the high quality of Petrosakh oil, which does not require deeper refining to produce such product.

Consequently, from May 2010 the Company intends to start production of Gasoline 92 and marketing it on the local market. Net back for Gasoline 92 (equivalent to Euro 3 gasoline) is currently higher than previously produced Gasoline 80 by $20.94/tn and compared to straight run gasoline is currently higher by $90.75/tn. The directors believe that this increase on a net-back will positively impact the value of the Petrosakh asset.

In addition to an improved net back, production of high octane gasoline will permit uninterrupted year round gasoline sales by the Company, thus removing seasonal variations and demand volatility. To date, the demand for this gasoline is exceeding supply, with Rosneft currently being the only supplier of this type of fuel to Sakhalin.

Petrosakh has already received orders from customers for Gasoline 92 for deliveries in May 2010.


Following the announcement, on April 12, 2010, that the Company had, conditional upon shareholder approval, entered into a restructuring arrangement with Petraco Oil Company, the Company confirms that the date of the expiration of warrants the Company proposes to grant to Petraco pursuant to the Restructuring will be December 31, 2013. 

Shareholders in the Company should also be aware that any shares issued to Petraco pursuant to the conversion of $2.0 million of current indebtedness owed by the Company to Petraco will be subject to lock up arrangements until December 31, 2010.  

Alexei Maximov, Chief Executive commented, "Since the suspension of trading in our shares on AIM was lifted in December 2009, we have made significant progress in re-establishing Urals' operations and alleviating any remaining funding concerns.

"Our recent operational successes are encouraging and the higher quality fuel that we intend to produce from Petrosakh should increase our revenues. The successful transition of the refinery to producing Gasoline 92 puts a start to a comprehensive re-haul program presently being developed by the Company with the aim of increasing its refined product offering on Sakhalin island in parallel with a focused marketing effort." 

"We look forward to further investigate hidden opportunities in the existing assets and continue building and maximizing value to our shareholders."


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