Urals Energy Acquires Komi Assets from Lukoil

Urals Energy has received formal approval from the Russian Federal Antimonopoly Service for the acquisitions of Dulisma and LTK, which were announced on April 18, 2006. This approval is an important step towards the completion of these transactions.

Urals Energy has also acquired the rights to purchase OOO "Voivozhneft", OOO "Nizhnyomrynskaya Neft" and OOO "Verkhneomrynskaya Neft", each a Russian limited liability company, from OOO Lukoil-Komi and OAO Komineft, subsidiaries of OAO Lukoil. The acquisition is for $1.5 million in cash plus certain working capital adjustments and is expected to be completed in June 2006. The closing is subject to approval by the Russian Federal Antimonopoly Service and other customary conditions.

Each of the companies to be acquired owns subsoil licenses located near the Company's existing producing properties in the Komi Republic. The licenses to be acquired have been in production for over 20 years. According to the Russian State reserves body, the main License being acquired is credited with approximately 25 million barrels of C1-C2 reserves. The license is currently producing approximately 350 bopd. On completion of the acquisition, Urals Energy intends to re-evaluate the reserves, identify areas for further development and prepare and institute a rehabilitation and production enhancement program. Based on the Company's experience, the re-evaluation of the reserves by the Group's outside reserve evaluation firm, DeGolyer and MacNaughton, normally results in a lower quantity of reportable recoverable reserves than is recorded by the Russian State reserves body.

The Group intends to pay for the acquisition out of its existing cash reserves.

The acquisition fits Urals Energy's acquisition criteria of acquiring producing and non-producing assets in complementary areas of Russia and the CIS with development and exploration potential at attractive prices.

William R. Thomas, Chief Executive Officer, commented:

"The approval of our Dulisma and LTK acquisitions by the Russian authorities is a welcome step in integrating these important assets into our portfolio. The added benefit of the acquisition of the additional assets from Lukoil is a significant low cost bolt-on for the Group, giving us assets near to our existing producing properties in Komi. This also evidences our ability to work with Lukoil, one of the major oil companies in Russia, on its portfolio rationalization program. We are confident this acquisition will also contribute to our continued growth."

Urals Energy is an independent exploration and production (E&P) company with its principal assets and operations in Sakhalin Island, Timan Pechora (including areas in the Nenets Autonomous Okrug and Komi Republic) and the Republic of Udmurtia, Russia. The Company was admitted to trading on AIM in August 2005.

The Group is focused on the integration of its five recently acquired subsidiaries and the exploitation of their assets. In addition, it is actively seeking to continue to grow and diversify its reserve and production portfolio through exploration activities and the acquisition of additional E&P companies or assets by taking advantage of the ongoing rationalization of E&P assets in Russia.

The Group's six existing E&P subsidiaries have Proved and Probable reserves of 116 million barrels of oil equivalent (MMBOE) and produced approximately 6,237 barrels of oil per day (BOPD) during the second six months of 2005.

The Group's two largest subsidiaries by production, Petrosakh and Arcticneft, own and operate refining assets with a total refining capacity of 5,300 BOPD, which provide the Group with the ability to maximize the value of the oil produced by choosing between the sale of oil or of refined products depending on market conditions, tax considerations and other factors.

According to a preliminary April 12, 2006 estimate by the Company's independent engineering consultants, DeGolyer and MacNaughton ("D&M"), the recently announced acquisition of the Dulisma Field will increase Urals Energy reserves by approximately 109 million barrels of proved and probable oil reserves, approximately 87 million barrels of possible oil and condensate reserves and 1.9 trillion cubic feet of possible gas reserves as at 31 March 2006, according to a report from DeGolyer and MacNaughton, the Company's engineering consultants.