Chairman's Update on Strategy

ENEGI OIL PLC

AIM ticker: 'ENEG'

OTC ticker: 'EOLPF'

16 September 2013

Enegi Oil Plc

("Enegi" or "the Company")

Chairman's Update on Strategy

Enegi, the independent Oil and Gas Company with a portfolio of assets located in the UK North Sea, Newfoundland Canada, Ireland, and Jordan is pleased to provide the following update on the Company's strategy.

Highlights:

· Farm-out of Newfoundland assets expected to enable full potential of those assets to be realised as investment and operational responsibility transfers to Black Spruce Exploration

· Strategy is to continue to build a portfolio with additional emphasis of low risk, highly-appraised marginal assets, with a low entry cost.

· Development of assets will utilise appropriate and proven technology including ABTechnology's ("ABT") buoy solution

· A Joint Venture with ABT, as announced on 29 May 2013, will now be renamed ABT Oil & Gas

· The new strategy is already delivering:- Fyne Field farm in announced on 2 July 2013- ABT Oil & Gas is also in negotiations with a number of other operators

Alan Minty, Chairman of Enegi commented:

"After what has been a transformational few months, Enegi's management team have refined the focus and strategy of the Company and we are pleased to provide this update to shareholders. 

We will continue to build a diverse portfolio assets, but with a strong emphasis on acquiring interests in marginal fields. These assets are low risk and highly-appraised and, consequently, our entry cost will be low. We will look to develop these assets utilising ABT's buoy technology, an appropriate solution which changes the development economics, enabling the early booking of reserves and further development projects. 

The implementation of this strategy is already well underway with the commencement of work on the Fyne oil field and negotiations are continuing as we look to add further assets to our portfolio. This is a very exciting time in the Company's development."

Strategy Update

Background

From its incorporation Enegi's stated objective has been to build a portfolio of oil and gas assets incorporating each of the phases of the exploration and production life-cycle, but with a particular weighting towards appraisal and development assets that can be managed through to production. Geographically, the focus was on western Newfoundland which management and investors believed offered a significant opportunity, albeit in an undeveloped hydrocarbon basin.

At the time that the original plan was devised the financial landscape was very different and in the intervening period financial institutions have significantly curtailed investment across all sectors and projects and junior oil and gas companies which are so reliant upon the financial markets for capital to develop frontier plays have felt the effect more than most.

The Company has always believed that to fully develop the petroleum system in Newfoundland, additional investment would be needed. The prize in western Newfoundland is potentially very significant with data indicating that the Garden Hill field alone is in contact with over 100MMBO. However, as with all major hydrocarbon plays many wells are needed to clearly delineate the reservoir and determine the most appropriate engineering solution, all of which are expensive given the frontier nature of the region. Even with a well flowing at over 1,000 bbls/day, full development would take many years, perhaps longer as financial institutions become less willing to invest in appraisal activity in a frontier territory.

Consequently, Enegi's management spent a great deal of time and resources in "working up" the Company's assets to the point where the full nature of the opportunity could be clearly defined and communicated to potential partners. The objective was to attract a partner with the technical and financial capability to implement the plans that the Company defined at the outset. After discussions with many potential partners the Company was delighted to conclude a transaction with Black Spruce Exploration ('BSE') who intend to develop the play in western Newfoundland.

Forward Strategy 

Management understands the need to diversify its portfolio and to do that at low cost; the avoidance of risk concentration is therefore a cornerstone of its strategy. The Company also realised that financial institutions are less willing to provide funds for junior oil and gas companies for assets that have higher perceived subsurface risk. Management's plan for the development of the Company acknowledges the constraints typically associated with the financing of junior oil and gas companies and is focused on shifting the Company's attention onto assets where the subsurface risk has been, to a large extent, removed. Furthermore, management is committed to delivering a solution which generates sufficient returns to satisfy the requirements of financial institutions and investors.

The main premise of the model is the application of appropriate and proven technology towards the creation of an economic development solution for an asset. This solution, often not considered by other operators, in many instances creates unanticipated value for the asset owner; value which can be acquired, in exchange for the provision of the solution, at a cost that is significantly cheaper than the prevailing market rates. Hence, the model allows Enegi to bring further reserves into the Company - reserves which have a tangible value and provide the Company with the ability to open up other financing opportunities to develop such projects, rather than by diluting shareholders.

The first stage of the implementation of the plan for Enegi was to reach a joint venture agreement with ABTechnology to work with it on the application of buoy technology. This was signed on 29 May 2013and the joint venture will now be called ABT Oil & Gas.

ABT Oil & Gas will only consider projects that are based upon discovered hydrocarbons. This means that costly exploration risk is removed, allowing Enegi to ensure that its capital budget is allocated to value creation. Additionally, the current reluctance of financial institutions to fund exploration risk suggests that the timing of the business model might be preferential to more traditional investment models.

Implementation of Strategy

One of the key elements in the successful implementation of the business model is that ABT Oil & Gas is the industry leader and has exclusive access to the technology that it advocates. This has two main benefits, firstly it creates a strong negotiating position and secondly, it allows Enegi to be able to benefit from returns both from the hydrocarbon asset and also from application of the technology. This is particularly important in being able to construct the appropriate financial model for each development.

The strategy is not one that is purely conceptual; it has been rigorously tested through consultation with the industry, where discussions are ongoing with a number of operators, and proven through the transactions that have been concluded to date. The extensive attention that the business model is receiving indicates that transactions such as the Fyne oil field farm-in are repeatable, certainly in the medium term.  

Via this "novel" approach to the development solution a significant increase in value can be generated. Furthermore, through the application of appropriate and proven technology this increase in value can, in many projects, create a return profile that exceeds the normal operator hurdle rates required to sanction the development of an asset. Consequently, Enegi believes that this model will make a project significantly more attractive to financiers and operators alike.

The implementation of the strategy is already delivering results. In partnership with ABT, Enegi has agreed a deal with Antrim Energy for the Fyne oil field and has secured two licences in the UKCS with a view to using ABT's buoy solution to develop them. Interest in this business model is high and ABT Oil & Gas is in discussions with a number of operators and have identified a number of strong, unlicensed targets. Management anticipates sustained growth in the value of the Company as projects and solutions are added and progressed and as risks associated with a number of projects are reduced once the first field reaches production.

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About Enegi

Enegi Oil Plc is an independent oil and gas company whose strategy is to create an oil and gas company with a diversified portfolio of assets across the E&P value chain. The Company's current portfolio is made up of operations focused on opportunities around the Port au Port Peninsula in Newfoundland, Canada, the Clare Basin in County Clare, Ireland, the UK North Sea and Jordan. The Port au Port Peninsula is located in western Newfoundland, which, although lightly explored, is in an active petroleum system with light oil having been discovered on a number of occasions. The Clare Basin is located in western Ireland and initial technical studies show that it has the potential to contain shale gas. The Company's licences in the UK North Sea benefit from significant previous exploration investment, and have been selected based on buoy technology operating criteria. The Company has also entered into the highly prospective Dead Sea and Wadi Araba in Jordan with its partner Korea Global Energy Corporation.