Interim Management Statement and Drilling Update

Exillon Energy plc

Interim Management Statement and Drilling Update

26 October 2011

Exillon Energy plc ("Exillon Energy" or the "Group") (EXI.LN), a British independent oil company with upstream operations in two oil-rich regions of Russia, Timan-Pechora ("Exillon TP" or "ETP") and West Siberia ("Exillon WS" or "EWS"), today issues its Interim Management Statement for the period beginning 1 July 2011. Unless otherwise stated, the financial and production data are for the period from 1 July 2011 to 30 September 2011 and all other information is as at 25 October 2011. All oil rates are presented in barrels of oil per day (bbl/day) and all wellbore depths are presented in meters true vertical depth sub-sea (meters, TVDSS).

KEY HIGHLIGHTS

·; The Group's average daily production1 in the period was 9,137 bbl/day, an increase of 53% over the comparable period in 2010 (5,985 bbl/day). 

·; The Group's daily peak production was 10,276 bbl/day during the period.

·; Beginning 15 November 2011, the Group intends to publish unaudited monthly production data for the preceding calendar month via RNS and on www.ExillonEnergy.com

1Metric ton to barrel conversion rates: 7.44 for Exillon TP and 7.67 for Exillon WS.

DRILLING - EWS I

·; Wells 43, 44 and 45 (all from Pad 32) were drilled and completed during the period with an average test natural flow rate of 638 bbl/day of water-free oil. These wells were completed in accordance with the revised cementing procedures adopted in response to the well-completion problems announced on 26 August 2011.

·; The Group has recently drilled Wells 4 and 18 (both from Pad 4). Well 4 was tested and produced water-free oil with a flow rate of 658 bbl/day and has been connected to the existing production facilities. Well 18 encountered 17.1 meters of effective net oil pay in the Jurassic P reservoir and is currently being tested.

DRILLING - EWS II

·; Wells 111, 118 and 103 (all from Pad 1) were drilled during the period in structurally flank positions. They were designed to test the presence of hydrocarbons on the southern margin of the EWS II field and to investigate the potential stratigraphic-structural connection with the EWS III field further to the south.

·; These wells were also designed to improve the Group's understanding of the depositional concept which anticipates reservoir thickening in off-structure locations. This will better inform the Group's drilling strategy by identifying efficient development locations and more prospective appraisal/step-out locations.

·; Exillon is currently testing these three wells, analyzing the results and integrating them into the full field model. Preliminary results demonstrate the presence of substantially thicker and better-developed Jurassic reservoir sands. Formation tests will be needed in order to confirm the presence of commercial hydrocarbon volumes before any such potential volumes may be able to be categorized as reserves.

DRILLING - Exillon TP

·; Development well 76 (ETP III - 76) was drilled on the southern part of the ETP III structure. This is the first new well to be drilled by the Group in Timan-Pechora since its IPO in December 2009.

·; The well reached a target depth of 3,418 meters and is currently being tested. A further announcement on Well 76 will be made within the next few weeks.

INFRASTRUCTURE

·; The Group continued the development of its physical infrastructure. A selection of recent photographs will be available today at www.ExillonEnergy.com 

Exillon WS

·; Installed 3MW gas power generators on the EWS I field.

·; Completed first stage oil processing facility on EWS II field.

·; Completed construction of oil filling station in line with all project documentation.

·; Construction of second stage oil processing facility on EWS I field is in progress.

·; Construction of the first stage of the Transneft entry point is in progress.

Exillon TP

·; Installed a 1MW gas power generator in Exillon TP, doubling capacity to 2 MW.

·; Construction of independent oil processing facility is in progress. Completion is expected in the first quarter of 2012.

PRODUCTION AND RESERVES

·; Average daily production reached 9,137 bbl/day in the period from 1 July 2011 to 30 September 2011, an increase of 53% from 5,985 bbl/day during the comparable period in 2010. 

o During July 2011, the Group achieved average daily production of 8,668 bbl/day, with Exillon TP contributing 3,132 bbl/day, EWS I fields contributing 5,149 bbl/day and EWS II fields contributing 386 bbl/day. During the month the Group reached a peak daily production of 9,164 bbl/day.

o During August 2011, the Group achieved average daily production of 8,972 bbl/day, with Exillon TP contributing 3,348 bbl/day, EWS I contributing 5,322 bbl/day and EWS II contributing 302 bbl/day. During the month the Group reached a peak daily production of 9,853 bbl/day.

o During September 2011, the Group achieved average daily production of 9,792 bbl/day, with Exillon TP contributing 3,357 bbl/day, EWS I contributing 6,057 bbl/day and EWS II contributing 378 bbl/day. During the month the Group reached a peak daily production of 10,276 bbl/day.

·; Exillon Energy expects to put Well 76 in Timan Pechora and Wells 18 and 40 in Western Siberia in production this year.

·; The Group expects to publish a revised reserve report audited by Miller and Lents before the end of the year. Management does not currently expect the increase in this year's reserves audit to be as large as in previous years.

FINANCIAL2

·; As at 30 September 2011the Group had a cash balance of US$ 126.9 million and US$ 48.7 million of debt. In addition the Group holds a AAA-rated EBRD Eurobond with nominal value of RUR 410 million and carrying value of US$13.5 million (at 30 September 2011) maturing in February 2012.

·; US dollars account for approximately 67% of Group's liquid assets (cash and bonds) with the remaining 33% held in Russian Rubles.

·; Capital expenditure for the period from 1 January to 30 September 2011 was US$ 70.0 million (2010: US$ 26.9 million). Of total capital expenditure, US$ 31.6 million was attributable to drilling, US$ 29.1 million to infrastructure and US$ 6.2 million to seismic data acquisition and interpretation. The infrastructure spend included completion of the oil processing facility, installation of gas power stations, completion of the oil filling station in WS, in-field pipelines and in-field infrastructure.

·; The average realised crude oil price for combined domestic and export sales during the period 1 July 2011 to 30 September 2011 was approximately US$62.56 per barrel, 19.3% higher than the corresponding period last year when it was US$52.43 per barrel. The Group's realised export crude oil prices achieved a discount of about 2.48% to Brent during the reporting period.

2Unaudited numbers.

DRILLING UPDATE

The following drilling update includes drilling results for two appraisal and three production wells that have been completed recently and have not been previously announced.

Appraisal Drilling Programme (EWS II and EWS III)

The following three wells were drilled as flank-position wells from pad 1 (EWS II). As referenced above, these wells were designed to investigate: a) the presence of hydrocarbons on the southern margin of the EWS II field; b) potential stratigraphic and structural relationship with EWS III; and, c) the concept of thicker, better-developed, reservoir sands in off-structure locations.

·; Appraisal well 103 (EWS II - 103) which was spudded on the 11 August 2011, was drilled on the southern part of the developed portion of EWS II field. The well was drilled directionally 1.1 km to the south-west from the well pad in the direction of EWS III. The well encountered the top of the gross Jurassic J2-5 reservoir interval at depth -1,971 meters and the base at -2,069 meters. Total gross Jurassic interval is 98 meters which is substantially greater than has been encountered typically in previously drilled on-structure wellbores. Effective net oil pay of 27.3 meters, as derived from petrophysical analysis of wireline logs, is indicated within this gross interval. Although some direct signs of hydrocarbons were observed in this interval, the calculated net pay thickness is inconclusive. As a result the Group is currently conducting formation testing and core sample analysis.

·; Appraisal well 118 (EWS II - 118) which was spudded on 24 July 2011, was also drilled on the southern part of the developed portion of EWS II field. Similar in concept to the well 103, this well was drilled directionally 1.4 km to the south-west from the well pad. The well encountered the top of the gross Jurassic J2-5 reservoir interval at depth of -1,952 meters and the base at -2,027 meters. Total gross Jurassic interval is 75 meters which is also substantially greater than has been encountered typically in previously drilled on-structure wellbores. Effective net oil pay of 8.8 meters, as derived from petrophysical analysis of wireline logs, is indicated within this gross interval. Because this net pay thickness estimate is inconclusive the Group is currently planning direct formation testing.

The following appraisal results have been previously announcedduring the course of 2011:

·; Appraisal well 111 (EWS II - 111) which was spudded on 2 July 2011, was drilled on the southern part of the developed portion of EWS II field; similar in concept to the well 103, but more to the eastward direction. The well encountered the top of the gross Jurassic J2-5 reservoir interval at depth of -1,958 meters and the base at -2,037 meters. Total gross Jurassic interval is 79 meters which is also substantially greater than has been encountered typically in previously drilled on-structure wellbores. Effective net oil pay of 17.2 meters, as derived from petrophysical analysis of wireline logs, is indicated within this gross interval. Direct formation testing may be required in order to substantiate these calculations.

These three wells have demonstrated clearly that thicker and better-developed Jurassic reservoir sands are present in off-structure locations. Further, they provide evidence supporting some degree of structural and stratigraphic correlation with EWS-III further to the south. Upon completion of successful formation testing of such sands, evidence will then be available to support increased volume estimates of EWS II reserves and resources.

Development Drilling Programme

·; Development well 4 (EWS I - 4), which was spudded on 18 July 2011 was drilled in 28 days on the southern part of the EWS I field (Pad 4). The well was drilled directionally 1.0 km to the west from the well pad. The well encountered Jurassic P reservoir at a depth of -1,800 meters confirming the presence of 13.2 meters of effective net pay within the Jurassic. The well was tested using ESP and has produced water-free oil with a flow rate of 658 bbl/day and has been connected to the existing production facilities.

·; Development well 18 (EWS I - 18), which was spudded on 17 September 2011 was drilled in 16 days on the eastern part of the EWS I field (Pad 4). The well was drilled directionally 1.3 km to the south from the well pad. The well encountered Jurassic P reservoir at depth of -1,807 meters indicating the presence of 17.1 meters of effective net pay within the Jurassic. Upon completion of successful testing it will be connected to the existing production facilities.

·; Development well 76 (ETP III - 76) was drilled on the southern part of the ETP III field. The well reached a target depth of 3,418 meters and is currently being tested. A further announcement on Well 76 will be made within the next few weeks.

The following drilling results were previously announced during the course of 2011:

·; Development well 43 (East EWS I - 43), which was spudded on 6 September 2011 was drilled in 21 days on the south-eastern part of East EWS I field (Pad 32). The well was drilled directionally 0.7 km to the north from the well pad. The well encountered the Jurassic P reservoir at 1,826 meters, confirming 15.5 meters of effective net oil pay within the Jurassic. The well flowed water-free oil naturally to the surface with a flow rate of 595 bbl/day on an 8 mm choke and has been connected to existing production facilities. 

·; Development well 44 (East EWS I - 44), which was spudded on 1 August 2011 was drilled on a south-eastern part of the East EWS I field (Pad 32). The well was drilled directionally 1.3 km to the west from the pad. The well encountered the Jurassic P reservoir at 1,834 meters, confirming 7.3 meters of effective net oil pay within the Jurassic and 3.1 meters of oil-water transition zone. The well flowed water-free oil naturally to the surface with a flow rate of 768 bbl/day on a 10 mm choke and has been connected to existing production facilities.

·; Development well 45 (East EWS I - 45), which was spudded on 8 June 2011, was drilled on the southern part of the East EWS I field from well pad 32. The well was drilled directionally 0.8 km west of pad 32. The well encountered Jurassic P formation at -1,833 meters, confirming the presence of effective net oil pay of 16.2 meters within the Jurassic. The well flowed oil at a rate of 550 bbl/day on a 6 mm choke and has been connected to existing production facilities.

·; Development well 14 (EWS I - 14), which was spudded on 27 May 2011, was drilled on the southern margin of the EWS I field. The well was drilled directionally 1.4 km west from pad 4. The well encountered Jurassic P formation at -1,821 meters confirming effective net oil pay of 10.7 meters. The well flowed water-free oil with a flow rate of 280 bbl/day.

A conference call with the Exillon Energy management to discuss this announcement will be held today, 26 October 2011, at 12:00 GMT. In order to register for participation in this call, or for further information, please contact Olga Gorina on +7 (495) 232-65-13 ext.116 or [email protected]. Please ensure that you register to take part in the call no later than 11:00 GMT.

Contact details:

About Exillon:

Exillon Energy is a British independent oil producer with assets in two oil-rich regions of Northern Russia: Exillon TP in Timan-Pechora and Exillon WS in West Siberia. Exillon Energy plc is incorporated in the Isle of Man, with head office in Urai, Russian Federation. For further information please visit: www.exillonenergy.com 

Disclaimer

This statement may contain forward-looking statements concerning the financial condition and results of operations of the Group. Forward-looking statements are statements of future expectations that are based on the management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. No assurances can be given as to future results, levels of activity and achievements and actual results, levels of activity and achievements may differ materially from those expressed or implied by any forward-looking statements contained in this report. The Group does not undertake any obligation to update publicly or revise any forward-looking statement as a result of new information, future events or other information.