Preliminary unaudited year end results for 2010

Exillon Energy plc

Preliminary unaudited year end results for the year ended 31 December 2010

18 March 2011

Exillon Energy plc ("Exillon Energy", the "Company" or the "Group") (EXI.LN), a British listed independent oil producer with assets in two oil-rich regions of northern Russia, Timan-Pechora ("Exillon TP") and West Siberia ("Exillon WS"), today issues its preliminary unaudited results for the year ended 31 December 2010.

Group Highlights

Corporate - FTSE promotion

- Admitted to the FTSE All-Share Index and the FTSE Small Cap Index effective 17 September 2010

- Promoted to the FTSE 250 Index effective 17 December 2010

Reserves - significant increase in booked volumes across 1P, 2P and 3P levels

- Group 1P reserves increased by 72% to 112 million barrels, 2P reserves increased by 82% to 239 million barrels and 3P reserves increased 19% to 439 million barrels as evaluated by Miller & Lents effective 31 December 2010

Production - substantial increase in output recorded

- The Group started the reporting period with production of 2,400 bbl/day and finished the year with production of 8,100 bbl/day, achieving an average daily production rate of 4,656 bbl/day, an increase of 137.8% over the comparable period in 2009 (2009: 1,958 bbl/day)

Financial - well funded for operational programmes

- 2010 revenue increased to $84.8 million, up from $22.5 million in 2009

- Equity offering raised $32.2 million in the second quarter

- Loan facility secured $50.0 million at an interest rate of LIBOR + 7%

- Group cash balance of $56.3 million at 31 December 2010 with $10.0 million of debt maturing in 2012, $20.0 million of debt maturing in 2013 and $20.0 million of debt maturing in 2014

Regional Highlights

Exillon WS

- Achieved 100% drilling success rate across seven wells drilled in 2010

- Successfully re-entered and tested two legacy wells with results supporting the possibility that EWS II and III fields could form a single large accumulation

- Completed 39 km pipeline allowing year round production to start on 6 June 2010

- Completed the first stage of an oil processing facility, allowing production of commodity oil

- Completed a permanent oil filling station next to the interstate road, shortening the transportation distance and allowing utilisation of higher capacity trucks

- Successful completion of infrastructure and completion of new wells led to a start of year round production of 4,750 bbl/day

Exillon TP

- Acquired the North Kenyunskoye licence adjacent to Exillon TP's ETP V field 

- Completed installation of the Gas Power Generator with 1MW capacity

- Successfully completed workover of 7 wells in Timan Pechora leading to an increase in production to 3,350 bbl/day

Alessandro Manghi, Chief Executive Officer, said:

"During 2010 the Group increased production 238% to 8,100 bbl/day, increased 2P reserves by 82% to 239 million barrels and completed some key infrastructure projects. We believe the macroeconomic and operational environment continues to be favourable for our business, and that there is substantial opportunity for further growth in our business."

Contact Details:

Tom Blackwell

[email protected]

Tel: +44 207 920 2330

Chief Executive's Report

After our successful IPO in December 2009, Exillon has achieved a number of important objectives and importantly positioned itself for future growth.

Operations

During 2010 the Group successfully increased production by 238% to 8,100 bbl/day and 2P reserves by 82% to 239 mmbbl.

In addition, a number of key infrastructure projects were completed, including a 39 km pipeline connecting Exillon WS oil fields to an interstate road, an oil processing facility and an oil filling station in Exillon WS, a 1 MW gas power generator in Exillon TP and a network of infield pipelines in both assets.

Financial

The Group has maintained a healthy financial position, having successfully raised $32.2 million in equity in the second quarter and later securing a $50.0 million loan facility at a competitive interest rate. Accelerated production helped us to significantly increase our revenue. Revenue in 2010 reached $84.8 million (up from $22.5 million in 2009).

Outlook

In 2011 the Group is planning to drill 21 new wells in an effort to more than double production by the end of 2011, reaching 17,000 bbl/day by the end of the year.

The Group is also planning to acquire 250 km2 of 3D seismic and 440 km2 of gravimetric and magnetic surveys across Exillon WS fields in order to improve our understanding of the fields and identify new opportunities. In addition, the Group will be completing additional infrastructure projects such as an entry point to the Transneft system that will allow us to drive operating costs down further.

Alessandro Manghi

CEO

Exillon Energy

MATERIAL EVENTS AND TRANSACTIONS

Operational Management Structure

On 15 March 2010, Exillon moved its operational management centre to Urai (Khanty-Mansiysk Autonomous Okrug, Western Siberia, Russian Federation), close to its Exillon WS assets. The move will reduce administrative costs and improve management oversight, ensuring that the Company has the right management on the ground.

Loan Facility

Exillon Energy agreed a term loan facility with Credit Suisse on 10 September 2010. The US$50 million facility has a LIBOR plus 7% interest rate, a term of 3.5 years, and is free of any equity related components.

The loan facility was drawn in full by the Company on 18 October 2010.

Placing of Shares

In June 2010 the Group placed 12,552,082 new ordinary shares to institutional investors (the "Placing"). The price per share was 170 pence, resulting in proceeds to the Company of $32.2 million. In addition, as part of the Placing, the Company's Chairman and principal shareholder, sold 9,740,953 ordinary shares in which he had a beneficial interest leaving him with a beneficial interest of 49.9% in the Company's outstanding issued share capital.

Production

The Group started the reporting period with production of 2,400 bbl/day and finished the reporting period with production of 8,100 bbl/day, achieving an average daily production rate of 4,656 bbl/day, an increase of 137.8% over the comparable period in 2009 (2009: 1,958 bbl/day).

OPERATIONAL REVIEW

Exillon TP

Exillon TP had a successful year, producing 1,050,997 bbl and generating revenue of $58.3 million, thus exceeding its revenue target of $50 million. The crude oil extracted from the Exillon TP fields is of high quality, with an average density of 35 to 38 API, low sulphur content of less than 0.4% and low paraffin content.

In 2009 Exillon TP owned four licences - three for production and one for production and exploration. On 25 February 2010, the Group acquired an additional licence in a state auction, which covers 119 sq km, most of which is covered by 2D and 3D seismic and borders the west margin of the ETP V field. The licence consists of three main structures with possible reserves estimated at 1.2 mmbbl, and unrisked net prospective resources estimated at 25.6 mmbbl. The new licence represents a significant addition to the Company's portfolio; development of the field is expected to commence in 2012.

At Exillon TP the main focus has been on production optimisation through the well workover programme which commenced in early 2010, and on construction of a Gas Power Generating Unit with 1MW capacity which brought a considerable reduction in diesel costs. During 2010, workover of 7 wells in Timan Pechora was successfully completed leading to an increase in production to 3,350 bbd.

Exillon WS

Uninterrupted production at Exillon WS started in June 2010, upon completion of the pipeline, infield infrastructure and drilling projects.

In February 2010, Exillon WS started construction of a 39 km pipeline from the EWS I oil field to a year-round state road. The pipeline was successfully completed in Q2 2010, and enabled the Group to unlock the potential of Exillon WS allowing the commencement of year round production.

To reduce dependence on third parties and to improve the economics of oil production, the first stage of an infield oil processing facility was completed, allowing production of commodity oil. A permanent oil filling station next to the interstate road was also completed in 2010, shortening the transportation distance and allowing for the use of higher capacity trucks. Commencement of oil processing at Exillon WS in October 2010 provided the Company with more options to sell its oil and to reduce transportation and processing costs further. The Group has now signed an agreement and started trucking oil from Exillon WS to the oil filling station owned by a third party, which is about 70km closer than the previous alternative.

Drilling

Exillon WS drilled seven wells during the period, achieving a 100% drilling success rate. The wells were drilled with an average drilling time of 30 days per well, and at an average cost of $1.2 million. Five wells drilled on EWS I fields were tested and achieved an average test flow rate of 524 bbl/day of water-free oil.

In addition in 2010, two legacy wells were successfully re-entered and tested with results supporting the possibility that EWS II and III fields could form a single large accumulation.

FINANCIAL REVIEW

The Unaudited Consolidated Financial Information which follows should be read in conjunction with this review which has been included to assist in the understanding of the Group's financial position at 31 December 2010.

Summary

The Group has maintained a healthy financial position due to the successful issuance of new shares in 2010, securing loan financing, strong growth in oil reserves and rising production levels.

In June 2010, the Group issued 12,552,082 of new shares with total proceeds of $32.2 million. Costs related to the issuance of new shares amounting to $1.9 million were recorded in the share premium account as directly attributable to the equity raising.

On 10 September 2010 Exillon Finance Limited agreed a $50,000,000 term loan facility with Credit Suisse. The facility has a competitive interest rate above LIBOR, a term of 3.5 years, and is free of any equity related components.

The Company was admitted to the FTSE 250 Index on 20 December 2010.

During the reporting period, Group production rose to 8,100 bbl/day following completion of workovers of 7 wells in Exillon TP and the launch of uninterrupted production at Exillon WS in June 2010.

Income Statement

The Group's revenue for the year ended 31 December 2010 comprised revenue from sale of crude oil and amounted to $84.8 million (2009: $22.5 million), of which $58.6million or 69% came from export sales and $26.2 million or 31% came from domestic sales. The increase in revenue was driven by the acceleration of production: a 47% increase to 1,050,997 bbl (2009: 714,672 bbl) in Exillon TP production following well optimisation programme in early 2010 and 649,312 bbl (2009: nil) production in Exillon WS following the start of production in Q2 2010. The Group achieved an average oil price of $74/bbl (2009: $63/bbl) for export sales and $30/bbl (2009: $27/bbl) for domestic sales, reflecting strengthening and stabilising crude oil prices during the period.

Cost of sales excluding depreciation, depletion and amortisation increased to $34.4 million or 40.6% of the Group's revenue (2009: $10.5 million or 46.7% of Group's revenue) as a result of an increase in production of 138% to 1,700,309 bbl (2009: 714,672 bbl).

The Group's depreciation, depletion and amortisation costs primarily relate to the depreciation of proven and probable reserves and other production and non-production assets for the year ended 31 December 2010. These costs totalled $6.7 million (2009: $3.5 million) or 8% of the Group's revenue (2009: 16%). The increase in DD&A costs is driven by higher production volumes.

Selling expenses for 2010 of $36.3 million (2009: $8.1 million) or 42.9% of Group's revenue (2009: 36%), comprised export duties of $28.9 million (2009: $5.8 million), which represented 49% of the Group's export sales (2009: 45%); transportation services of $6.7 million (2009: $2.1 million) and other selling expenses of $0.7 million (2009: $0.2 million). Export duty rates increased at the beginning of the period by 14%, from $267 per ton to $303.8 per ton following the increase of crude oil prices, due to the fact that the Russian government has been revising the crude oil export duty monthly on the basis of the immediately preceding month's average crude oil price.

Administrative expenses totalled $11.7 million (2009: $9.4 million) amounting to 13.8% of the Group's revenues (2009: 41.7%). The increase is primarily attributable to the increase in salaries and consulting costs.

The 2010 taxation credit of $0.14 million (2009: $0.27 million) comprised an income tax charge of $0.32 million (2009: $0.03 million) and a deferred tax credit of $0.46 million (2009: $0.3 million). Income tax charge relates to the Exillon TP's operating profit generated in 2010. Exillon WS has also generated operating profit in 2010, but no current income tax was accrued, because of tax loss carry forward from previous periods. The basic corporate income tax rate in the Russian Federation is 20%.

The Group's net loss decreased by U.S.$13.6 million from $17.2 million (pre bargain purchase gain) in 2009 to $3.6 million in 2010 primarily due to the increase in production and higher crude prices. This had a positive effect on revenue but was offset by an increase in depreciation, depletion and amortisation leading to losses in 2010. Despite these losses, the Group continues to be well funded and able to finance ongoing operational programmes.

Financial Position

In June 2010, the Group issued 12.5 million ordinary shares at a value of $30.3 million (net of transaction fees) to fund exploration and development activity. Total equity as at 31 December 2010 was $408.0 million compared to $383.8 million at the beginning of the year.

The Group ended the year in a strong financial position with $56.3 million of cash and cash equivalents (2009: $34.3 million), of which $47.1 million (net of transaction fees) was received from the term loan agreed with Credit Suisse in September 2010. The cash proceeds will be used to finance drilling and infrastructure related projects in Exillon WS and Exillon TP.

The increase in the property, plant and equipment has been driven by the construction of pipeline, drilling of wells and other field developments in Exillon WS; successfully completed installation of the Gas Power Generator at Exillon TP and the purchase of the ETP VI licence.

Cash Flow

Net cash used in operating activities for 2010 was US$6.7 million, compared to US$7.1 million used in 2009. Operating cash flow before working capital changes was positive in 2010, at US$3.9 million compared to an outflow of US$9.9 million in 2009. Net cash from operating activities was positively affected by longer payment terms for tax payments to the Russian Government. The was offset by a decrease in trade and other payables following the settlement of payment obligations for drilling works and an increase in trade and other receivables because of the expansion of the Group's operations in 2010.

Net cash used in investing activities during the year was US$48 million (2009: US$63.7 million) representing capital expenditure for purchase of equipment for works related to the drilling of wells and the construction of infrastructure.

Cash flow from financing activities was US$76.7 million (2009: US$104.9 million). This inflow relates to the net proceeds from borrowings of US$47.1 million (2009: $9.1 million) and net proceeds of US$30.3 million from the issue of new shares.

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 Company 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.

exillon energy plc

consolidated statement of comprehensive income (UNAUDITED)

exillon energy plc

consolidated statement of changes in equity (UNAUDITED)

exillon energy plc

consolidated statement of cash flow (UNAUDITED)

exillon energy plc

notes to the financial INFORMATION (UNAUDITED)

The principal activity of the Company and its subsidiaries (together "the Group") is the exploration, development and production of oil within the Commonwealth of Independent States ("CIS") region. The Group's production facilities are based in the Republic of Komi and the Khanty-Mansiysk Region of the Russian Federation. The Group's structure is given in Note 18.

Exillon Energy plc (the "Company" or the "Parent") is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the Isle of Man. The company was formed on 27 March 2008. Its registered address is Fort Anne, South Quay, Douglas, Isle of Man, IM1 5PD.

As at 31 December 2010, the main shareholder has 49.9% in the Company's outstanding issued share capital.

The Group's operations are conducted primarily through its subsidiaries, Exillon TP and Exillon WS.

2. basis of preparation

The financial information in this announcement does not constitute the Group's annual accounts for the years ended 31 December 2010 or 2009. The preliminary results for the year ended 31 December 2010 have been extracted from unaudited consolidated financial statements. The financial information for the year ended 31 December 2009 is derived from the annual report for that year.The consolidated financial statements of Exillon Energy plc have been prepared in accordance with International Financial Reporting Standards ("IFRS"), International Financial Reporting Interpretation Committee ("IFRIC") interpretations and on the historical cost basis with the exception of share based payments, that are incorporated using fair value.

3. segmental analysis

Management has determined the operating segments based on the reports reviewed by Directors that are used to make strategic decisions, who are deemed to be the chief operating decision maker.

Exillon Energy plc manages its business as 3 operating segments, Exillon WS, Exillon TP andRegional Resources.

·; Exillon TP: oil company based in the Timan-Pechora basin in the Komi Republic in the Russian Federation. The revenue is derived from extraction and sale of crude oil.

·; Exillon WS: oil company based in Western Siberia in the Russian Federation. The revenue is derived from extraction and sale of crude oil.

·; Regional Resources: oil trading company based in Moscow in the Russian Federation.

Segmental information for the Group for the year ended 31 December 2010 is presented below:

*under Russian Accounting Standards

For the year ended 31 December 2010, revenues of approximately $33,289 thousand (full amount is attributable to Exillon TP), $22,084 thousand (full amount is attributable to Exillon TP) and $14,753 thousand (TP: $3,869 thousand; WS: $10,884 thousand) are derived from three external customers. These revenues are attributable to Exillon TP and Exillon WS segments and are from the only customers which individually represent over 10% of the Group's revenues.

The Group's management assesses the performance of the operating segments based on EBITDA (Earnings before interest, tax, depreciation and depletion and exploration expenses) which is calculated as follows: operating result plus depletion and depreciation, exploration and evaluation expenses and plus/minus other significant one-off income/(expenses). In 2009, other significant on-off items included Bargain purchase gain. EBITDA is calculated based on depletion and depreciation calculated in compliance with IFRS.

Net back is defined as revenue less selling and transportation expenses.

Segmental information for the Group for the year ended 31 December 2009 is presented below:

**under Russian Accounting Standards

For the year ended 31 December 2009, revenues of approximately $12,840 thousand and $3,379 thousand are derived from two external customers. These revenues are attributable to Exillon TP segments and are from the only customers which individually represent over 10% of the Group's revenues.

Reconciliation of operating (loss)/profit to EBITDA for the year ended 31 December 2010 is presented below:

Reconciliation of operating (loss)/profit to EBITDA for the year ended 31 December 2009 is presented below:

For management purposes, depreciation calculated in accordance with Russian Accounting Standards (RAS) is reported to the CODM. IFRS depreciation is calculated based on fair value of Property, plant and equipment as it was measured in business combination, while RAS calculations are based on historical costs. Another principle difference of calculation relates to the usage of straight-line method for Property, plant and equipment related to oil and gas production activities in RAS instead of usage of unit-of-production method used in IFRS. The reconciliation of depreciation is presented below:

Activities by geographical areas

The Group derives its revenue from export and domestic sales with allocation of revenue on the basis of the customer's location:

For the year ended 31 December 2010, revenues of approximately $14,660 thousand, $3,403 thousand and $2,880 thousand are derived from three external customers and attributable to domestic sales. Export sales included revenues from two customers which individually represent over 10% of the Group's revenues.

For the year ended 31 December 2009, revenues of approximately $4,420 thousand, $1,250 thousand and $961 thousand are derived from three external customers and attributable to domestic sales. Export sales are derived from a single external customer, which individually represent over 10% of the Group's revenues.

As at 31 December 2010 and 31 December 2009, non-current assets located outside the Russian Federation were insignificant.

4. revenue

5. cost of sales

6. selling expenses

7. administrative expenses

8. earnings per share

Basic earnings per share ('EPS') is calculated by dividing net profit for the year attributable to ordinary equity shareholders of the Group by the weighted average number of ordinary shares outstanding during the period.

The following reflects the income and adjusted share data used in the EPS computations:

9. Property, plant and equipment

Included within oil and gas properties as of 31 December 2010 is $2,829 thousand (2009: $1,746 thousand) relating to decommissioning costs and $175 thousand (2009: nil) relating to borrowing costs capitalised during the period. Total borrowing costs incurred during the period amounted to $989 thousand with capitalisation rate equal to 17.7%.

Exploration and Evaluation Assets as of 31 December 2010 are attributable to the North Kenyunskoye licence acquired in February 2010.

Construction in progress relates to the construction of infield infrastructure and drilling of oil wells commenced during the year ended 31 December 2010.

10. Inventories

11. trade and other receivables

In determining the recoverability of a trade receivable, the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Accordingly, the management of the Group believes that there is no further credit provision required in excess of the allowance for doubtful debts.

12. provision for decommissioning

In accordance with the licence agreements the Group is liable for site restoration, clean up and abandonment of the wells upon completion of their production cycle. The provision for future site restoration relates to obligations to restore the oilfields after use. All of these costs are expected to be incurred at the end of the life of wells after 2027. They depend on the estimated lives of the wells, the scale of any possible contamination and the timing and extent of corrective actions.

The unwinding of the discount related to future site restoration and abandonment reserve is included within finance costs. The management believes that this estimate of the future liability is appropriate to the size of the fields.

13. trade and other payables

Long-term payables represent payables to Zarubezhneft, which had arisen from the purchase of oil well #15 in January 2009. The amount is payable in monthly installments of $195 thousand until the end ofApril 2011.

14. borrowings

There is no material difference between the carrying amount and fair value of borrowings.

Credit Suisse - On 10 September 2010, the Group agreed a loan facility of $50 million with a term of 3.5 years. Interest is charged at LIBOR plus 7% interest rate. At 31 December 2010, the outstanding balance of $47,147 thousand was recognized net of the unamortized amounts of borrowing costs of $2,853 thousand. The amortisation of borrowing costs for 2010 was $230 thousand.

The loan is free of any equity related components and is repayable in instalments from 18 January 2012: four equal payments in the amount of $2.5 million will be made on a quarterly basis in 2012; four equal payments in the amount of $5 million will be made on quarterly bases in 2013; the payment of $5 million will be made on 20 January 2014 and the remaining amount of $15 million will be paid on 22 April 2014.

The interest is payable quarterly with the first payment made in January 2011.

The loan is secured by a pledge of the 100% shares of certain Group's subsidiaries (Note 17): Exillon TP, Exillon WS, Regional Resources LLC, Ucatex Oil LLC, Kayumneft LLC, Nem Oil LLC, Actionbrook Limited, Claybrook Limited, Diamondbridge Limited, Lanarch Limited, Halescope Limited, Vitalaction Limited, Corewell Limited, Touchskope Limited and Silo Holdings Limited and Exillon Finance Limited.

The loan is also secured by the rights to receive cash from Trade receivables balances under export contracts with Vitol S.A. and Altex Handel und Betatung GmbH and cash balances from bank account opened in CJSC Bank Credit Suisse (Moscow).

15. share capital

The amount of share capital available for issue at the date of these consolidated financial statements and the issued share capital of the Company are as follows:

The total number of allotted ordinary shares is 138,072,911 with a par value of $0.0000125 each.

Share split - each of the authorised but unissued ordinary shares of $0.001 par value in the capital of the Company was subdivided into 80,000,000 ordinary shares of $0.0000125 par value each.

Shares issued to EBT - an employee benefit trust ("EBT") was set up on 11 December 2009, before the IPO date and subscribed for 3,765,624 ordinary shares in the Group at nominal price for the total amount of $47. The market value of the shares as at 31 December 2010 is £12,351 thousand or $19,109 thousand (2009: £6,778 thousand or $10,796 thousand).

The Group intends to operate Performance Share Plan by distribution of these shares to the employees in accordance with performance criteria. Currently, the Group hasn't yet established performance criteria and employees to whom shares will be granted, and no awards have been made to employees. The members of the Board constituting the remuneration committee will determine the performance criteria for each eligible employee after the 2010 financial year.

IPO share awards - 1,255,205 ordinary shares awards with a par value of $0.0000125 each were awarded to Directors and senior management as part of the IPO plan. The share awards are subject to a restriction period of three year from the date of the IPO, during which any dealings are prohibited.

Issuance of shares on IPO - on 17 December 2009, the Company successfully completed its IPO and Listed on the London Stock Exchange. A total number of 40,500,000 new shares with a par value of $0.0000125 each were issued at £1.53 for total proceeds of £61,965 thousand or $100,644 thousand. Costs related to the issuance of new shares and attributable to IPO costs taken against share premium amounted to $5,860 thousand.

Issuance of new shares - on 24 June 2010, the Company issued 12,552,082 of new shares with a par value of $0.0000125 each at £1.70 for total proceeds of £21,339 thousand or $32,190 thousand. Costs related to the issuance of new shares taken against share premium amounted to $1,939 thousand.

16. COMMITMENTS AND CONTINGENCIES