Progress Report on R-103 Frac in Ukraine

JKX OIL & GAS plc ("JKX")

Progress Report on R-103 Frac in Ukraine

JKX Oil & Gas plc ("JKX") is pleased to provide details of Stages 4 to 7 of the well R-103 frac and advise that the number of planned stages has now increased from nine to ten. Each stage covers approximately 100m of the sub-horizontal 1,000m reservoir section. Work has now started on the final Stages 8 to10 of the programme.

JKX's Chief Executive, Dr Paul Davies, commented: "The last four stages have proved to be more challenging but the results continue to be encouraging. Stage 4 was our largest frac of the operation and Stages 6 and 7, despite placing smaller volumes of proppant, appear to have also been effective. The additional equipment needed to handle the higher pressures has added to the time needed to complete each stage. I look forward to reporting progress on the final three stages of the programme soon."

As reported on 31 July, the well was shut-in following the short flow-back on completion of Stages 1, 2 and 3.

Stage 4 was completed without incident with plug setting, perforating, mini and main frac operations performed to plan. Total proppant injected was 140 tons, total volume of gel and fluid was 621 cubic metres and the pump rate was 3.38 cubic metres per minute (31,000 bpd) with a pump pressure of 682 bar (9,900psi). The propped frac length was calculated at 139m with an average width of 6.3mm. It was decided to drill out the plug between Stages 3 and 4 and perform a 24 hour flow back which recovered 210 cubic metres of fluid.

Stage 5 proved to be more difficult. The first attempt with the min-frac was shut down as the surface pump pressure required to achieve breakdown exceeded the 690 bar limit on the system. After re-perforating, the mini-frac and initial stages of the main frac appeared to be going smoothly with a pump rate of 3.7 cubic metres per minute (34,000 bpd), but soon after the introduction of proppant to the stream the pump pressure began to increase and at 680 bar the well refused to take any more of the frac fluid and proppant mix - it "screened out". Total proppant injected was 14.5 tons with just over 400 cubic metres of gel.

Additional equipment was installed to increase the capability of the system to handle surface pressures up to 800 bar (11,600 psi).

Stage 6 experienced similar difficulties to Stage 5 despite the increased limit for surface pressures. The breakdown pressure was 725 bar in the mini-frac and 650 bar in the main frac with the pump rate increasing to 4 cubic metres per minute (36,500 bpd), and fluid injection volume reaching 390 cubic metres. Again, the well screened out after injecting 18 tons of proppant with the surface pump pressure reaching 790 bar.

Some positive aspects of these last two stages were noted. Both of the Stage 5 and 6 fracs appear to have been in higher pressure and higher permeability regions of the wellbore, and the frac dimensions were still substantial, indicated by the large volume of fluid injected ahead of the proppant. The higher permeability aspect is reflected in the fact that the well started to flow back gas during the normal post-frac pressure release phase - indicating that the calculated propped frac length of 49 metres was sufficient to access a more permeable reservoir zone.

The design of Stage 7 took into account the results of the two previous fracs. This was tuned further with an additional pre-frac pressure test which led to the adoption of a lower proppant density and a smaller volume of fluid. This resulted in a successful frac with a breakdown pressure of 560 bar (8,120 psi), a total of 44 tons of proppant and 424 cubic metres of gel and fluid injected. The pump rate reached 4.9 cubic metres per minute (44,000 bpd) with a final pump pressure of 803 bar (11,643 psi). The propped frac length was calculated at 82m with an average width of 3.6mm.

The plug between Stages 6 and 7 was drilled out successfully, but technical difficulties prevented the plug between Stages 5 and 6 being removed; this plug will now be removed prior to the final clean-up and flow back. Stages 6 and 7 were allowed to flow back together and the total volume of liquids recovered was 148 cubic metres.

Work has now commenced on Stage 8 and will be followed by Stages 9 and 10. Stage 8 is an additional frac and is, effectively, a replacement for the low performing Stage 5.

JKX Oil & Gas plc is an exploration and production company listed on the London Stock Exchange. The Company has licence interests in Ukraine, Russia, Hungary and Slovakia.

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For further information please contact:

Anthony Cardew / Lauren Foster, Cardew Group T: 020 7930 0777