Shareholder update

Urals Energy PCL

(''Urals Energy'', the ''Company'' or the ''Group'')

Shareholder update

Urals Energy PCL (AIM:UEN), the independent exploration and production company with operations in Russia, is pleased to announce the following update for its shareholders. In this update the Board has sought to clarify a number of issues raised by shareholders over the last few months.

Listing on AIM

The Board is aware that a number of companies with Russian assets have recently proposed to cancel the listings of their shares on markets such as AIM. Reasons given by these companies have included: i) the large disparity between the current stock market valuation of such companies compared with the value of their assets on a traded Net Present Value basis; ii) the effect of this valuation disparity on the ability of these companies to raise addition equity and/or debt; and iii) the costs of maintaining a listing.

The Board believes that the low valuations of listed companies with Russian assets is a market phase that listed companies need to live through. Russia is still the largest oil producer in the world and has much scope for adding reserves and production. Our cash operational costs in Russia are low (see below), and the importance of the oil industry to Russia has been demonstrated by the significant offset of recent oil price weakness by the exchange rate for the Russian Rouble. Urals Energy is in the position of not having a highly leveraged balance sheet which needs to be refinanced in the short term.

The Company's financial position allows the Board to follow its strategy of selective acquisitions in these difficult circumstances and the Board believes that maintaining a share trading facility on AIM is key to the Company executing its strategy. The Board has recently taken steps to reduce the costs of the Company's listing on AIM.

Cost savings

The Company's average cash cost per barrel at the well head (net of taxes) has been US$8.40 per barrel over the nine months to December 2015, compared with US$14.5 per barrel for the same period in 2014. Some of these production cost reductions have been offset recently by some Russian Rouble inflation and movements in exchange rates. During the final months of 2015, the Russian Rouble recovered some of its heavy falls against the US Dollar from earlier in 2015. Other cost reductions have been achieved by: i) delaying the start of new wells; and ii) reducing general administration costs, including as noted above the costs of maintaining the listing of the Company's shares on AIM.

Komineftegeofizika ("KNGF") update

As announced on 19 November 2015, the consideration the Company paid for the acquisition of BVN Oil Limited ("BVN") included debt owed by BVN to KNGF being offset against amounts owed by KNGF to the Company as a result of the 2014 arbitration award. Following a cash payment to Urals Energy, KNGF has fulfilled its obligations to Urals Energy.

Update on Well 109

On 15 March 2016 Urals Energy announced an update on Well 109. A workover is in hand on this well with the aim of slowing the production of highly pressured water.

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