Signs Agreement with MEO for Puka Farm-out

Kea Petroleum plc

("Kea" or the "Company")

Signs Agreement with MEO Australia for Puka Farm‐out 

· NZ$14m staged work programme with MEO to boost production and further appraise Puka.

· Phase 1: MEO firm commitment of NZ$4m to earn a 30% interest with a work program consisting of:

o the workover of both existing Puka wells to boost production;

o the drilling of a new well from the existing surface location to test a potential reservoir sweet spot and further boost production; and

o testing the suspended Douglas 1 well to determine the fluid content of the Tikorangi Limestone and the Northern extent of the Puka field.

· Phase 2: MEO election for a further commitment of NZ$7.5m (to earn a further 20% interest) for a subsequent development phase which is anticipated to include:

o the construction of a new central drilling and production facility;

o drilling of appraisal wells to evaluate the central portion of the field identified by both parties on 3D seismic data to assist in resource determination;

o enhance field production through the application of horizontal drilling and production techniques, including at least one further high angle producer.

The PEP 51153 permit (the "Permit") covers an area of 104.4 sq km situated onshore along the eastern margin of the Taranaki Basin, New Zealand's prolific hydrocarbon province.

Under the Agreement, MEO will earn a 30% interest in the Permit in return for funding NZ$4m (80%) of a NZ$5m first phase work program ("Phase 1"). Phase 1 is intended to boost existing production and assist future field appraisal and involves a workover of the existing two Puka wells and drilling of a new well (Puka-3) from the existing pad with the objective of further increasing production and appraising the prognosed primary channel sand identified on the recent 3D seismic survey. Phase 1 also involves further testing of the suspended Douglas-1 well. The testing program will be designed to definitively test the Tikorangi Limestone and to confirm log pay in the northern extension of the Puka field at the lower Mount Messenger level. Phase 1 is intended to commence by the end of June 2014.

Upon assessment of the results of Phase 1, MEO can elect within 6 months to earn an additional 20% participating interest in the Permit by funding NZ$7.5m of a NZ$9m second phase work program ("Phase 2"). Phase 2 is intended to further appraise and commercialise Puka by developing a new surface location from which the central portion of the field can be accessed. Further wells, potentially including horizontal wells, are planned to be drilled and tested from this location to assist with field appraisal, reserves certification and design of a full field development plan. Upon completion of Phase 2, which will also involve the establishment of permanent production facilities, MEO will have earned a 50% interest in the Permit.

Both work program phases are designed to move the discovery towards full field development in 2016 by reducing uncertainties in relation to achievable flow rates in horizontal wells, resource size and recovery.

At the conclusion of Phase 1 or 2 the parties have agreed that MEO has the option to enter into negotiations to acquire KEA's remaining interest in the Permit.

The farm-out is subject to customary conditions precedent, including applicable New Zealand government and regulatory approvals.

Commenting, Ian Gowrie-Smith, Kea's Chairman said:

"Kea's future success was dependent upon attracting a quality farm-in partner to assist in the development of Puka. We are delighted with the introduction of MEO into PEP 51153 and the farm-out arrangements which provide for a substantial carry for Kea.

"The agreed work programme is designed to boost near-term oil production, verify the Puka 2P resource, and accelerate the commercialisation of the oil potential identified within the permit. MEO's entry into onshore New Zealand is very welcome, bringing valuable additional technical and commercial expertise at a critical time for the development of Puka. MEO's technical team has extensive expertise in major oil companies with geologically similar turbidite fields. MEO's staff also have significant international development and commercial expertise that complements Kea's technical strengths and local operational expertise."

This release has been approved by non‐executive director Peter Mikkelsen FGS, AAPG, who has consented to the inclusion of the technical information in this release in the form and context in which it appears.

For further information please contact:

Kea Petroleum plc

David Lees, Executive Director Tel: +44 (0)20 7340 9970

WH Ireland Limited Tel: +44 (0)20 7220 1666

James Joyce

Nick Field

Buchanan Tel: +44 (0)20 7466 5000

Mark Court

Sophie Cowles

Notes to Editors:

Kea Petroleum is an AIM listed oil and gas company with interests in three petroleum exploration permits in the Taranaki Basin of New Zealand. Kea listed on the London AIM market in February 2010.