Petroceltic : Publication of Response Circular

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

Dublin

6 April 2016

Petroceltic International Plc

('Petroceltic' or the 'Company')

Publication of Response Circular

On 26 February 2016, Sunny Hill Limited, a company wholly owned by the Worldview Economic Recovery Fund, ('Sunny Hill') announced the terms of an all cash offer to be made by it for the entire issued and to be issued share capital of Petroceltic other than the Petroceltic Shares in the beneficial ownership or control of Worldview International Management Limited SEZC ('Worldview') and/or any of the Worldview Funds (the 'Offer').

The Offer, which is subject to the terms and conditions set out in the Offer Document and the Form of Acceptance, is being made on the following basis:

for each Petroceltic Share 3 pence in cash.

On 4 March 2016, Worldview EHS International Master Fund, presented a petition to the Court to appoint an examiner to Petroceltic International plc, Petroceltic Investments Limited and Petroceltic Ain Tsila Limited (together the 'Petition Companies') and to admit such companies to the protection of the Court pursuant to the relevant provisions of the Companies Act 2014 (the 'Petition'). As a result of the Petition, the Petition Companies are currently in Examinership, which is an Irish company law rescue procedure for companies that are either insolvent or close to insolvency, involving a court enforced moratorium on creditor action.

On 10 March 2016, Sunny Hill announced that the Worldview Economic Recovery Fund had acquired 69.44 per cent. of the Group's outstanding indebtedness in respect of the Senior Bank Facility. On 4 April 2016, Sunny Hill announced that, on 2 April 2016, the Worldview Economic Recovery Fund disposed of 32 per cent. of the Petroceltic Group's outstanding indebtedness in respect of the Group's Senior Bank Facility to an independent third party investor and that the Worldview Economic Recovery Fund remains interested in 37.44 per cent. of the Senior Bank Facility.

On 24 March 2016, Sunny Hill published the Offer Document in respect of the Offer.

The Board of Petroceltic (the 'Board') today announces the publication of a circular setting out the views of the Board in relation to the Offer (the 'Response Circular'). The Board, having regard to the facts set out in the Response Circular and specifically the likely outcomes for Shareholders on conclusion of the Examinership process, as described more fully in the Response Circular, and having been so advised by Davy Corporate Finance, recommends that Shareholders accept the Offer as soon as practicable but, in any event, by no later than 1.00 p.m. (Irish time) on 14 April 2016. In providing advice to the Board, Davy Corporate Finance has taken into account the commercial assessments of the Board.

The Response Circular is published in accordance with Rule 25.1(a) of the Irish Takeover Rules and a copy will be posted to Petroceltic shareholders shortly. Copies of the Response Circular will also be available shortly on the Company's website atwww.petroceltic.com, while the Offer remains open to acceptances.

Part I (Letter from the Chairman) of the Response Circular is reproduced in full below. Shareholders are advised to read the Response Circular carefully and in full.

The Offer Document is available on Sunny Hill's website, www.sunnyhill.co (for the avoidance of doubt, the contents of that website are solely the responsibility of Sunny Hill and are not incorporated by reference into, nor do they form any part of, this announcement).

Terms and expressions used in this announcement shall, unless the context otherwise requires, have the same meanings as given to them in the Response Circular.

For further information, please contact:

Petroceltic International plc:

Tel: +353 (1) 421 8300

Brian O'Cathain

Tom Hickey

Davy Corporate Finance:

Financial Adviser & Corporate Broker to Petroceltic

Tel: +353 (1) 679 7788

John Frain

Roland French

Bell Pottinger:

Joint PR Adviser to Petroceltic

Tel: +44 (20)3772 2500

James Henderson

Rollo Crichton-Stuart

Murray Consultants:

Joint PR Adviser to Petroceltic

Tel: +353 (1) 498 0300

Joe Heron

Douglas Keatinge

Important Information

The Directors of Petroceltic International plc accept responsibility for the information contained in this announcement. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Davy, which is authorised and regulated in Ireland by the Central Bank, is acting exclusively for Petroceltic and for no one else in connection with the matters set out in the Response Circular. In connection with such matters, Davy, its affiliates and its and their respective directors, officers, employees and agents will not regard any other person as their client, nor will they be responsible to anyone other than Petroceltic for providing the protections afforded to its clients or for providing advice in connection with the contents of the Response Circular or any matter referred to herein.

A person interested in 1% or more of any class of relevant securities of Petroceltic may have disclosure obligations under Rule 8.3 of the Irish Takeover Rules.

Notes to Editors

Petroceltic International plc is an upstream oil and gas exploration and production company, with licences in North Africa, the Mediterranean and Black Sea regions, and listed on the London Stock Exchange's AIM Market and the Irish Stock Exchange's ESM Market. The Company has production, exploration and development assets in Algeria, Egypt, Bulgaria and Italy.

Appendix - Letter from Robert Adair, Non-Executive Chairman of Petroceltic

To the Shareholders, and, for information only, to the Option Holders

Dear Shareholder,

Response to the all cash offer by Sunny Hill for Petroceltic

1. INTRODUCTION

On 26 February 2016, Sunny Hill Limited, a company wholly owned by the Worldview Economic Recovery Fund, ('Sunny Hill') announced the terms of an all cash offer to be made by it for the entire issued and to be issued share capital of Petroceltic other than the Petroceltic Shares in the beneficial ownership or control of Worldview International Management Limited SEZC ('Worldview') and/or any of the Worldview Funds.

On 24 March 2016, Sunny Hill published the Offer Document in respect of the Offer. The Offer Document is available on Sunny Hill's website, www.sunnyhill.co (for the avoidance of doubt, the contents of that website are solely the responsibility of Sunny Hill and are not incorporated by reference into, nor do they form any part of, this document).

The Offer, which is subject to the terms and conditions set out in the Offer Document and the Form of Acceptance, is being made on the following basis:

for each Petroceltic Share 3 pence in cash.

The Offer is being conducted by way of a contractual takeover offer and is conditional, inter alia, upon the receipt by Sunny Hill prior to 1.00 p.m. (Irish time) on 14 April 2016of valid acceptances in respect of not less than 90 per cent. of the Petroceltic Shares not beneficially owned or controlled by Worldview and/or any of the Worldview Funds, which as at the date of the Offer Document stood at approximately 29.6 per cent. of the Company's issued Ordinary Shares.

Petroceltic, along with PIL and PATL, (together, the 'Petition Companies') are currently in Examinership. Examinership is an Irish company law rescue procedure for companies that are either insolvent or close to insolvency, involving a court enforced moratorium on creditor action.

In principle, it is possible that a potential acquirer of, or investor in, the Group (including Worldview) might, as an investor under any proposals put forward under the Examinership process or as part of a separate restructuring outside the Examinership process, agree to discharge all outstanding liabilities of the Petition Companies as at the time of presentation of the Petition and to allow Shareholders to retain all or some of their Ordinary Shares following that transaction becoming effective. The Board believes, and has been advised, that this is unlikely to occur. Further, even in the unlikely circumstance where Shareholders were allowed under any transaction to retain all or some of their Ordinary Shares, the Board believes that such transaction would result in significant dilution to existing holdings of Ordinary Shares. In any event, the Board believes, and has been advised, that, for the reasons set out in the Response Circular, it is far more likely that any proposals put forward under the Examinership process will (if confirmed by the Court) result in the restructuring of the outstanding liabilities of the Petition Companies (including Petroceltic) as at the date of presentation of the Petition and will also provide for all existing Ordinary Shares (other than Ordinary Shares held by any person who agrees to invest in the Company under the Proposals) to be cancelled for no consideration.

2. BACKGROUND

2.1Strategic Review

On 23 December 2015, Petroceltic announced that it was initiating a formal strategic review of the Company's business and assets with a view to considering all options to maximise value for shareholders and stakeholders (the 'Strategic Review'). As part of the Strategic Review, the Board, together with its advisers, engaged with interested parties on a number of potential transactions including, inter alia, a farm-out or sale of one or more of the Group's existing assets, a corporate transaction such as a merger with a third party or the sale of the entire issued, and to be issued, share capital of the Company and the raising of capital in the form of debt and/or a subscription for new ordinary shares in the Company by one or more third parties.

The Strategic Review was announced following a period of exceptionally challenging market conditions, especially for smaller oil and gas companies such as Petroceltic. Specifically, in its 2014 annual financial results released on 29 June 2015 and its 2015 half year results released on 30 September 2015, the Company stated that a combination of adjustments to reserves arising from the 2014 competent persons' reports for Egypt and Bulgaria, the drop in oil prices and a reduction in capital investment programmes in relation to the Group's assets in Egypt and Bulgaria had impacted on availability under the Group's Senior Bank Facility during 2015. These circumstances had led to the requirement to make material repayments, which the Group has not to date been in a position to satisfy and other breaches to the covenants of the Senior Bank Facility, which is secured over substantially all the assets of the Group.

On 3 March 2016, following the announcement on 26 February 2016 by Sunny Hill of its intention to make the Offer, the Company announced that it continued to have a constructive dialogue with its Original Lenders, who had supported the Strategic Review process through their provision of short-term financing and on-going waivers in respect of, inter alia, the requirement for the Company to make repayments under its Senior Bank Facility. The Company also noted that the then current waiver of repayments under its Senior Bank Facility would expire on 4 March 2016. The Company further stated that, based on relevant factors prevailing at that time, the Board had concluded that it was not possible at that time to give a firm recommendation to Petroceltic Shareholders to either accept or reject the Offer, once made.

2.2Presentation of Petition, suspension of trading in Petroceltic Shares and status of Petition

On 4 March 2016 Worldview EHS International Master Fund, a member of the Worldview Group, presented a petition to the Court to appoint an examiner to the Petition Companies and to admit such companies to the protection of the Court pursuant to the relevant provisions of the Companies Act 2014 (the 'Petition'). The full hearing of the Petition was then scheduled for 4 April 2016. No application was made to appoint an interim examiner at the time of presentation of the Petition. The Petition was made without any prior consultation with or advice to the Company. At the time of presentation of the Petition to the Court on 4 March 2016, the Company had substantially agreed with its Original Lenders the commercial terms and conditions of a further waiver to 18 March 2016. However this waiver could not be concluded in light of the presentation of the Petition and as a consequence a significant proportion of the Senior Bank Facility fell due for immediate repayment.

Given the significant uncertainties in relation to the Group's financial circumstances arising from the Petition and the failure to conclude a further waiver, the Company applied for its Ordinary Shares to be suspended from trading on AIM and ESM with effect from 7.30 a.m. on Monday 7 March 2016. That suspension continues and, given the likely outcomes of the Examinership as described in paragraph 3 below, the Board believes that it is unlikely that trading in its Ordinary Shares on AIM and ESM will re-commence.

On 9 March 2016, Petroceltic announced that the Court had approved the application for the appointment of Mr. Michael McAteer of Grant Thornton (the Proposed Examiner under the Petition) as the interim examiner to the Petition Companies (the 'Interim Examiner'), pending the full hearing of the Petition.

On 10 March 2016, Sunny Hill announced that the Worldview Economic Recovery Fund had acquired 69.44 per cent. of the Group's outstanding indebtedness in respect of the Senior Bank Facility. As at close of business on 9 March 2016, being the latest practicable date prior to that announcement, the total amount outstanding pursuant to the Senior Bank Facility (including accrued interest) was approximately US$232.5 million.

On 16 March 2016, an application was made by the Worldview EHS International Master Fund and Petroceltic for Court protection and the appointment of Mr Michael McAteer of Grant Thornton Ireland as examiner, on an interim basis, in respect of Petroceltic Resources plc (a subsidiary of Petroceltic). The application was heard by the Court on 18 March 2016. The Court declined to make an order extending the examinership to Petroceltic Resources plc but indicated that it was open to a further application regarding this company at a later stage.

On 24 March 2016, Sunny Hill published the Offer Document in respect of the Offer.

On 4 April 2016, counsel for Worldview EHS International Master Fund requested a short adjournment for the Petition hearing scheduled for that day. The hearing of the Petition is currently scheduled for Friday, 8 April 2016. However, on 4 April 2016, the Court confirmed the extension of court protection for the Petition Companies until 8 April 2016.

On 4 April 2016, Sunny Hill announced that, on 2 April 2016, the Worldview Economic Recovery Fund disposed of 32 per cent. of the Petroceltic Group's outstanding indebtedness in respect of the Group's Senior Bank Facility to an independent third party investor and that the Worldview Economic Recovery Fund remains interested in 37.44 per cent. of the Senior Bank Facility.

3. ABOUT THE EXAMINERSHIP PROCESS

3.1 Basis for appointment of an examiner or an interim examiner

Examinership is a rescue procedure under the Irish Companies Acts for a company that is either insolvent or close to insolvency that, on a successful conclusion of the process, usually involves new investment into the company and a forced write down of the company's liabilities. The examiner's proposals (see further at paragraph 3.3 below) must be presented to the court within 100 days from the date of presentation of the petition to appoint the examiner. During this time, there is a prohibition on any enforcement action being taken by any creditor (including secured creditors) against the company. Court protection can be extended beyond this 100 day period if the confirmation hearing (at which the court will decide whether to confirm the examiner's proposals) takes place after the initial 100 day period has concluded.

Under the Irish Companies Acts, a petition to appoint an examiner can be presented by a number of parties, including any member of a company holding at least 10 per cent. of the paid up capital of the company. This was the basis on which Worldview EHS International Master Fund stated that it presented the Petition to Court on 4 March 2016. Following presentation of the Petition, the Court fixed 4 April 2016 as the date for the hearing of the Petition.

If it is appropriate to do so, a court can appoint an interim examiner pending the hearing of the petition to appoint the examiner. In the case of the Petition Companies, as was noted above, the Court did not appoint an interim examiner on presentation of the Petition on 4 March 2016, but on 9 March 2016, following a joint application by the Company and Worldview EHS International Master Fund, the Court appointed the Interim Examiner to the Petition Companies.

On 4 April 2016, counsel for Worldview EHS International Master Fund requested a short adjournment for the Petition hearing scheduled for that day. The hearing of the Petition is currently scheduled for Friday, 8 April 2016. However, on 4 April 2016, the Court confirmed the extension of court protection for the Petition Companies until 8 April 2016.

3.2 Petition to appoint the Proposed Examiner and consequences for Shareholders if the Proposed Examiner is not appointed

At the hearing of the Petition, creditors and members of the Petition Companies will be afforded the opportunity to make representations to the Court in respect of the application to appoint the Proposed Examiner to the Petition Companies. The Court will generally refuse to appoint an examiner at the hearing of a petition if it cannot be demonstrated that such an appointment will facilitate the survival of the relevant company. If the Court were to refuse to appoint the Proposed Examiner to the Petition Companies, then in circumstances where such companies were insolvent, without the prospect of securing further funding, the directors of the each Petition Company would need to take immediate steps to place the relevant Petition Company into liquidation. The Board believes that if an order was to be made for the winding up of Petroceltic in those circumstances, it would be very unlikely that Shareholders would realise any value with respect to their holdings of Ordinary Shares.

3.3 The role of the Proposed Examiner (if appointed)

The main role of the Proposed Examiner (if appointed) (being the 'Examiner') with respect to each Petition Company will be to:

· examine the Petition Company's finances;

· establish what parts of the Petition Company's business can be rescued; and

· negotiate with investors, creditors and other relevant stakeholders in order to prepare proposals for a compromise or scheme of arrangement that will facilitate the Petition Company's survival (the 'Proposals').

During the Examinership Period, each Petition Company must continue to meet its debts and liabilities as they arise.

Once the Examiner has formulated the Proposals (if any), he will convene meetings of separate classes of members and creditors of each Petition Company, at which meetings the members and creditors of each Petition Company will consider those Proposals insofar as they relate to that Petition Company. Each class of member and creditors for each Petition Company will have separate meetings and must then vote either in favour of or against those Proposals. When all of the class meetings have been held, there will be a hearing of those Proposals before the Court, which must sanction the Proposals before they become binding on the members and creditors of each Petition Company.

The Court will not confirm any Proposals with respect to a Petition Company unless:

(a) at least one class of creditors of the Petition Company whose interests or claims would be impaired by implementation of the Proposals with respect to that Petition Company has accepted the proposals, and

(b) the Court is satisfied that:

(i) the Proposals are fair and equitable in relation to any class of members or creditors of the Petition Company that has not accepted the Proposals and whose interests or claims would be impaired by implementation; and

(ii) the Proposals are not unfairly prejudicial to the interests of any interested party,

and in any case shall not confirm any Proposals if the sole or primary purpose of them is the avoidance of payment of tax due. If confirmed, the Proposals with respect to a Petition Company will become binding on the members and creditors of that Petition Company regardless as to how those members and creditors voted at the respective meetings.

With respect to any meeting of Petroceltic Shareholders to consider any Proposals made by the Examiner for a compromise or scheme of arrangement relating to Petroceltic, you should be aware that (i) such meeting will be convened by the Examiner (and not by the Company) and accordingly the usual notice requirements for a meeting of Shareholders convened by the Company will not apply (and, in fact, under the applicable Court rules, the Examiner will be obliged to give the relevant members and creditors a minimum of three days' notice only) and (ii) a vote by Shareholders to reject any Proposals would not bind the Court and the Court would be free to subsequently confirm those Proposals (subject to it being satisfied as to the matters set out at sub-paragraphs (a) and (b) above).

If any Proposals with respect to one or more Petition Companies are approved by the Court, the Court protection for the relevant Petition Company would be lifted on the date that the Court appoints for the compromise or scheme of arrangement with respect to the Petition Company to come into force.

3.4 Consequences for Shareholders if the Proposed Examiner is appointed and (a) his Proposals are confirmed by the Court; (b) no Proposals are forthcoming or (c) those Proposals are not confirmed by the Court

As at the time of presentation of the Petition on 4 March 2016, Petroceltic had outstanding liabilities in excess of US$250 million.

The Company has been advised that if any Proposals made by the Examiner with respect to Petroceltic were to envisage the impairment of anyinterest or claim of any creditor of Petroceltic as at the date of presentation of the Petition, then it would be very likely that those Proposals would also envisage that, if the Proposals were subsequently to be approved by the Court, all Ordinary Shares (other than Ordinary Shares held by any person who agrees to invest in the Company under the Proposals) would be cancelled for no consideration.

The Board notes the statement by Sunny Hill in its Offer Document (at page 11) that:

'Worldview intends to approach Petroceltic and the interim examiner with a proposal to restructure the Senior Bank Facility, as part of a wider restructuring of Petroceltic's capital structure, either pursuant to an examinership scheme of arrangement or as a standalone restructuring, which, amongst other consequences, could lead to the cancellation of the entire issued share capital of Petroceltic for no consideration and/or the potential conversion of a significant proportion of the outstanding debt into new ordinary shares in the capital of Petroceltic and consequent dilution for existing Petroceltic Shareholders.'

In principle, it is possible that a potential acquirer of, or investor in, the Group (including Worldview) might, as an investor under any proposals put forward under the Examinership process or as part of a separate restructuring outside the Examinership process, agree to discharge all outstanding liabilities of the Petition Companies as at the time of presentation of the Petition and to allow Shareholders to retain all or some of their Ordinary Shares following that transaction becoming effective. The Board believes, and has been advised, that this is unlikely to occur. Further, even in the unlikely circumstance where Shareholders were allowed under any transaction to retain all or some of their Ordinary Shares, the Board believes that such transaction would result in significant dilution to existing holdings of Ordinary Shares. In any event, the Board believes, and has been advised, that, for the reasons set out in the Response Circular, it is far more likely that any proposals put forward under the Examinership process will (if confirmed by the Court) result in the restructuring of the outstanding liabilities of the Petition Companies (including Petroceltic) as at the date of presentation of the Petition and will also provide for all existing Ordinary Shares (other than Ordinary Shares held by any person who agrees to invest in the Company under the Proposals) to be cancelled for no consideration.

Further, if:

· the Examiner is unable to formulate any viable Proposals to ensure the survival of a Petition Company; or

· any Proposals with respect to a Petition Company are not confirmed by the Court; or

· a Petition Company is unable to continue to discharge its debts and liabilities during the Examinership Period,

the Court is likely to exercise its jurisdiction to make an order for the winding up of the Petition Company.

The Board believes that if an order was to be made for the winding up of Petroceltic, it would be very unlikely that Shareholders would realise any value with respect to their holdings of Ordinary Shares.

4. VIEWS OF THE PETROCELTIC BOARD ON THE SUNNY HILL OFFER

The Offer values the entire issued and to be issued share capital of Petroceltic at approximately £6.42 million. The Offer Price of 3 pence for each Petroceltic Share represents a discount of approximately:

· 60.0 per cent. to the Closing Price of 7.5 pence per Petroceltic Share on 4 March 2016, being the last trading day prior to the suspension of Petroceltic Shares from trading on AIM and ESM;

· 83.3 per cent. to the Closing Price of 18.0 pence per Petroceltic Share on 25 February 2016, being the last trading day prior to the date of the announcement of the Offer by Sunny Hill;

· 73.9 per cent. to the Closing Price of 11.5 pence per Petroceltic Share on 21 January 2016, being the last trading day prior to the date of the announcement released by Worldview, via Worldview Capital Management, regarding a possible offer for the Company; and

· 89.4 per cent. to the Closing Price of 28.375 pence per Petroceltic Share on 22 December 2015, being the last trading day prior to the announcement of the Strategic Review process.

Notwithstanding the above stated discounts, the Board believes that any assessment of the merits of the Offer must be made having regard to the following matters:

(a) the Board believes, and has been advised, that there are only two realistic outcomes to the Examinership process for the Petition Companies, being:

(i) a successful outcome for all the Petition Companies (i.e. the Proposed Examiner is appointed and he then makes Proposals that are confirmed by the Court), in which case the Board believes, for the reasons set out at paragraph 3 above, that those proposals would very likely result in all Ordinary Shares held by Petroceltic Shareholders (other than Ordinary Shares held by any person who agrees to invest in the Company under the Proposals) being cancelled for no consideration; or

(ii) an unsuccessful outcome for all the Petition Companies (i.e. the Proposed Examiner is not appointed or he is appointed and (A) no Proposals are forthcoming or (B), if they are forthcoming, those Proposals are not confirmed by the Court or (C) the Petition Companies are unable to continue to trade), in which case the result is likely to be immediate commencement of winding-up of the Petition Companies and, in which case the Board believes, for the reasons set out at paragraph 3 above, that it would be very unlikely that Shareholders would realise any value with respect to their holdings of Ordinary Shares; and

(b) the Board believes that it is unlikely there will be an offer for the entire issued and to be issued share capital of Petroceltic other than the Offer by Sunny Hill for the following reasons:

(i) subsequent to the announcement of the Strategic Review on 23 December 2015, Sunny Hill made the Offer, thereby highlighting to any potential offeror that Worldview has, by virtue of the number of Ordinary Shares held by Worldview and the Worldview Funds, the ability to block any such potential offeror from acquiring 100% of the existing Ordinary Shares and, to date, no competing offer or possible offer has been made or announced; and

(ii) in any event, given that Petroceltic is currently in an Examinership process, the Board believes that any potential acquirer of, or investor in, the Group other than Worldview would be far more likely to invest through that process (given the potential benefits offered by the statutory process) rather than by way of an offer to acquire the entire issued and to be issued share capital of Petroceltic.

Accordingly, the Board, having regard to the above beliefs, facts and likely outcomes, recognises that the Offer represents the best possible opportunity for Shareholders (other than any Shareholder who may invest in the Company under any Proposals) to realise any value from their holding of Ordinary Shares and therefore, having being so advised by Davy Corporate Finance, recommends that Shareholders accept the Offer. In providing advice to the Board, Davy Corporate Finance has taken into account the commercial assessments of the Board.

Notwithstanding its recommendation, the Board highlights that the Offer is highly conditional and that there is no certainty that the Offer will complete and that Shareholders will receive the Offer Price for their Ordinary Shares. Importantly, as noted above, the Offer is conditional upon receipt of a very high level of acceptances of the Offer (i.e. receipt by Sunny Hill prior to 1.00 p.m. (Irish time) on 14 April 2016 of acceptances in respect of not less than 90 per cent. of the Petroceltic Shares not beneficially owned or controlled by Worldview and/or any of the Worldview Funds) (the 'Acceptance Condition'). While Sunny Hill may, under the terms of the Offer, reduce the Acceptance Condition or extend the deadline for its satisfaction, it is under no obligation to do so, unless the Panel otherwise directs.

In addition, the Board notes that, in its Offer Document, Sunny Hill has specifically reserved its right to invoke those conditions of its Offer relating to default under the Group's debt facilities or insolvency of members of the Group and other matters, including its right to invoke such conditions in circumstances where an examiner issues a notice to convene a meeting of creditors of Petroceltic to consider proposals for a compromise or scheme of arrangement in relation to Petroceltic which involves the cancellation of all, or substantially all, of the Petroceltic Shares Affected. Any such invocation of conditions would require the consent of the Panel under the Irish Takeover Rules.

Accordingly, in making its recommendation to Shareholders to accept the Offer, the Board highlights that there is no certainty that the Offer will complete and that Shareholders will receive the Offer Price for their Ordinary Shares. In making any decision to accept the Offer, Shareholders should be fully aware of those risks.

5. VIEWS OF THE PETROCELTIC BOARD ON SUNNY HILL'S PLANS FOR PETROCELTIC AND ITS EMPLOYEES

As required by the Irish Takeover Rules, the Board's views on the effects of implementation of the Offer on all Petroceltic's interests including, specifically, employment and on Sunny Hill's strategic plans for Petroceltic and their likely repercussions on employment on the locations of Petroceltic's places of business, are set out below. In fulfilling its obligations under the Irish Takeover Rules, the Board can only comment on the details provided in the Offer Document.

The Board notes that, on the Offer becoming wholly unconditional, Sunny Hill plans to undertake a comprehensive review of all of Petroceltic's operations 'with a view to materially improving the Petroceltic Group's efficiency and significantly reducing its cost base' (see page 13 of the Offer Document).

Sunny Hill has not provided any detailed plans, save for its intention to undertake a comprehensive review, and therefore the Board is unable to comment on the effect of implementation of the Offer on Petroceltic's interests or Sunny Hill's strategic plans for Petroceltic.

Sunny Hill states that, subject to completion of its review process, it currently expects to 'significantly reduce the Petroceltic Group's staffing levels which may also involve the closure of some of the Petroceltic Group's existing offices and facilities in order to significantly reduce operating costs' (see also page 13 of the Offer Document).

The Board notes that Sunny Hill has confirmed that the existing rights and terms and conditions of employment, including pension obligations, of the management and employees of Petroceltic and its subsidiaries will be observed at least to the extent required by law as part of this review process.

6. RECOMMENDATION

The Chairman, Robert Adair, together with Skye, holds in aggregate the beneficial interest in 41,136,078 Petroceltic Shares, representing approximately 19.2 per cent. of the current issued share capital of Petroceltic. Prior to presentation of the Petition to appoint the Proposed Examiner on 4 March 2016, Robert Adair had stated that neither he nor Skye intended to accept the Offer. Having regard to the significant change in circumstances affecting the Company by virtue of the Examinership process and as outlined in the Response Circular, Robert Adair and Skye now intend to accept the Offer. Mr Adair also joins with the other Directors in recommending that Shareholders accept the Offer.

Brian O'Cathain and Tom Hickey, whose beneficial holdings of Petroceltic Shares amount to, in aggregate, 727,047 Petroceltic Shares, representing approximately 0.34 per cent. of the current issued share capital of Petroceltic, intend to accept the Offer.

Alan Parsley, whose beneficial holding of Petroceltic Shares amounts to 11,608 Petroceltic Shares, representing approximately 0.005 per cent of the current issued share capital of Petroceltic, does not intend to accept the Offer. Dr. Parsley nonetheless joins with the other Directors in recommending that Shareholders accept the Offer.

Yours faithfully,

ROBERT ADAIR

Chairman

ENDS