Petroceltic International PLC : Operational Update and Guidance

Dublin

7th January 2014

Petroceltic International Plc

Operational Update, 2014 Production Outlook and Capital Expenditure Programme

Petroceltic International  plc (AIM: PCI) ("Petroceltic" or the "Company"), the oil and gas exploration, development and production company focused on the Middle East and North Africa, the Mediterranean and Black Sea regions, today provides an operational update together with guidance for its 2014 production outlook and exploration and development work programmes.

Highlights

·     2013 production in-line with guidance at 25.2 Mboepd; 2014 forecast production range of 20.0 to 22.0 Mboepd

·     Shakrok well in Kurdistan Region of Iraq  drilling ahead at 1818 m in Jurassic; testing programme anticipated

·     High impact exploration drilling campaigns continuing in Romania and Kurdistan

·     Three new high potential exploration licences ratified in Egypt, increasing core Egyptian exploration acreage position by over 300%

·     Significant progress on Ain Tsila project in Algeria; Front End Engineering and Design award and signature of detailed Gas Sales contract anticipated during Q1 2014

·     Completion of new subsea well tie-back in Bulgaria and facilities expansion projects in Egypt

·     Significant cash receipts from EGPC in December 2013; EGPC  receivable has decreased by 25% year on year

·     Year-end net debt of US$246 million (2012 - $213 million)

Brian O'Cathain, Chief Executive of Petroceltic commented:

"2013 was a year of solid progress, with highlights including the successful farm-out of the Ain Tsila Field in Algeria and the completion of a US$500 million debt facility, with availability for projects in Algeria, Egypt and Bulgaria. We have successfully integrated the Melrose business into Petroceltic, and have continued to build good relations with Governments in all of our areas of focus. We are looking forward to significant progress on the Algerian Ain Tsila development in 2014, and to potentially exciting exploration results in Romania and in the Kurdistan Region of Iraq.  In particular, the planned well test programme for the Shakrok-1 well in Kurdistan should give some interesting results in the first quarter of 2014. As always, we look forward to updating shareholders on progress throughout the year"

Business Performance and Production Outlook

Average 2013 production from the Company's interests in Egypt and Bulgaria was in line with prior guidance at approximately 25.2 Mboepd on a working interest basis. Current production is approximately 25 Mboepd and the average daily production rate for 2014 is expected to be in the range of 20.0 to 22.0 Mboepd, comprising approximately 85 per cent gas and 15 per cent liquids. Egypt and Bulgaria are expected to contribute 83 per cent and 17 per cent of the total production volume, respectively.

Financial Performance and Capital Programmes

Throughout 2013, the Company received regular payments for production in Bulgaria.  Receivables in Egypt decreased by over 30% during the second half of 2013 and by 25% over the year as a whole. Two part cargo shares in September and December (funds to be received in January 2014 ) were augmented by a significant additional payment from EGPC in December.  This more than negated a slowdown in payments during the summer months.  As a result, the level of receivables in Egypt now stands at approximately US$80 million (2012 - US$108 million) and year end net debt was US$246 million (2012 - US$213 million). We will continue to work closely with our counterparts in EGPC to manage the continuing payment of receivables.

An active exploration and development programme is scheduled for 2014 with a capital expenditure budget of US$130 million. The carry following completion of the second stage Ain Tsila farmout to Sonatrach is expected to reduce Petroceltic's overall net capital expenditure budget to approximately US$100 million.

Exploration accounts for approximately 47 per cent of the budget with the balance committed to development activities. The overall planned 2014 programme is summarised as follows:

Notes: 1) Figures in parentheses are post Algerian farm-out

2) Kurdistan costs exclude the well testing programme

3) 2013 actuals remain subject to audit.

Exploration

Petroceltic's 2014 exploration programme comprises four firm exploration wells which includes a second well in Kurdistan and further drilling in Romania. Additional activity may also be undertaken in Italy, Egypt and Kurdistan.

Kurdistan Region of Iraq

The Shakrok exploration well is drilling ahead approximately one month behind schedule principally due to weather related delays. Based on current estimates of timing, we anticipate reaching total depth for the well in late February, at which point a testing program will commence, including testing of the Jurassic formation. Further updates will be provided in due course.

A second  exploration well will also be drilled on the Shireen prospect in the Dinarta Block. At present the wellsite is nearing completion, with rig mobilisation from Erbil currently in progress. The well is expected to spud in February, with an anticipated duration of 150 days.

Romania

The Company plans to drill up to three wells offshore Romania, one on the Muridava licence (rescheduled from 2013 following essential rig maintenance)  and at least one well on  the Est Cobalcescu block (Petroceltic 40 per cent working interest). The drilling programme on the Muridava licence is then expected to continue in early 2015. While the South Cobalcescu-1 exploration well drilled in 2013 did not encounter commercial quantities of hydrocarbons, it did provide valuable information to assist in the refinement of the 2014 programme for both licences, which will involve the testing of a number of geologically independent plays and material prospects. 

Egypt

Petroceltic has applied for a permit to drill the South Dikirnis exploration well during 2014. This prospect is situated within the West Dikirnis development lease, immediately adjacent to existing facilities and infrastructure. If successful, this 4.4 MMbbl prospect, would be swiftly brought into production.

During the fourth quarter, the ratification process for the award of the El Qa'a Plain exploration licence was completed followed by ratification of two further new licences, North Thekah and South Idku licences in early January 2014. The addition of these new licences has increased our core exploration acreage position in Egypt by over 300%. We look forward to commencing preliminary activities on each of these licences during 2014, and to potentially participating in the recently announced 2014 EGAS and EGPC licencing rounds.         

Development

Algeria

During 2013, Petroceltic made significant progress on the Ain Tsila development, including the establishment of the Groupement Isarene ("Groupement") which is a joint development organisation staffed by seconded personnel from Petroceltic, Enel and Sonatrach. The Groupement has opened an office in Algiers and recently issued invitations to qualified counterparties to undertake the Front End Engineering and Design (FEED) study for the Ain Tsila development, with a view to awarding the FEED contract during the first quarter. Looking further ahead, detailed planning has also commenced in relation to the sequence and timing of development drilling activities, while the detailed Gas Sales contract is substantially agreed and should be signed during Q1 2014. The development plan remains on schedule, and we are targeting first gas from the Ain Tsila field in late 2017.

During 2013, Petroceltic finalised arrangements for a second farmout of an 18.375% interest in the Ain Tsila project to an international oil and gas company. As part of this process, Sonatrach and Enel each had the right to pre-empt the transaction on similar commercial terms and in October 2013, Petroceltic announced that it had been notified by Sonatrach of its intention to exercise this right in respect of the entire 18.375% interest. Finalisation of the text of the amendment to the Production Sharing contract necessary to give effect to this transfer is at an advanced stage and further announcements will be made as appropriate. Upon completion, Sonatrach will pay Petroceltic US$20 million of cash, and fund a minimum of US$140 million of Petroceltic's development expenditure obligations from the effective date in July 2013.

Egypt

Egypt is a core area for Petroceltic and in 2013 over US$60 million was invested in a range of facilities and development activities.

The major LPG and compression facilities projects at West Dikirnis and West Khilala fields are now substantially complete. The development budget for 2014 amounts to US$32 million and the firm investment programme includes facilities safety upgrade works initiated in 2013 on West Dikirnis and West Khilala, further development drilling at East Abu Khadra and routine asset integrity and maintenance work across the remainder of the field portfolio. Locations have also been developed for a number of further infill production wells in existing fields and we have retained sufficient operational flexibility to extend rig contracts and initiate additional exploration activities should the opportunity arise. This rescheduling of drilling activity has had the effect of deferring incremental production to future periods and thus slightly reducing 2014 guidance versus previous estimates.

Bulgaria

Following the Kaliakra-1 production well tie-back in 2013, the Company has no major investments planned in Bulgaria until 2015, when the Kavarna East development is scheduled to be completed. Petroceltic's current gas sales arrangements with Bulgargaz, the state-owned gas utility company, and Agropolychim, an independent industrial consumer, will remain in force in respect of all 2014 production. The received price is expected to average approximately US$8.50 per Mcf, in line with 2013 average realisations of approximately US$8.40 per Mcf.

Ends

For further information, please contact:

Brian O' Cathain /Tom Hickey, Petroceltic International        Tel: +353 (1) 421 8300

Philip Dennis / Rollo Crichton-Stuart,

Pelham Bell Pottinger                                                             Tel: +44 (20) 7861 3919

Joe Murray / Joe Heron, Murray Consultants                         Tel: +353 (1) 498 0300

John Frain, Davy                                                                     Tel: +353 (1) 679 6363

Dr. Dermot Corcoran, Head of Exploration, Petroceltic International plc, and the qualified person as defined in the AIM Note for Mining and Oil and Gas Companies, June 2009, has reviewed and approved the technical information contained in this announcement. Dr. Corcoran has a B.Sc in Geology, a M.Sc. in Geophysics, and a Masters degree in Business Administration, all from the National University of Ireland, Galway. He also holds a Ph.D in Geology from Trinity College, Dublin. Dr. Corcoran has over 20 years experience in oil & gas exploration and production, and has previously worked at ExxonMobil, the Petrofina Group, and Statoil.

Glossary:

Boepd: Barrels of oil equivalent per day

Mboepd: Thousand barrels of oil equivalent per day

MMbbl: Million barrels

Mcf: Thousand standard cubic feet

Notes to Editors:

Petroceltic International plc is a leading Upstream Oil and Gas Exploration and Production Company, focused on North Africa, 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, Romania, the Kurdistan Region of Iraq Italy and Greece.