Petroceltic International PLC : Operations Update

Dublin

6th November, 2012

PETROCELTIC INTERNATIONAL PLC

OPERATIONS UPDATE - 10 WELLS PLANNED OVER NEXT 12 MONTHS

Petroceltic International plc ("Petroceltic" or "the Company"), the upstream oil and gas exploration and production company focused on North Africa, the Mediterranean and Black Sea regions, today provides an operational update on its near term drilling and development activities.

Highlights:

Drilling Operations

·     Ten wells planned over the next 12 months, including:

o  Six  high impact exploration wells in Egypt, the Kurdistan Region of Iraq, the Black Sea and Italy

o  Two shallow wells in the Nile Delta, Egypt with early production potential

o  Two wells in Bulgaria, the Kamchia exploration well with early production potential and completion for production of the suspended Kaliakra discovery well

Development

·     Commissioning activities on the West Dikirnis LPG plant expansion in Egypt to commence around year end

·     Plans to bring the East Dikirnis-1 and West Abu Khadra-1 wells in Egypt on stream in early 2013

Production

·     On track to achieve market guidance of 28.0 Mboepd for 2012:

o  Average working interest production of 28.9 Mboepd for the first 9 months of 2012

o  Current working interest production of 28.2 Mboepd

Brian O'Cathain, Chief Executive of Petroceltic commented:

"The commencement of Mesaha-1 kicks off an exciting programme of ten exploration and development wells over the next year. Mesaha-1 well is a wildcat in a new basin with an uncertain stratigraphy but numerous big fault block structures. Any evidence for a working petroleum system in this frontier area will be encouraging, given the substantial upside potential in the region. Early results of seismic processing in Romania and Kurdistan are promising and we look forward to drilling these potentially transformational exploration wells in the second and third quarters of 2013".

Operated Drilling

Egypt

Drilling operations on the Mesaha-1 frontier exploration well in southern Egypt have commenced; this is the first exploration well to be drilled in the 43,000 square kilometre Mesaha concession, which contains one of the larger untested sedimentary basins in East Africa. The well is being drilled into a major tilted fault block and will provide information on the stratigraphy of the basin and the possible presence of effective reservoir and hydrocarbon source rocks. The planned well depth is 9900 feet and it is expected to take approximately two months to drill at a cost of $8.0 million (gross). Petroceltic operates and holds a 40%working interest in the concession.  

In addition to Mesaha-1, Petroceltic has also contracted a second rig to drill two shallow wells in the Nile Delta. The first well will be the North Tarif-1 exploration well (previously referred to as Mustafa-1) which is targeting a four-way dip closure in the Mansoura concession  five kilometres to the east of the East Dikirnis field. The prospective resources are estimated at 2 MMbbl of oil and 16 Bcf of gas. The well will cost approximately $4.0 million and is planned to spud in early December.  If successful the well will be tied back to East Dikirnis and producing within a few months of the discovery.

The rig will then move to drill a development well on the South Damas gas field in the South East Mansoura concession. This field has out-performed since inception and the additional production well is required to effectively access the proved plus probable reserves of 50 Bcf. The well is estimated to cost approximately $4.0 million to drill and complete. Petroceltic has a 100% working interest in its Nile Delta concessions.

Bulgaria and Romania

The Company has signed a letter of intent with Grup Servicii Petroliere S.A. for the provision of a jack-up drilling rig to perform four well operations in the western Black Sea, commencing in the first quarter 2013.

The rig will first be used to drill the Kamchia-1 exploration well in the Galata block (Petroceltic 100% working interest), targeting prospective resources of 27 Bcf of gas. In the event of success, the well could be rapidly tied back to the Galata platform for production using similar subsea technology employed for the Kavarna and Kaliakra developments. A further seven exploration leads and prospects have been identified in the vicinity of the Kamchia structure containing combined prospective resources of 102 Bcf of gas.

Subsequently, the rig will complete the suspended Kaliakra discovery well to enable it to be tied back for production. This operation, coupled with the reinstatement of production from the Galata field, should allow the Company to maintain its planned Bulgarian production levels in 2013 with the re-phasing of the Kavarna East development into 2014.  

The two remaining rig slots will be used to drill the Company's first exploration wells offshore Romania, one on each of the Muridava and East Cobalcescu blocks (Petroceltic 40%working interest). The prospects to be tested by these wells remain subject to the ongoing interpretation of the recently acquired 3D seismic data which has confirmed the presence of the main exploration plays identified in older vintage 2D seismic data. These include Eocene and Cretaceous oil plays and  Pliocene and Miocene gas plays with the gross potential resources on the blocks estimated to be in the range of 1 Tcfe to 2 Tcfe.

Non-Operated Licences

Kurdistan Region of Iraq

Geophysical surveying operations at the Shakrok block (Petroceltic 16% working interest) were completed on 21 September 2012, with 276 kilometres of 2D seismic lines acquired. Drilling remains scheduled to commence on Shakrok in Q3 2013 and rig contract negotiations are well advanced. The most likely first well on the block will target the main Shakrok anticlinal structure, with a most likely gross prospective resource of 650 MMbbls, and a chance of success of 24.5%1. The well will primarily target Jurassic and Triassic reservoirs.

On the Dinarta block (Petroceltic 16% working interest), geophysical survey operations continue. It is expected that a second rig will be used for the Dinarta well, which is due to start drilling in Q4 2013 and negotiations for a rig contract award have also commenced.

Italy

ENI, as operator of the Carpignano Sesia well (Petroceltic 47.5% working interest) is engaging with all relevant stakeholders, including the local environmental and regulatory authorities, as part of the permitting process. The Operator continues to target a well commencement date in H1 2013, however this schedule maybe  subject to change based on progress of the permitting process.

Developments

Egypt

The Company's development projects are progressing well with commissioning activities on the West Dikirnis LPG plant expansion (comprising the installation of a turbo expander and chiller units) expected to commence around year end. The engineering and major equipment contracts have also been placed for the West Khilala compression project and this is on schedule to complete in mid 2013.

Flow tests have been performed on the East Dikirnis-1 and West Abu Khadra-1 wells prior to installing the flow lines required to tie them back for production. East Dikirnis-1 flowed at a maximum rate of 1050 bopd and 2.6 MMcfpd on a 20/64 inch choke and West Abu Khadra-1 produced 12 MMcfpd and 290 bcpd on a 28/64 inch choke. Both wells are expected to be brought on stream early in 2013 and will initially be produced at restricted rates to gather reservoir data and, in the case of East Dikirnis-1, to maximise oil recovery from the oil rim before switching to produce the gas cap reserves.

Algeria

Following the agreement with Sonatrach of the Declaration of Commerciality and the Heads of Terms for Gas Sales, the plan of development for the Ain Tsila field (Petroceltic, Operator, 56.625% working interest) was submitted bySonatrachto the Competent Authority (ALNAFT) for final approval in August 2012. The response of ALNAFT is expected in the near future. Development planning activities are continuing, with partners currently co-operating in establishment and staffing of the operating team and organisational structure required under the PSC to take the project forward to front end engineering and design during 2013.

Current Production

Average working interest production from Egypt and Bulgaria for the first 9 months of the year was 28.9 Mboepd (16.4 Mboepd on a net entitlement basis). Current working interest production is 28.2 Mboepd and we are confident of achieving market guidance of 28.0 Mboepd for the year. Receipts from production remain in line with expectations and previously agreed payment schedules.

Revenue from the production in Egypt and Romania will be recognised in the accounts of Petroceltic with effect from 11 October 2012, the date of formal completion of the Merger with Melrose Resources plc.

Further guidance on 2013 production outlook and capital work programmes will be provided in a separate press release in December.

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, is the qualified person who 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

Mboepd:                      Thousand barrels of oil equivalent per day

MMbbl;                         Million barrels of oil

Bcf:                              Billion cubic feet

Tcfe:                            Trillion feet of gas equivalent

Bopd:                           Barrels of oil per day

MMcfpd:                       Million cubic feet of gas per day

Bcpd:                           Barrels of condensate per day

Choke setting 64"s:     The choke setting in diameter, measured in 64ths of one imperial inch.

MMscf/d:                      Million standard cubic feet per day

Notes to the editors

Petroceltic International plc (AIM:PCI.L, ESM: EG5, ISIN: IE0003186172) is a regionally focused North Africa, Mediterranean and Black Sea independent oil and gas company with a balanced portfolio comprising production, development and high-impact exploration assets. The Company has interests in Bulgaria, Egypt, Algeria, the Kurdistan Region of Iraq, Italy and Romania and has 2P reserves of 79.2 MMboe as at 30 June 2012 in addition to, contingent resources of 357 MMboe and unrisked prospective resources of 1,365 MMboe as at 1 January 2012.

1.     DeGolyer & MacNaughton Estimates from Competent Persons Report, August 2012.