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Exillon Energy Interim Management Report

Exillon Energy plc a British listed independent oil producer with assets in two oil-rich regions of northern Russia, Timan-Pechora (“Exillon TP”) and West Siberia (“Exillon WS”), today issues its Interim Management Statement for the period beginning 1 January 2011. The financial and production data are for the period fr om 1 January 2011 to 30 April 2011 and all other information, including details on operations is as at 17 May 2011.

Key highlights

Prospecting and appraisal drilling

2011 appraisal well programme has been completed successfully
Appraisal Well 5 (Well 50P) – the well encountered 12.4 meters on net oil pay of the Jurassic P reservoir on a northern extension to the East EWS I field which contained pre drill estimates of 13.3 million barrels of possible reserves
Appraisal Well 3 (Well 139) – successfully tested a western extension to the EWS II field by confirming the presence of 28.1 meters of effective net oil pay in an area that is currently mapped as a zero net pay zone
Acquired 250 square km of 3D seismic – results of seismic interpretation will be ready in Q4 2011
Acquired 440 square km of gravimetric and magnetic survey – preliminary results of magnetic survey support Groups hypothesis that EWS II and EWS III fields are in communication
Acquired 840 geochemical samples – results detected hydrocarbon shows in areas targeted by the Group
Development drilling

Achieved 100% drilling success across seven development wells and two appraisal wells drilled in 2011, extending the perfect drilling success rate since 2006 to 23 wells. The development wells were drilled with an average drilling time of 20 days per well, and at an average cost of US$ 1.0 million.

The wells have been tested and encountered the following effective oil net pay zones:

Well EWS I – 16: 23.1 meters
Well East EWS I – 391: 4 meters
Well East EWS I – 371: 13.8 meters
Well EWS I – 20: 14.6 meters
Well East EWS I – 33: 7.5 meters
Well East EWS I – 36: 5.4 meters
Well East EWS I – 38: 9.0 meters
Field development

Constructed 18.7 km of electricity lines that will allow the Group to save on diesel costs upon installation of gas power generators in Q2 2011
Constructed 10.8 km of infield pipelines enabling production from isolated well pads
Completed 38 km of all season roads allowing for year-round access to major fields in Exillon WS
Constructed well pads 2, 4, 32 for further development drilling
Production

The average daily production rate reached 7,386 bbl/day in the period to 30 April 2011, an increase of 166% over the comparable period in 2010 (2010: 2,780 bbl/day).
Financial

Equity offering raised US$ 148.0 million in the second quarter
Group cash balance of US$ 180.9 million at 30 April 2011 and US$ 47.6 million of debt
MATERIAL EVENTS AND TRANSACTIONS

Placement of Shares

The Group placed 23,438,000 new ordinary shares to institutional investors. The price per share was 400 pence, resulting in net proceeds to the Company of US$ 148.0 million.

Production

Gross production for the four months to 30 April 2011 averaged 7,386 bbl/day. This represents a 166% increase over the comparable period in 2010 when the average daily production rate was 2,780 bbl/day. The Group’s revenue for the period comprised revenues from sales of crude oil and amounted to US$ 52.3 million.

Drilling

Exillon WS drilled nine wells in the period, achieving 100% drilling success rate, and extending a perfect drilling success rate to 23 wells since 2006.

Appraisal well 5 (EWS I – 50Р)

Appraisal well 5 (EWS I – 50Р), which was spudded on 9 March 2011, was designed to test a five square km northern extension to the East EWS I field. The well reached a target depth within the Jurassic P reservoir at 1,858 meters, confirming the presence of 12.4 meters of net oil pay within the Jurassic. The well flowed water-free oil naturally to the surface with a flow rate of 690 bbl/day on a 10 mm choke, and was drilled on a turn-key contract in 18 days. This appraisal well contained pre drill estimates of 13.3 million barrels of possible reserves (Miller and Lents December 2010 reserves report). The well will be connected to existing production facilities in Q2 2012.

Appraisal well 3 (EWS II – 139)

Appraisal well 3 (EWS II – 139) which was spudded on the 4 April 2011 was drilled in 31 days on the western margin of the EWS II field. The well was designed to test a western extension to the EWS II field, and successfully confirmed the presence of 28.1 meters of effective net oil pay in an area that is currently mapped as a zero net pay zone (Miller and Lents December 2010 reserves report). The well also showed that oil water contact zone is at least 25 meters lower than previously anticipated, which further supports the Group’s hypothesis that EWS II and EWS III fields are in communication. The well was drilled directionally 0.6 km to the west from a standalone well pad. Testing of the well will be completed in Q3 2011.

EWS I – 16

The EWS I -16 well, which was spudded on 25 December 2010, was drilled on a northern extension of the EWS I field. The well flowed water-free oil with a flow rate of 370 bbl/day and was drilled in 19 days on a turn-key contract. The well reached target depth within the Jurassic P reservoir at 1,824 meters, confirming the presence of 16.6 meters of effective net oil pay within the Jurassic. In addition the well encountered 6.5 meters of effective net oil pay within the Pre-Jurassic at a depth of 1869 meters, making the total effective net oil pay encountered by the well of 23.1 meters. The well was drilled directionally 1.0 km to the north from the existing well pad.

EWS I – 391

The EWS I – 391 well, which was spudded on 25 December 2010, was drilled in 19 days on the north-western part of the East EWS I field on a turn-key contract. The well encountered producing Jurassic P reservoir at 1,862 meters, confirming the presence of 4 meters of effective net oil pay. The well was drilled directionally 1.0 km to the north-west from the existing well pad 30, and will be connected to existing production facilities upon completion of testing.

EWS I – 38

EWS I – 38 well, which was spudded on 2 March 2011, was drilled in 17 days on the eastern part of the East EWS I field on a turn-key contract. The well encountered producing Jurassic P reservoir at 1,858 meters, confirming the presence of at least 9.0 meters of effective net oil pay within the Jurassic. The well was drilled directionally 1.1km to the north-east from the existing well pad. On completion of testing the well will be connected up to existing production facilities.

EWS I – 20

EWS I – 20 well which was spudded on 13 April 2011, was drilled in 24 days on an eastern part of the East EWS I field on a turn-key contract. The well flowed water-free oil naturally to the surface with a flow rate of 625 bbl/day on an 8 mm choke. The well encountered the Jurassic P reservoir at 1,809 meters, confirming 14.6 meters of effective net oil pay within the Jurassic. The well was drilled directionally 0.9 km to the north-west from the existing well pad.

EWS I – 33

EWS I – 33 well which was spudded on 20 March 2011 was drilled in 15 days on an eastern part of the East EWS I field on a turnkey contract. The well encountered the Jurassic P reservoir at 1,845 meters, confirming the presence of 7.5 meters of effective net oil pay within the Jurassic. The well was drilled directionally 0.5 km to the east from the existing well pad.

EWS I – 371

EWS I – 371 well which was spudded on 5 April 2011 was drilled in 19 days on an eastern part of the East EWS I field. The well encountered the Jurassic P reservoir at 1,864 meters, confirming the presence of 13.8 meters of effective net oil pay within the Jurassic. The well was drilled directionally 1.5 km to the east from the existing well pad. On completion of testing the well will be connected up to existing production facilities.

EWS I – 36

EWS I – 36 well which was spudded on 26 April 2011 was drilled in 21 days on an eastern part of the East EWS I field. The well encountered the Jurassic P reservoir at 1,849 meters, confirming the presence of 5.4 meters of net oil pay within the Jurassic. The well was drilled directionally 1.2 km to the south-east from the existing well pad. On completion of testing the well will be connected up to existing production facilities.

Board Structure

The Group has appointed David Herbert as a Non-Executive Chairman of the Board and Maksat Arip as CEO of the Group’s subsidiary holding companies.

Dr. Herbert has more than 20 years experience in investment banking, including most recently as Managing Director and Head of International Corporate Finance at ING Bank N.V. Dr. Herbert also has considerable experience in the oil and gas industry, having worked for more than 10 years at BP, wh ere he served in a variety of senior management positions. He has also held various non-executive director and advisory roles with significant resource and advisory businesses in Russia and the CIS. After receiving his first degree in economics from the University of Dublin, Dr. Herbert went on to complete his doctorate at Brunel University, wh ere he taught for eight years.

Maksat Arip’s new position as CEO of the Group’s subsidiary holding companies will allow him to concentrate on the day-to-day management of the Company’s operations, as well as the development and implementation of the Group’s strategy.

FINANCIAL POSITION AND PERFORMANCE

Cash and cash equivalents and term deposits

The cash and cash equivalents and term deposits at 30 April 2011 were approximately US$ 180.9 million (30 April 2010: US$ 11.0 million).

Capital expenditure

Capital expenditure in the period to 30 April 2011 was around US$ 30.2 million (2010: US$ 12.5 million). Of the total capital expenditure, approximately 64% was attributable to infrastructure with the balance spent on drilling. The infrastructure spend during the first four months of the year included the construction of an inter-field road, system of electricity supply and inter-field pipeline system.

Realised prices

The average realised crude oil price during in the period to 30 April 2011 was approximately US$ 64.0 per barrel which was 30.6% higher compared to the corresponding period last year (2010: US$ 49.0/bbl). The Group’s realised crude oil prices achieved a discount of about 4% to Brent during the first four months of the year.

CURRENT OPERATIONS AND OUTLOOK

The Group continues to follow the strategy of growing output and also increasing reserves in a cost efficient and effective manner. The Group has four drilling rigs that have been mobilized for drilling in West Siberia and three more drilling rigs that are currently mobilizing.

During the first quarter of 2011, the Group has completed all season roads to EWS I and EWS II oil fields in Exillon WS. The presence of all season roads will allow year-round access to major fields in Exillon WS. During the course of the year, the Group also expects to complete an entry point to the Transneft pipeline in Exillon WS, complete a first stage of oil processing in Exillon TP, and install additional gas power generators in Exillon TP and Exillon WS. This additional infrastructure will significantly improve operational efficiency.

About Exillon:

Exillon Energy is an independent oil producer with assets in two oil-rich regions of Northern Russia: Exillon TP in Timan-Pechora and Exillon WS in West Siberia. Exillon Energy plc is incorporated in the Isle of Man, with an operational centre in Urai, Russian Federation. For further information please visit: www.exillonenergy.com

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