UEN Urals EN.

RNS Number:9609P
Urals Energy Public Company Limited
23 January 2007


FOR IMMEDIATE RELEASE:

                      Urals Energy Public Company Limited

                               Operational Update

Urals Energy ("Urals Energy" or the "Group") (LSE:UEN) a leading independent
exploration and production company with operations in Russia announces an
operational update.

Highlights

Production

*   Current production 11,600 BOPD increased from 10,100 in September 2006.
*   On track to achieve 15,000 BOPD by third quarter 2007 and 19,000 BOPD by 
    year end.
*   Completed nine successful producing wells in second half 2006.

Exploration

*   Exploration well to test 60 million barrel potential Nadezhdinsky prospect 
    in Timan Pechora expected to spud in April.
*   Re-entry of well 29 at Arcticneft to test deep Permian horizon begun.
*   Acquisition of approximately 300 kilometres of new 2D seismic over the Dinyu 
    field area.

Dulisma

*   Receipt of written confirmation from Irkutsk Oblast Tax Inspectorate
    verifying a ten year production tax holiday for the Dulisminskoye field (1
    January 2007 - 31 December 2016).
*   Dulsima oil development plan approved by Russian Central Field Development 
    Committee.
*   Successful completion of innovative new $US130 million debt finance facility 
    provided by Goldman Sachs International to fund the development of the oil 
    reserves at the Dulisminskoye field.
*   Development plans accelerated and field development advancing rapidly.
*   Project is now funded to achieve peak production of 30,000 BOPD by 2011.

Financial

*   Dulisma capex for 2007 is expected to include $17 million for drilling and 
    $25 million for pipelines, infrastructure and facilities.
*   Total capex for 2007 expected to be $90 million.
*   As a result of funding and continued production growth, the Group is in a 
    strong financial position.

Outlook

*   Progress across all its areas of operation with an intensive development, 
    drilling and exploration programme underway this year.
*   Following approval of Dulisma financing and development, on target to reach 
    overall Group production of 50,000 BOPD by 2011.

William R Thomas, Chief Executive of Urals Energy commented:

"2007 will be an important year for Urals Energy and the progress we continue to
make across all areas of the business is creating a solid platform for growth.

We have made significant progress at Dulisma, which is a key asset.  Financing
for the project has been secured, a ten year production tax holiday has been
officially confirmed by the tax authorities, and our field development plan has
been approved by the Russian Government. All this is further indication of the
progress we are making."

                                                                 23 January 2007


Pelham PR
James Henderson                                                    020 7743 6673
Gavin Davis                                                        020 7743 6677


Production

Oil production has increased from a maximum productive rate of 10,100 BOPD in
late September 2006 to 11,600 BOPD today. A combination of weather related
delays in drilling, which are not unusual for this time of year, and a delay in
launching our fracture stimulation programme resulted in year-end production
being slightly lower than initially anticipated. We are confident of achieving
15,000 BOPD by the third quarter and we continue to target group production of
19,000 BOPD by year end 2007.

Overall we completed a total of nine producing wells in the second half of 2006,
lower than expected due to both timing delays and poor equipment. We have
subsequently invested in new equipment which is already producing positive
results.

At Petrosakh, the frac fleet and associated equipment has now been delivered to
the field site and is being readied to begin fracturing the first four wells of
a planned eight well program.  We should know the results of this initial four
well program by the end of the first quarter. Once we fracture stimulate the
remaining suitable wells at Petrosakh, we will move the equipment to Komi and
begin fracture stimulating our fields at CNPSEI, Dinyu and Nizhne Omrinskaya
Neft, of which all have excellent stimulation potential.

We had excellent results at the Potapovskoye field in Urdmurtia where we drilled
3 new producing wells with all producing above plan.

Exploration

We drilled one exploration well at the Dinyu field in the Komi Republic in the
third quarter of 2006.   This well, DN-48, was drilled to test an extension of
the Dinyu field to the Southeast.  The well encountered a previously
unidentified reef structure with over 60 meters of permeable limestone
reservoir.  After extensive testing, the well produced only small quantities of
live oil perhaps indicating the oil has migrated up-structure.

As a result, we have recently completed the acquisition of approximately 300
kilometres of new 2D seismic over the Dinyu field area, and we will be looking
to identify several new drilling locations with this new data.  The potential
includes the new reef trend we encountered while drilling DN-48, and a newly
identified eastern lobe that has excellent potential.

We have signed contracts, purchased equipment and materials, and begun site
preparation for the Nadezhdinsky No. 1 exploration well in Timan Pechora.
Located approximately 60 kilometers southwest of the port of Varendey on the
northern coastline of Russia, this prospect is our highest rated exploration
target of the five licenses we hold there.  With a target potential of 60
million barrels recoverable, the well is expected to spud in April 2007 and has
an AFE dry hole cost of approximately $8 million for a target depth of 3,200
meters.

At Petrosakh, we continue to re-process and re-interpret our 3D seismic data
base that covers the offshore license area, Pogranichny.  We expect to complete
this new analysis in the second quarter and will then be in position to refine
our exploration drilling plans for this high-potential area.

At Arcticneft we are now re-entering well 29 to begin a deep sidetrack to
explore the Permian horizon.  If successful, this well test would have a
significant impact on our development plans at Arcticneft.

Dulisma

We have today separately announced the completion of a new debt finance facility
for the development of the Dulisminskoye field in Irkutsk Oblast, Eastern
Siberia.  Goldman Sachs International and Standard Bank are providing a total of
US$130 million of subordinated debt which is expected to fund Urals Energy's
commitment to develop the oil reserves at the Dulisminskoye field.

This loan will provide Urals Energy with the debt capital necessary to develop
the Dulisminskoye field to its peak oil production level of 30,000 BOPD by 2011
while at the same time accelerating our development plan to meet Transneft's new
pipeline construction timetable.

In addition, on 22 January 2007, we received written confirmation from the
Irkutsk Tax Inspectorate verifying that the Dulisminskoye field qualifies for a
ten year, zero production tax rate for the period beginning 1 January 2007 and
ending 31 December 2016.  Production taxes paid by Urals Energy's other Russian
producing subsidiaries for the 11 month period ending 30 November 2006 averaged
approximately $11.50 per barrel.  Based on the Dulisminskoye field reserve
report by DeGolyer & MacNaughton dated 31 March 2006, Urals Energy estimates
that the gross tax savings provided by this ten year production tax holiday will
approximate $308 million and result in an approximate $191 million increase in
the project's present value discounted at ten percent.

Development activity at Dulisminskoye has already begun with the arrival of a
workover rig, two gas-electric generators, drilling tubulars, bulldozers and
excavating equipment.  We have purchased a new 100-man field camp which will be
delivered and constructed shortly, and ordered the manufacture of vessels for a
central processing facility ("CPF").  The early manufacture and delivery of the
CPF vessels this winter will allow us to complete construction of the CPF in
time for delivery of pipeline quality oil when the ESPO is commissioned in 2008.

A Chinese-manufactured mobile drilling rig is now clearing customs and is
expected in the field next month.  We plan to spud the first Dulisminskoye
development well in early April. We also expect to order pipe for the
construction of our approximate 80 kilometer ESPO interconnect in the second
quarter of this year.

Our capex budget for Dulisma in 2007 is expected to include $17 million for
drilling and $25 million for pipelines, infrastructure and facilities.

Finally, development progress has been further solidified by the approval of the
Russian Central Committee for Field Development of Urals Energy's field
development plan for the Dulisminskoye field.  The combined result of full field
debt financing, official development plan approval, and continued progress by
Transneft in constructing the ESPO, now provides Urals Energy with a clear path
for the successful development of the Dusliminskoye field.

Financial

While the industry wide impact of increases in Russian export taxes and lower
crude prices in the fourth quarter of 2006 will have a short term impact on our
net realisations, we are confident that as a result of the current oil price
environment there will be a reversal of this trend by mid year.

Overall, as a result of the Dulisma financing announcement and continued
production growth, the Group expects to fund the development of the
Dulisminskoye field and our overall 2007 activity from existing cash and
internally generated cash flow.

Outlook

The Group is making progress across all its areas of operation and has an
intensive development, drilling and exploration programme underway this year. We
expect to drill 22 development wells and at least one high-impact exploration
well.  Our fraccing programme has the potential to materially increase
production across all the Group's fields. Total capital expenditures for 2007
are expected to total approximately $90 million.

With the approval of the Dulisminskoye development plan by the Russian
Government, confirmation of a ten year production tax holiday, and the
successful Dulisma project financing also announced today, Urals Energy is
currently targeting Group production of 50,000 BOPD by 2011.

We continue to develop several excellent new acquisition opportunities in Russia
and the FSU.  The market continues to increase in terms of number of deals
offered, but we remain careful about identifying and closing acquisitions that
are accretive and will have a material impact.  We hope to close one or more new
and important deals in 2007.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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