Mr. Jim McFarland reports

VALEURA ANNOUNCES EXECUTION OF DEFINITIVE AGREEMENTS FOR STATOIL FARM-IN ON BANARLI LICENCES IN TURKEY

Valeura Energy Inc.'s wholly owned affiliate, Corporate Resources BV (CRBV), has executed the definitive transaction documents with Statoil Holding Netherlands BV, a wholly owned affiliate of Statoil ASA, for a farm-in agreement for the exploration of the deeper formations on Valeura's two 100-per-cent-owned-and-operated Banarli exploration licences in the Thrace basin of northwest Turkey. The definitive agreements include a farm-in agreement, a joint operating agreement to apply postearning and a number of ancillary agreements.

"Completion of the definitive agreements is a key milestone and we now look forward to obtaining the necessary Turkish government approvals to close the farm-in transaction," said Jim McFarland, president and chief executive officer of Valeura. "Valeura and Statoil have worked diligently to negotiate the definitive agreements and in parallel have collaborated to advance the preparatory work to expeditiously launch the farm-in work program, to be operated by Valeura, pending receipt of Turkish government approvals," added Mr. McFarland.

Banarli farm-in

Under the terms of the definitive agreements, Statoil has the option to earn a 50-per-cent participating interest in the deep formations on the Banarli licences by investing in an exploration program that includes payments and carried costs of at least $36-million (U.S.). The actual amount invested by Statoil to earn its 50-per-cent interest may be higher based on the actual agreed costs of the three-phase work program to satisfy the commitments as described more fully in Valeura's May 15, 2016, press release. The earning work program includes two deep exploration wells and additional 3-D seismic.

The next step in the transaction requires the parties to jointly submit applications to the General Directorate of Petroleum Affairs (GDPA) of the Republic of Turkey for approval of the associated licence interest transfers, whereby Statoil would hold a 50-per-cent participating interest in the deep formations below approximately 2,500 metres and Valeura would retain a 100-per-cent interest in the shallow formations on the Banarli licences. These applications are expected to be submitted by the end of August, 2016. GDPA approval of the licence interest transfers is a key condition to close the transaction and Valeura will receive $6-million (U.S.) at closing as a contribution to past exploration costs incurred on the Banarli licences.

In the meantime, preparatory work has continued to position the possible commencement of drilling by year-end 2016 or early 2017, contingent on the timing of government approvals to close the transaction.

Other business development and operational highlights

The Statoil farm-in on the Banarli licences has set the stage for the corporation to more actively pursue a joint venture partner to explore the deeper horizons below approximately 2,500 metres on certain joint venture lands acquired from Thrace Basin Natural Gas (Turkiye) Corp. (TBNG) and Pinnacle Turkey Inc. (PTI), which also have potential for a potential basin-centred gas play.

In concert, the corporation is actively pursuing strategic acquisitions and exploring its options to ramp up exploration and development activities in the shallow formations on its 40-per-cent non-operated interest in the TBNG joint venture. A resumption of activity on the TBNG joint venture would expand the drilling and fracking opportunity portfolio, balance risk and complement the 100-per-cent-controlled shallow program on the Banarli licences, which is in the early exploration phase. The objective of this strategy is to grow a more robust, premium-priced, high-netback conventional shallow gas and unconventional tight gas business in Turkey, while retaining meaningful exposure to a potentially high-impact, deep-basin-centred gas play in the Thrace basin financed in the early stages by joint venture partners.

Bati Gurgen-2 well

The Bati Gurgen-2 sidetrack well on the Banarli licences has now been completed as a natural gas producer from the Osmancik formation and is in the process of being tied in with a very short flow line to the existing gathering system from the Bati Gurgen-1 well. The well is expected to be on stream by early September, 2016. Approximately eight metres of conventional stacked sands were perforated in the Osmancik below a true vertical depth of 1,640 metres. A short 12-hour well test was carried out at a restricted rate of approximately one million cubic feet per day. The gas will be sold to the TNBG joint venture under the same sales contract currently in place for Banarli sales sourced from the Bati Gurgen-1 well.

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