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Valeura Energy Inc. (VLE.T) has received positive interim production test results at the Yamalik-1 exploration well in Turkey and has confirmed Yamalik as a natural gas and condensate discovery.

Yamalik-1 is the first deep exploration well drilled under phase 1 of the Banarli farm-in agreement with its partner Statoil Banarli Turkey B.V. and is the corporation's first test of the deep, basin-centred gas potential in the Thrace Basin of northwest Turkey. The well was drilled through overpressured formations below 2,500 metres to a total drilled depth of 4,196 metres. A comprehensive 60-day testing program commenced in early November, 2017, comprising four planned production tests with two frac stages per test interval (eight stages in total), starting at the bottom of the well.

The first of the four planned production tests has been successfully completed in the Kesan formation. Two slick-water fracs were completed in the first production test interval to access approximately 15 metres of indicated net gas pay over a depth interval from 3,996 to 4,147 metres. After establishing steady flow, the well was produced continuously for 44 hours through a range of choke sizes and was concluded on Nov. 25, 2017. Over the final 24 hours of the test the well was produced at an average restricted rate of approximately 0.8 million cubic feet per day ("MMcf/d") of natural gas and 60 to 70 barrels per day of 56o API gravity condensate (70 to 80 barrels per MMcf). At the end of the test, the well was still cleaning up.

This 44-hour flow period for the first production test was viewed as sufficient for preliminary internal evaluation purposes. As disclosed previously, if the aggregate production tests are sufficiently positive, it is planned to tie-in Yamalik-1 to Valeura's existing pipeline and facility infrastructure to enable a long term production test and to generate gas and liquids sales.

The estimated initial bottom hole pressure in the well is in the range of 10,700 to 11,200 pounds per square inch ("psi") based on a preliminary analysis of a diagnostic fracture injection test carried out in advance of the first stage frac. This pressure is higher than estimated from mud weights during drilling and represents a pressure gradient from surface of 0.80 to 0.84 psi/ft (18.1 to 19.0 kilopascals per metre) or 85 to 94% higher than a normal water pressure gradient.

Although the Corporation had previously advised that aggregate test results would be disclosed at the end of the test program after all four planned production tests were completed, these interim production test results have exceeded expectations and are viewed as material to the Corporation. The results are also encouraging given that this first production test was in the deepest and lowest porosity test interval. Additionally, the test only accessed approximately 10% of the planned total net pay to be production tested in the well. The condensate content of the gas was also much higher than expected and is a significant value addition to any future on-stream sales.

These positive interim production test results have increased the likelihood that Yamalik-1 will be tied in at the conclusion of the testing program. Accordingly, the Corporation is commencing engineering and design work to be positioned for a timely tie-in. Any future sales from Yamalik-1 will benefit from strong commodity prices in Turkey. In Q3 2017, the Corporation's realized prices for natural gas and liquids were $6.98 per thousand cubic feet and $65.16 per barrel, respectively.

The Yamalik-1 testing program is continuing and a bridge plug has been set above the first test interval prior to executing a planned two-stage frac in the second test interval at a depth of approximately 3,950 metres.

About Valeura Energy Inc.

Valeura Energy is a Canada-based public company currently engaged in the exploration, development and production of petroleum and natural gas in Turkey.