Urals Energy announces receipt of the approval by the Russian Federal Antimonopoly Service for the previously announced acquisition of OOO Dulisma (“Dulisma”) and OOO Lenskaya Transportnaya Kompanaya (“LTK”), and the acquisition of oil assets located in the Komi Republic from affiliates of OAO Lukoil with Russian State reserves of 25 million barrels of oil for $1.5 million in cash.

FAS approval of the Dulisma and LTK Acquisitions

Urals Energy announces that is has received formal approval from the Russian Federal Antimonopoly Service for the acquisitions of Dulisma and LTK, which were announced on 18 April 2006. This approval is an important step towards the completion of these transactions.

Acquisition of oil and gas assets in the Komi Republic from OAO Lukoil Urals Energy also announces that it has acquired the rights to purchase OOO “Voivozhneft”, OOO “Nizhnyomrynskaya Neft” and OOO “Verkhneomrynskaya Neft”, each a Russian limited liability company, from OOO Lukoil-Komi and OAO Komineft, subsidiaries of OAO Lukoil. The acquisition is for $1.5 million in cash plus certain working capital adjustments and is expected to be completed in June 2006. The closing is subject to approval by the Russian Federal Antimonopoly Service and other customary conditions.

Each of the companies to be acquired owns subsoil licences located near the Company’s existing producing properties in the Komi Republic. The licences to be acquired have been in production for over 20 years. According to the Russian State reserves body, the main Licence being acquired is credited with approximately 25 million barrels of C1-C2 reserves. The licence is currently producing approximately 350 bopd.

On completion of the acquisition, Urals Energy intends to re-evaluate the reserves, identify areas for further development and prepare and institute a rehabilitation and production enhancement program. Based on the Company’s experience, the re-evaluation of the reserves by the Group’s outside reserve evaluation firm, DeGolyer and MacNaughton, normally results in a lower quantity of reportable recoverable reserves than is recorded by the Russian State reserves body.

The Group intends to pay for the acquisition out of its existing cash reserves.

The acquisition fits Urals Energy’s acquisition criteria of acquiring producing and non-producing assets in complementary areas of Russia and the CIS with development and exploration potential at attractive prices.

William R. Thomas, Chief Executive Officer, commented:
“The approval of our Dulisma and LTK acquisitions by the Russian authorities is a welcome step in integrating these important assets into our portfolio. The added benefit of the acquisition of the additional assets from Lukoil is a significant low cost bolt-on for the Group, giving us assets near to our existing producing properties in Komi. This also evidences our ability to work with Lukoil, one of the major oil companies in Russia, on its portfolio rationalisation program. We are confident this acquisition will also contribute to our continued growth.”