Kulczyk Oil Ventures Inc.: EBRD Approves USD 40 Million Loan for KUB-Gas LLC

CALGARY, ALBERTA--(Marketwire - May 5, 2011) -

Highlights

• The European Bank for Reconstruction and Development approved a USD 40 million loan to KOV's 70% indirectly owned Ukrainian subsidiary, KUB-Gas LLC, subject to finalization of the loan agreement and related security agreements.
• Funds to be applied towards the further development of Ukrainian assets.
• The Loan will help KUB-Gas consolidate its position as one of Ukraine's leading private sector hydrocarbon producers.

Detail

Kulczyk Oil Ventures Inc. (WARSAW:KOV) ("Kulczyk Oil", "KOV" or the "Company") is pleased to announce that the European Bank for Reconstruction and Development (the "EBRD") has approved a USD 40 million loan (the "Loan") to the Company's indirectly held 70% subsidiary KUB-Gas LLC ("KUB-Gas").

Formalization of the arrangements between the EBRD and KUB-Gas for the Loan are subject to completion of agreements, including a Loan Agreement and ancillary security arrangements which are at the time of this release under preparation.

The Loan is to be applied to the funding of ongoing development of KUB-Gas' Vergunskoye, Olgovskoye, Makeevskoye and Krutogorovskoye natural gas and condensate fields in the Lugansk region of Ukraine (including the purchase of servicing equipment and production facility upgrades) to enable KUB-Gas to consolidate its position as one of Ukraine's largest private sector hydrocarbon producers. Additionally, the funds may be used to repay existing shareholder loans of up to USD 7 million made by KOV to KUB-Gas that were advanced for the same purposes as the intended use of the EBRD funds.

The Loan may be drawn down from two tranches of funds. The commitment period for doing so is two years from signing the Loan Agreement. Repayment of the Loan is to be by way of 11 equal semi-annual installments starting 15 July 2012. Drawing down the Loan is subject to a customary set of conditions precedent.

The First Tranche of the Loan ("Tranche 1") will be for USD 23 million. Tranche 1 debt will include a fixed element and a variable element designed to simulate an 'equity kicker' for the EBRD to allow it to share in any success resulting from the further exploration, development and production of KUB-Gas' assets resulting from the Loan.

The Second Tranche of the Loan ("Tranche 2") will be for USD 17 million. Before KUB-Gas can draw down Tranche 2, a number of additional conditions must be satisfied, including the complete drawdown of Tranche 1 and the conversion of at least 2 of KUB-Gas' existing licenses (including Olgovskoye) into production licenses (with durations exceeding maturity of the Loan).

As part of the security package for the Loan, the Company will provide a parent company guarantee to the EBRD in respect of monies owed by KUB-Gas under the Loan Agreement. Other security will include a mortgage over the K200 drilling rig, together with pledges over the charter capital of KUB-Gas and its future moveable property.

In relation to the Loan, the EBRD has stated:

"By backing KUB-Gas, the Bank will support an existing domestic producer in maximising the exploitation of its reserves and contributing to increased energy security for Ukraine. The acquisition of a controlling stake by KOV and associated skills and knowledge transfer will also contribute to strengthen transparency (including disclosure under Publish What You Pay principles), corporate governance and business and environmental practices at KUB-Gas, contributing to set higher standards for the industry in Ukraine."

Tim Elliott, the Chief Executive Officer of KOV said:

"I'm very pleased to welcome the EBRD's investment in the ongoing success of our Ukrainian business, as well as the continued development and improvement of the Company's Ukrainian assets. The EBRD's participation in, and the application of its resources to, these key projects will strengthen KUB-Gas in consolidating its position as one of Ukraine's leading independent gas producers."

Assets of Kulczyk Oil

Kulczyk Oil is an international upstream oil and gas exploration company with a diversified portfolio of projects in Brunei, Syria and Ukraine and with a risk profile ranging from exploration in Brunei and Syria to production and development in Ukraine.

In Brunei, KOV owns working interests in two production sharing agreements which gives the Company the right to explore for and produce oil and natural gas from Block L and Block M. KOV owns a 40% working interest in Block L, a 2,220 square kilometre (550,000 acre) area covering onshore and offshore areas in northern Brunei and a 36% working interest in Block M, a 3,011 square kilometre (744,000 acre) area onshore in southern Brunei.

In Ukraine, KOV owns an effective 70% interest in KUB-Gas LLC. The assets of KUB-Gas consist of 100% interests in five licenses near to the City of Lugansk in the northeast part of Ukraine. Four of the licenses are gas producing.

In Syria, KOV holds a participating interest of 70% in the Syria Block 9 production sharing contract which provides the right to explore for and, upon fulfillment of certain conditions, to produce oil and gas from Block 9, a 10,032 square kilometre (2.48 million acre) area in northwest Syria. The Company has agreements to assign an aggregate of 25% in ownership interests to third parties which are subject to the approval of Syrian authorities, and which, if approved, would leave the Company with a remaining effective interest of 45% in Syria Block 9.

The main shareholder of the Company, Kulczyk Investments S.A. owns almost 50% of the issued common shares. Kulczyk Investments S.A. is an international investment house founded by Polish businessman Dr. Jan Kulczyk.

For further information, please refer to the Kulczyk Oil website (www.kulczykoil.com).

Translation: This news release has been translated into Polish from the English original.

Forward-looking StatementsThis release contains forward-looking statements made as of the date of this announcement with respect to future activities of the Company in Ukraine that are not historical facts. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable as of the date hereof, any potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors that could impair or prevent the Company from completing the expected activities on its projects include that the Company's projects experience technical and mechanical problems, there are changes in product prices, failure to obtain regulatory approvals, the state of the national or international monetary, oil and gas, financial , political and economic markets in the jurisdictions where the Company operates and other risks not anticipated by the Company or disclosed in the Company's published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties and actual results may vary materially from those expressed in the forward-looking statement. The Company undertakes no obligation to revise or update any forward-looking statements in this announcement to reflect events or circumstances after the date of this announcement, unless required by law.