Neon Energy Limited provide the following update further to the ongoing production testing operations at the Company's Paloma Deep oil and gas discovery.

Testing of the Lower Stevens 'B' sand in the Paloma Deep-2 vertical appraisal well has thus far progressed well. The zone of interest was fracture stimulated via high pressure injection of gelled water, infused with a propant (ceramic beads) designed to be deposited within the induced fractures. Initial flow back of fracture fluid has included oil and gas.

To facilitate clean up of the wellbore and initiate an increased and steady flow of hydrocarbons from the reservoir, the 'frac' tubing (3½') is being replaced with smaller diameter (27/8') production tubing. After adding additional perforations to increase the test interval, the well will then be placed on pump; an operation expected to be complete in approximately one week's time. A further announcement will be issued after the well has cleaned up and a stable flow rate has been attained.

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