Neon Energy Limited provide the following update regarding 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 well is nearly complete, with recovery rates of up to 8 barrels of oil per day and 20 thousand cubic feet of gas per day. This is lower than was achieved at the Paloma Deep-1 well which saw a maximum flow rate of 226 barrels of oil/condensate per day and nearly 2 million cubic feet of gas per day. The reason for the lower flow rate is believed to be mainly due to lower reservoir permeability, although the nature of the well completion and a sub-optimal fracture stimulation are also possible contributing factors.

Downhole gauges are currently recording shut in build-up pressure data. The gauges will be retrieved in approximately one week, after which diagnostics for reservoir parameters will be incorporated into simulation models of potential development scenarios.

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