IOG.L Regulatory News (IOG)

16 May 2006 12:08

Island Oil and Gas PLC16 May 2006 16 May 2006 ISLAND OIL & GAS PLC ANNOUNCES UP TO STG£21 MILLION INWARD INVESTMENT OPPORTUNITY AND MAJOR BOOST TO INTERNATIONAL AMBITIONS Island Oil & Gas plc ("Island" or the "Company"), the oil and gas explorationand production company, today announces that Platinum Petroleum Limited("Platinum"), an international energy investment group focused on investing inupstream and downstream assets in the oil and gas sector, has agreed a strategicinvestment in Island of up to Stg£21 million, subject to regulatory andshareholder approvals ("the Transaction"). Island has also entered into aMemorandum of Understanding ("MOU") with Platinum under which Platinum willgrant Island an opportunity to participate in specific exploration andproduction opportunities in both West and North Africa. The MOU with Platinum represents a major boost to Island's internationalaspirations. Under the terms of the MOU, Platinum will offer Island specificopportunities in what are proven hydrocarbon provinces, These opportunitieswill be offered under the terms of a proposed Area of Mutual Interest Agreement("AMI Agreement"), which is to be entered into between the parties. Anyconsideration payable to Platinum arising from a decision by Island toparticipate in any opportunity generated under the AMI Agreement will be agreedon a case-by-case basis Approvals Platinum currently holds 15,000,000 ordinary shares in Island (all of which wereacquired in November 2004 prior to AIM admission), amounting to approximately23% of the current issued share capital of 65,141,000 ordinary shares.Following completion of all elements of the proposed investment, thatshareholding may rise to 41%. In order to facilitate the Transaction, Islandwill seek the approval of independent shareholders at an Extraordinary GeneralMeeting ("EGM") to be convened in due course, and has applied to the IrishTakeover Panel for a waiver from any obligation on the part of Platinum to makea general offer to all shareholders that might otherwise arise under Rule 9 ofthe Irish Takeover Rules ("the Waiver"). If the Waiver is granted by the IrishTakeover Panel, Island will thereafter send an EGM circular to all shareholders,including a resolution asking the independent shareholders of Island to approvethe Waiver (the "Approvals"). Convertible Loans Island has entered into agreements with Platinum relating to the provision of upto Stg£10 million to Island in two non-interest bearing convertible loans (the"Loans") and to provide Platinum with 10 million warrants to subscribe forordinary shares in Island at Stg£1.10 each (the "Warrants"), subject to certainconditions. The investment provided by Platinum will be applied to Island'songoing exploration programme. As previously announced Island is funding 100%of the cost of a well in the Seven Heads West Sub-Area, including testing, inreturn for increasing its equity interest in the Sub Area from 12.5% to 55.75%. Island will also fund 100% of the drilling costs of the Old Head of Kinsaleexploration well in return for increasing its equity interest to 100% subject tothe normal consents and approvals from the Petroleum Affairs Division ("PAD") ofthe Department of Communications, Marine and Natural Resources and otherregulatory authorities. Platinum has agreed to provide a convertible loan to Island in the sum ofStg£4,500,000 (the "First Loan"). The First Loan can be drawn down any timeafter 21 May 2006 upon Island giving Platinum seven days notice. Platinum hasalso agreed to provide a second convertible loan to Island in the sum ofStg£5,500,000 (the "Second Loan") subject to the granting of the Approvals. TheSecond Loan can be drawn down within seven days of the Approvals being granted.Should the Approvals not be granted, drawdown will not take place. Both Loans are convertible into ordinary shares at Stg£1.00 per ordinary shareafter the EGM of the Company. If the Approvals are granted, both Loans willconvert into ordinary shares of the Company. If the Approvals are not granted,only the First Loan will convert into ordinary shares to the extent that theshareholding of Platinum after conversion will not exceed 29.99%. Any loancapital remaining in the First Loan after conversion will be repayable in cashto Platinum by 31 December 2006. Warrants In consideration for Platinum providing the First Loan, Platinum shall have theright to subscribe for 4,500,000 ordinary shares of Island at an exercise priceof Stg£1.10 per ordinary share. In consideration for Platinum providing theSecond Loan, Platinum shall have the right to subscribe for 5,500,000 ordinaryshares of Island at an exercise price of Stg£1.10 per ordinary share. All ofthe Warrants are exercisable within twelve months of the Approvals beinggranted. Commenting on the agreements with Platinum, Paul Griffiths, Chief Executive ofIsland, said: "The large investment by Platinum, Island's largest shareholder, is important incementing the strategic relationship between Island and Platinum, which will beimportant both in terms of funding our current and future drilling programmesand in exploring areas outside of Ireland." "The execution of the MOU with Platinum potentially adds a new internationaldimension to Island's expanding portfolio of oil and gas interests, built upover the past 18 months by Island's experienced management team. The MOU willgive us access to additional exploration and production opportunities in provenhydrocarbon basins in North and West Africa. These opportunities, combined withhaving already secured a drilling rig for 2007 and having created an in-houseoperating capability, have put us in a strong position to secure new explorationand production licences in North and West Africa, on the basis that Island canfast-track drilling activity on such potential licences as early as 2007. Thisgives us a competitive edge compared to other more long-establishedoperators." Enquiries: Lisa J Newman MCIPR MIRSNewman Consulting Tel: +44 (0)1252 878682 Notes to Editors : Island was founded in 2003 and listed on AIM in December 2004. The Company hasinterests in nine Irish offshore licences, (four as operator and two astechnical manager), including one producing gas field. The Company's 2006three-well drilling programme is now underway offshore Ireland, using thePetrolia Rig, owned and operated by Petrolia Drilling Limited, under contract toIsland. Island has spudded its first well of the programme, the 48/23-3 well, targetinga possible gas structure, at the Seven Heads Sub Area in the Celtic Sea.Subject to the usual regulatory consents and approvals, the Company intends tomove the rig after the completion of the 48/23-3 well to the nearby Old Head ofKinsale prospect, to drill 49/23-1, the second well of its 2006 three-wellprogramme. The rig then moves on to the Donegal Basin for its planned thirdwell, which will be operated by Lundin. Island is also developing its 2007exploration plans, and has secured the Petrolia rig for a 2007 150 day drillingprogramme. In addition to its activities offshore Ireland, Island continues topursue specific opportunities internationally where it can build value throughthe application of its technical expertise. Further information on Island can be found on the Company's website at http://www.islandoilandgas.com. This information is provided by RNS The company news service from the London Stock Exchange