IOG.L Regulatory News (IOG)

24 Apr 2007 07:02

Island Oil and Gas PLC24 April 2007 24 April 2007 ISLAND OIL & GAS CONCLUDES IRISH AND INTERNATIONAL FARM OUT AGREEMENTS WITH ENCORE OIL Island Oil & Gas plc ("Island") (LSE:IOG) today announces that, in line with itscurrent strategy of bringing forward the value of its project portfolio, it hasconcluded farmout and option agreements with EnCore Oil plc ("EnCore") coveringboth Irish and international assets. These include farm out agreements on theOld Head of Kinsale and the Schull gas fields in the Celtic Sea, both of whichare the subject of the 2007 drilling programme, and the Amstel Field, offshorethe Netherlands, and arise as a result of the Cooperation Agreement entered intobetween EnCore and Island in October 2006. The farm out agreements for the Old Head of Kinsale and Schull gas fields aresubject to approval from the Irish Minister for Communications, Marine andNatural Resources. The Amstel farm out is subject to the approval of the DutchMinister for Economic Affairs. •Exploration Licence 4/05 ("Old Head of Kinsale" gas field) - Islandhas concluded a farm out agreement with EnCore over the Island-operated Old Headof Kinsale gas field, whereby EnCore will acquire a 15% interest, in return fora cash consideration for past costs, reducing Island's interest to 65%. Islandhas also granted EnCore an option to acquire a further 5% interest, subject tocertain conditions. Drilling of appraisal well 49/23-2 is expected to commenceduring May this year using the Petrolia rig. •Exploration Licence 5/05 ("Schull" gas field) - Island has concludeda farm out agreement with EnCore over the Island-operated Schull gas field,whereby EnCore will acquire a 12.5% interest, reducing Island's interest to42.5%. EnCore is also granted an option to acquire an additional 7.5%, subjectto certain conditions. Island is currently negotiating the acquisition of anadditional 20% interest in Schull from the minority partners, in order toadvance drilling activity. It is expected that post-conclusion of thistransaction Island will have a shareholding of 62.5% in Schull, prior to anydecision by EnCore to exercise its option to acquire a further 7.5%. Anappraisal well will be drilled at the Schull gas field this year followingdrilling and testing of the Old Head of Kinsale appraisal well. •Netherlands Q13 Production Licence ("Amstel" field) - Island hasconcluded a farm out agreement with EnCore over the Amstel field, whereby EnCorewill acquire a 10% interest for a cash consideration, reducing Island's interestto 50%. EnCore is also granted an option to acquire a further 5% interest,subject to certain conditions. •Overriding Royalty Agreements - Island and EnCore have entered intoOverriding Royalty Agreements in connection with the above farm out agreementswhereby, EnCore agrees to pay Island a royalty defined as a percentage of therevenue from the sale of hydrocarbons from the farm out interests in theLicences above (7.5% Old Head of Kinsale, 10% Schull and Amstel), subject tocertain conditions including field performance. •Option Agreement, Southern North Sea - EnCore holds a 100% interestin a UK Promote Licence in the Southern North Sea, containing the BennettProspect, adjacent to the Cavendish gas field. EnCore has granted Island anoption to acquire a 15% interest in the licence, subject to certain conditions. •Option Agreement, Nimes, France - EnCore holds a 100% interest in anapplication for a licence for a block in the Nimes area in France, and hasgranted Island an option to acquire a 30% interest in the total equity awarded,subject to certain conditions. Island will only exercise the options in the Southern North Sea and France ifthere is an opportunity to farm out for a fully carried interest in any futurework programmes. EnCore will immediately participate pro-rata in the upcomingappraisal wells 49/23-2, at the Old Head of Kinsale gas field, and 57/2-3, atthe Schull gas field. Further to these farm out agreements, Island will now proceed with a placing toinstitutional investors to secure additional equity to support its drilling andcontingent testing programme. Paul Griffiths, Chief Executive of Island, commented: "Island has successfully delivered upon its stated strategy of seeking to farmout its substantial equity interests in its extensive portfolio of explorationand near-development assets in order to accelerate drilling activity and thedevelopment of our portfolio to early production, whilst limiting financialexposure and bringing forward value." Enquiries: Lisa J Newman MCIPR MIRSNewman Consulting Tel: +44 (0)1252 878682 Paul GriffithsChief Executive Island Oil & Gas plc Tel: +353 1 631 3755 Anthony Farrell Davy + 353 1 679 6363 Andrew MatharuBridgewell Limited Tel: +44 (0)207 003 3105 Notes to Editors: About Island Island was founded in 2003 and listed on AIM in December 2004 (LSE:IOG). TheCompany has interests in eleven Irish offshore licences, as well as licences inthe Netherlands and Morocco. Island is involved in an exploration andappraisal programme which in 2006 saw successful Celtic Sea gas wells at the OldHead of Kinsale and the Seven Heads Sub-Area. The Company has again secured thePetrolia rig for its 2007 Celtic Sea drilling programme. This is due to commencein the second quarter of 2007 with an appraisal well at the Old Head of Kinsalegas field, followed by an appraisal well at the Schull gas field. Further information on Island can be found on the Company's website at http://www.islandoilandgas.com. Partners and Interests in Farm Out Agreements in This Announcement: Old Head of Kinsale gas field Island operator with 65%*; EnCore 15% (*with option to acquire an additional5%); Valhalla Oil and Gas Limited 20%. Schull gas field Island operator with 42.5%*; EnCore 12.5% (*with option to acquire an additional7.5%); Carob Limited 15%; Celtex Exploration 15%; Bexley Investments 15%. Amstel Field Island operator with 50%*; EnCore 10% (with the option to acquire an additional5%); EBN 40% This information is provided by RNS The company news service from the London Stock Exchange