IOG.L Regulatory News (IOG)

31 Jan 2005 07:30

Island Oil and Gas PLC31 January 2005 Island Oil and Gas plc "Curdarragh" Annamult Bennettsbridge Co. Kilkenny Republic of IrelandPRESS RELEASE 31 January 2005 ISLAND OIL AND GAS plc FARMS INTO FRONTIER EXPLORATION LICENCE 1/05 OFFSHORE DONEGAL, IRELAND Island Oil and Gas plc ("Island"), the technology-led independent oil and gasexploration company, today announces that, through it's wholly owned subsidiaryIsland Assets Porcupine Limited ("IAPL"), it has further expanded its portfolioof interests offshore Ireland with the execution of a farm in agreement toacquire a 26% interest in the Frontier Exploration Licence 1/05 over the DonegalBasin Block 13/7 and part-Blocks 13/11 (NE) and 13/12 (N) ("the Blocks").Frontier Exploration Licence 1/05 lies off the northwest coast of Irelandapproximately 70kms from shore and the recently constructed Coolkeeragh 400 MWgas fired power station at Derry. A number of prospective structures have been identified within the Blocks. Thelargest of these, Inishbeg, was first identified by the current Island technicalteam in 2000 and resulted in the original partners successfully applying for theprevious Licensing Option. Subsequently, the prospect has been matured to a stage where exploration drilling can be justified on the basis of an acceptablerisk-reward scenario. Inishbeg is a large and robust four-way dip-closedanticlinal structure which lies in a water depth of approximately 320 feet. The farm in terms involve Island acquiring a 26% interest in the Blocks bycarrying 40% of the dry hole costs of an exploration well to evaluate theTriassic hydrocarbon potential of Inishbeg for Ramco Donegal Limited ("Ramco"),a wholly owned subsidiary of Ramco Energy plc, and Sunningdale Donegal BasinLimited ("Sunningdale"), a wholly owned subsidiary of Sunningdale Oils (Ireland)Limited. In the event of a successful well, and subject to partner approval,Island will also carry Ramco's and Sunningdale's part of the testing costs onthe same basis. Island is currently fully funded to meet such a commitment. Petroceltic International plc, through its wholly owned subsidiary LeridaTrading Limited, is also farming into the Frontier Exploration Licence 1/05 onthe same pro rata terms. Following the farm in agreement and the execution of a Joint Operating Agreementthe equity interests in the Frontier Exploration Licence will be as follows: Lundin Exploration B.V.* 35% (Operator)Island Assets Porcupine Ltd* 26%Ramco Donegal Ltd 19.25%Lerida Trading Ltd 16.25%Sunningdale Donegal Basin Ltd 3.5% * Island announced in December 2004 that it had reached an agreement to acquire a portfolio of offshore oil and gas interests from Lundin Ireland Limited ("Lundin"). This transaction is expected to be completed during the first quarter of this year, subject to certain conditions including Irish government and partner approvals. As part of this transaction, Island, upon approval, will be granted an option to acquire an additional 5% groundfloor participating interest in the Donegal Basin Blocks. If exercised, this would increase Island's participating interest to 31%, making it the largest equity holder in the Frontier Exploration Licence, and subsequently reduce Lundin's interest to 30%. Under the terms of the Frontier Exploration Licence, which runs for 15 years, itis currently anticipated that, subject to rig availability, an exploration wellwill be drilled during 2005 to evaluate the potential of the Triassic SherwoodSandstone reservoirs. These reservoirs are gas-bearing in the Corrib Gas Field,which lies on trend to the southwest in the Slyne Trough. Commenting on Island's further expansion of its Irish offshore interests, PaulGriffiths, Chief Executive of Island, said: "Our execution of this farm-in agreement is consistent with our previouslystated strategy of participating in a more proactive manner in the areas forwhich Island acquired a Net Profits Interest entitlement arising out of the saleof Island Petroleum Developments Limited to DNO ASA in September 2002. We havehad a long association with these particular blocks and believe that, as such,we are well-placed to participate actively in the future success of this area.We look forward to working with our partners in the Blocks and with the Irishauthorities. "The Inishbeg Prospect carries exploration risk, however the risk-reward ratiois very attractive for us. We are encouraged by the fact that the Inishbegstructure is potentially larger than and bears certain geological similaritiesto the structure of the Corrib Gas Field. Triassic reservoirs are interpreted tooccur at much shallower depths in Inishbeg, which also lies in shallower waterdepths compared to Corrib, thereby potentially reducing appraisal anddevelopment costs and creating several development options should the initialexploration well be successful. We are further encouraged by the potential forfollow-up drilling opportunities on the Blocks should the presence of Triassicreservoirs in the Inishbeg structure be confirmed by drilling. The presence of a newly constructed gas fired power plant at Derry generates an opportunity todevelop a local gas market" Enquiries: Lisa J NewmanNewman ConsultingTel: +44 (0) 1252 878682Mobile: +44 (0)7717 500257Email: newmanconsulting@hotmail.com Notes to editors:Island, which was founded in 2003, was admitted to AIM in December 2004 at whichtime it had cash in bank of approximately £9 million and no debt. The Companyaims to capitalise upon its technical knowledge and expertise to become aregionally focused international oil and gas exploration company, whilstcontinuing to develop its existing Irish projects. The Company's management teamhas extensive experience in oil and gas exploration as well as in business andfinance. Island currently has interests in a number of licences and options offthe west coast of Ireland and off the southeast of Ireland in the Celtic Sea. Inaddition, Island is actively pursuing other potential opportunities to broadenits geographic exposure. Further information on Island can be found on the Company's website at www.islandoilandgas.com This information is provided by RNS The company news service from the London Stock Exchange