BOIL.L Regulatory News (BOIL)

7 Oct 2005 12:07

Gold Oil PLC07 October 2005 FOR IMMEDIATE RELEASE 7 October 2005 GOLD OIL ACQUIRES OPERATORSHIP AND INTEREST IN OIL AND GAS PRODUCING FIELD AND EXTENDS ITS MOU WITH MAN FERROSTAAL Gold Oil Plc ("Gold" or "the Company") is pleased to announce that it haspurchased an onshore oil production company based in northern Spain. This is thefirst production in Gold's history and will provide its initial source of incomefrom oil and gas activities. It most importantly provides Gold with "operator"status now essential for the Company to pursue its main explorationopportunities in Peru. Gold has also signed an extension to its Memorandum ofUnderstanding ("MOU") with MAN Ferrostaal of Essen, Germany for the evaluationand feasibility study for a petrochemical plant to be constructed in NorthernPeru. Gold has signed the agreement with Northern Petroleum Plc for 100% of the issuedshare capital of Northern Petroleum Exploration Limited ("NPE") (a wholly-ownedsubsidiary of Northern Petroleum Plc) for a cash consideration of £300,000. Theagreement provides that the cash balance at completion is paid to the vendor insettlement of the outstanding inter-company balance. NPE holds the operatorshipand a 22.5% share of the Ayoluengo oil field in the Sedano Basin about 280kmnorth of Madrid. The Oil from the field is highly priced, and is sold as crudeto be blended and burned by local industry, yielding a price above that of Brentcrude oil. However, the indexation formula means that although the benefit ofcurrent high oil prices will be enjoyed by Gold this will be in future months asthe sale price lags behind the current oil price. Gross annual revenue for theentire field in 2005 is estimated at US$1.6 million at the prevailing oil priceswith an unaudited net operating profit of US$446,000. The purchase includes the oil processing facilities, tanks, offices and the landon which they stand, together with substantial related equipment and stocks,including a work-over rig. For the year ended 31 December 2004, NPE reportedturnover of £489,164, on gross loss of £3,212, operator fees of £42,000 and aloss on ordinary activities before taxation of £111,154 and had as at that datea net deficit of £212,295. The Ayoluengo oil field is currently producing about 110 barrels of oil per dayfrom 11 wells with a further well producing sufficient quantities of gas togenerate the power required to run the operations. Approval has been received tore-enter the wells to increase production by perforating several identifiedzones previously undeveloped. GOLD OIL EXTENDS ITS MOU WITH MAN FERROSTAALGold Oil has signed an extension of its existing MOU with MAN Ferrostaal ofEssen, Germany to evaluate the feasibility of developing a petrochemical plantin Northern Peru. Under the terms of the MOU, MAN Ferrostaal is responsible forevaluating the petrochemical plant and Gold Oil is responsible for evaluatingthe gas supplies and pipeline transportation options. The MOU envisages several phases of development with Gold Oil having an optionto participate in the petrochemical plant and MAN Ferrostaal an option toparticipate in the upstream gas supply. Gary Moore, Managing Director of Gold Oil Plc, said "It may seem strange for acompany focused on South America to purchase assets in Europe, but this has beendone for very good reasons. The first and most important is "Operatorship". With such high oil prices thestate licencing authorities in many South American countries have recently beganraising the hurdle level for licences in their countries. Three years ofaccounts plus current operatorship and oil production is now the norm, making itimpossible for new oil companies such as Gold Oil to acquire or retain licences.We have tried endlessly to contract with existing operators in those countrieswithout giving away control and a considerable interest in our target areas butthis could not be achieved. We now have the ability to turn our promotionagreements and areas of interest into Exploration and Exploitation Licenceswithout diluting our interest. The second reason is that as I was a non-executive director with NorthernPetroleum Plc at the time Northern first purchased the Spanish assets, I amfamiliar with the assets and do see upside if the costs can be kept down.We are delighted to be able to sign an extension to the MAN Ferrostaal MOU,where the feasibility study, the first stage of the petrochemical plant project,has proved encouraging. Whilst $70/bbl oil and the price and gas resource sizein the area that Gold operates in Peru makes the project very attractive, italso brings in more competition and impinges upon resources making progressslower than we would have hoped for." Note: Mike Burchell, B.Sc., 63, has over 40 years experience in the oil and gasbusiness. He has read and approved the technical disclosure in this regulatoryannouncement. ENQUIRIES: Gary Moore Managing Director; Tel: 01737833597Email: gmoore@goldoilplc.comMike Burchell Chairman; Tel: 01372361772Email: mikeburchell@hotmail.comRoland Cornish Beaumont Cornish Limited; Tel: 020 7628 3396 This information is provided by RNS The company news service from the London Stock Exchange