IOG.L Regulatory News (IOG)

12 Dec 2006 07:00

Island Oil and Gas PLC12 December 2006 12 December 2006 ISLAND OIL & GAS PLC ANNOUNCES DETAILS OF 2007 DRILLING PROGRAMME AND ATLANTIC MARGIN FARMOUT STRATEGY, OFFSHORE IRELAND Further to a successful 2006 drilling programme offshore Ireland, Island Oil &Gas plc (LSE:IOG), ("Island" or the "Company") today announces details of itsproposed 2007 drilling programme. The programme, for which Island has alreadysecured a rig, will focus primarily upon pre-development drilling in the OldHead of Kinsale gas field. The option will also exist for the Company to drill awell in the Schull Licence to further evaluate the gas potential in and aroundthe Schull gas field. In addition, Island has established a farmout programmefor various near-development and exploration projects on the Atlantic Margin,which would allow the Company to progress a rolling programme of potential oiland gas developments over the next two to five years. HIGHLIGHTS: •Pre-development drilling and testing in 2007 at Old Head of Kinsale gas field where Island made a successful gas discovery during 2006 •Option maintained to drill to evaluate gas potential in and around the Island-operated Schull gas field dependent upon duration of drilling and testing operations at Old Head of Kinsale •Drilling activity expected to commence Second Quarter 2007 •Atlantic Margin farmout process of multi-tcf gas prospects ongoing •Connemara oil field near-development studies reaching advanced stage •Common strategy report for the joint development of Island and Providence Resources plc ("Providence") Celtic Sea oil assets, including the Seven Heads Oil Option •International expansion initiated with the award of Dutch Q13 Production Licence to Island as an approved operator Celtic Sea During 2006, Island made a landmark gas discovery with its operated explorationwell 49/23-1 at the Old Head of Kinsale Prospect, to the southeast of theKinsale Field; the first new gas discovery in the Celtic Sea for 16 years. TheCompany also had a successful gas well at Seven Heads West. The Old Head ofKinsale well encountered a Lower Cretaceous reservoir sequence with a gross 100foot gas column, and with initial indications showing that the gas extends overan area of up to 22 sq km. The potential volumes of gas in place are currentlythe subject of a review by an independent third party Competent Persons' Report.The gas discovery is located only 25 km from Marathon's production facilities atthe Kinsale field, greatly enhancing the economics, and work is ongoing todetermine the technical and commercial feasibility of a potential subseatie-back to the Kinsale Alpha Production Platform. Based on the encouraging wellresults, Island suspended the 49/23-1 well as a potential gas producer, pendingfurther evaluation of the gas discovery in 2007. Drilling activity at the OldHead of Kinsale is currently anticipated to begin in the Second Quarter of 2007following mobilisation of the Petrolia rig from the UK North Sea to Ireland. Following operations at the Old Head of Kinsale, the Petrolia rig will eitherstay in place there for further pre-development drilling, or will move to thenearby Schull Licence, where Island has the option to drill and operate a wellin 2007. The Schull well is planned with a view to developing the gas potentialof the area through the Seven Heads/Kinsale infrastructure. The Schull gas fieldwas first discovered by the Total operated well 57/2-2 in 1987 at a time oflower gas prices and no available access to gas infrastructure. It liesapproximately 43 km to the southwest of the Seven Heads gas field and theassociated infrastructure linking Seven Heads to the Kinsale Alpha platform. Thearea contains three potential gas structures: the Schull Gas Field; and theSchull Central and Schull North prospects. Island has completed a programme ofseismic reprocessing and reservoir distribution studies that has significantlyupgraded the gas potential of the area. The 2007 drilling programme is subject to the normal consents and approvals ofthe Minister for Communications, Marine and Natural Resources Atlantic Margin On the Atlantic Margin the Company continues to progress the farmout of itsmulti-tcf gas prospects in the Donegal, Slyne and Rockall Basins. The area isseen by Island as being highly prospective for Triassic gas analogous to thattrapped in the Corrib gas field. The Company is receiving an increased level ofinterest in its portfolio of gas prospects given their materiality and, in theinstance of the Killala Licence, due to their proximity to the development ofthe Corrib gas-gathering infrastructure and the proposed LNG facility atShannon. In addition, the existence of spare capacity in the gas interconnectorsbetween Ireland and the United Kingdom already provides the route necessary toestablish a potential gas export market for Atlantic Margin gas. Significant interest from the industry, as evidenced in part by the announcementof the Cooperation Agreement with EnCore Oil, has also been received by theCompany in respect of its potential Connemara oil field development. Reservoirengineering and facilities studies are progressing to determine the optimumtechnical and commercial criteria necessary to proceed to the submission of aplan of development for the field and the Company expects to announce furtherdetails in the first quarter of 2007. Possible synergies with any futuredevelopment of Celtic Sea oil assets are also being evaluated based on thecommon strategy arising from the announcement in September 2006 by Island andProvidence of an agreement to work together to develop a common strategy reportfor the joint development of the companies Celtic Sea oil assets based on ashared floating production facility. The assets to be included in this studyincorporate each company's Celtic Sea oil assets, including the Seven Heads OilOption, which covers the oil-bearing Middle and Lower Wealden reservoirs in theSeven Heads structure. The study will also include the reservoir engineeringstudy produced by Island for a pilot development project based on a short lifeproduction profile for the Seven Heads Oil Option of 9,000 bopd. International Island recently established a strategic position in the Netherlands through theaward of the Q13 Production Licence covering the undeveloped Amstel oil fieldand thus achieving another landmark in becoming the first company of our size tobe approved as an operator of a field development project in the Netherlands.Reservoir engineering and facilities studies have commenced with DutchContractors with a view to completing a series of potential field developmentscenarios that will form the technical and commercial basis for seeking ajack-up rig to commence development drilling, which currently is anticipated tobe in 2008, subject to rig availability. Commenting on the Drilling Program, Paul Griffiths, Chief Executive of Islandstated: "Following our successful drilling program in 2006, the Company has undergone aperiod of intense technical and commercial activity necessary to prepare its keynear-development projects for financing. The Company is now embarking on animportant stage in its development as it seeks to increase its ability togenerate future production revenues from its undeveloped oil and gas fields.Simultaneously we are seeking to unlock value in our portfolio of material gasprospects on the Atlantic Margin through farmout to multi-national corporationscapable of investing the funds required to evaluate prospects in this highpotential drilling environment". 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 eleven Irish offshore licences, (six as operator) and the Q13Production Licence offshore Netherlands. The Company is involved in an activeexploration and appraisal programme with two successful gas discoveries in 2006,and has secured the Petrolia rig for its planned 2007 drilling programme. Island's interests in the projects mentioned in this announcement are: •Seven Heads Oil Option - Island 12.5% participating interest. Through an Option Agreement executed with Ramco Oil and Gas Limited in April 2004, Island can acquire a further 44.4% equity interest in the Seven Heads Oil Licensing Option by committing to and funding 74% of an appraisal well to test the oil-bearing Middle and Lower Wealden reservoirs in the Seven Heads structure. •Old Head of Kinsale - Island 100% interest •Schull Licence - Island 55% interest This drilling update has been reviewed and approved by Paul Griffiths, ChiefExecutive of Island. Paul Griffiths is a geology graduate of the Royal Schoolof Mines, Imperial College London, and is a member of the Petroleum ExplorationSociety of Great Britain. He has 30 years experience in the oil and gasexploration sector and is a qualified person as defined in the guidance note forMining Oil & Gas Companies, March 2006 of the London Stock Exchange. Further information on Island can be found on the Compamy's website at http://www.islandoilandgas.com This information is provided by RNS The company news service from the London Stock Exchange