IOG.L Regulatory News (IOG)

3 Jan 2008 07:00

Island Oil and Gas PLC03 January 2008 3 January 2008 ISLAND OIL & GAS PLC ANNOUNCES COMPLETION OF SHARE PURCHASE AND EXERCISE OF CONNEMARA OPTION AGREEMENT WITH SUPERNOVA IRELAND RESOURCES Island Oil & Gas plc (LSE:IOG) ("Island" or the "Company"), today announces thatit has completed the Agreement, first announced on 17 July 2007, with SupernovaIreland Resources B.V. ("Supernova"), a member of the Bluewater Group("Bluewater") of the Netherlands, covering Frontier Exploration Licence 1/04(the "Licence") located in the Porcupine Basin in the prospective AtlanticMargin off the west coast of Ireland. The Licence includes the Connemara oilfield and several significant exploration prospects. Supernova has exercised itsexclusive option to farm in for 10% equity in the Island operated Licence,thereby reducing the Company's net equity interest from 61.5% to 51.5%. Supernova has purchased 3,750,000 ordinary shares in Island for Stg£0.60 pershare in a private placing (total value Stg£2.25m), representing 3.22% of theincreased issued share capital. The Company has applied for these new sharesto be admitted to trading on the AIM market of the London Stock Exchange and itis expected that trading will commence on 4 January 2008. The new ordinaryshares will rank pari passu with the existing issued ordinary shares of theCompany and will increase the number of shares in issue to 116,456,990. Island is also pleased to announce that Horizon Energy Partners BV ("Horizon")has completed a Reservoir Engineering Report for the Connemara Field. Island andits joint venture partners, Valhalla Oil and Gas Limited and Supernova, arecurrently reviewing the results of this study. One option under consideration isfor a pilot field development to target two specific areas of the Connemarafield: 26/28-2-East, which is unappraised, and the 26/28-A1 area, which wasintersected by Statoil's 26/28-A1 horizontal well but which failed to penetratethe primary reservoir objective. Horizon has indicated that these two areascontain 63.6 mm barrels of oil in place relative to a mid-Case estimate of 134.9mm barrels for the entire field. The optimum pilot development scenario requiresa single dual lateral production well to target both areas and a water injectorfor the 26/28-2-East area to potentially boost oil recoveries. The simulatedbase case production profile potentially recovers 5.59 mm barrels of oil overtwo years based on an annual production rate of 10,100 bopd in Year 1 decliningto 5,200 bopd in Year 2. The pilot development project may provide valuableinformation on the performance of the reservoirs and the effectiveness of waterinjection over time which can then be used to recalibrate, if necessary, thegeological model for the Connemara Field to assist with planning a full-fielddevelopment programme. Supernova retains a second option to farm in for an additional 10% equity in theLicence in return for a cash only consideration of a further Stg£2.25m,exercisable up to 31 March 2008. Supernova, Valhalla and Island will work closely on progressing developmentoptions for the Connemara Field and in accelerating farmout activity in respectof the joint venture's Atlantic Margin portfolio of exploration prospects. Island, as Operator with a 50% equity interest, and Supernova have also appliedfor prospective blocks in the South Porcupine Licensing Round, the closing datefor the receipt of applications being 18th December 2007. Island expects to beinformed early in 2008 as to whether or not it has been successful in beinggranted any or all of the blocks that it has applied for. Commenting on the completion of the Agreement with Supernova, Paul Griffiths,Chief Executive of Island, said: "Island has broadened and strengthened its shareholder base with the addition ofthe Bluewater Group as a substantial shareholder in Island. As a specialist inthe operation of Floating Production Systems, Bluewater is an ideal partner inthe Porcupine Basin and advances one of Island's objectives of being the firstcompany to develop and produce indigenous Irish oil resources." This announcement 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. Enquiries: Paul GriffithsChief ExecutiveIsland Oil & Gas plcTel: +353 1 631 3755 Karl PrendervilleCommercial DirectorIsland Oil & Gas PLCTel: +353 1 6313755 Notes to Editors: 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, Albania and Morocco. Island is involved in an exploration andappraisal programme which in 2006 and 2007 saw successful Celtic Sea gas wellsat the Old Head of Kinsale, Schull and Seven Heads Sub-Area. Bluewater has built a technological lead specializing in lease and operation oftanker-based Production and Storage (FPSO/FSO) systems, and has become a leadingprovider of advanced Single Point Mooring (SPM) systems. Bluewater operatesworldwide with offices in The Netherlands, United Kingdom, United States,Nigeria, Angola, South Africa, Malaysia and China. This information is provided by RNS The company news service from the London Stock Exchange