IOG.L Regulatory News (IOG)

9 Oct 2006 14:30

Island Oil and Gas PLC09 October 2006 9 October 2006 ISLAND OIL & GAS ENTERS COOPERATION AGREEMENT WITH ENCORE OIL ON PORTFOLIO DEVELOPMENT Island Oil & Gas plc ("Island") today announces that it has entered into aCooperation Agreement (the "Agreement") with EnCore Oil plc ("EnCore") coveringthe future development by both companies of their respective portfolios ofexploration and near- development interests both in Ireland and the UK. As partof the Agreement, EnCore has also been granted an exclusive option (the"option") by Island to acquire up to a 20% working interest in theIsland-operated Frontier Exploration Licence 1/04 ("FEL 1/04") on the Atlanticmargin 150 km offshore the west of Ireland in the Porcupine Basin. FEL 1/04, which covers Block 26/28 and Part-blocks 26/27, 35/2 & 35/3, containsthe Connemara oil field and several undrilled exploration prospects. Under theAgreement, EnCore has paid an initial deposit of Stg £2 million to secureexclusive options to acquire up to a 20% interest in FEL 1/04. The first optionto acquire a 10% interest in FEL 1/04 is exercisable up until 30 November 2006,with a second option, to acquire a further 10% interest, exercisable by 10January 2007. Any assignment of interest in FEL 1/04 will of course be subjectto the consents and approvals of the Minister for Communications, Marine andNatural Resources ("Minister"). Separately Island also announces today that it has reached agreement with itsjoint venture partners in FEL 1/04, Valhalla Oil and Gas Limited ("Valhalla")and X-Ipec Limited ("X-Ipec"), to acquire X-Ipec's entire 35% interest also inFEL 1/04 ,pro-rata with Valhalla (21.5% to Island and 13.5% to Valhalla),subject to the consents and approvals of the Minister. Completion of thetransaction will increase Island's interest in FEL 1/04 to 61.5% prior to theexercise of the EnCore option. The undeveloped Connemara oil field was discovered by BP in 1979 following thedrilling and testing of the 26/28-1 well, which flowed at a rate of 5,589 bopdfrom Jurassic reservoirs. In 1997, at a time of low oil price, Statoil attemptedto appraise and develop the field by drilling two horizontal wells. Based on theanalysis of the results of these wells Statoil relinquished the licence in 1999.Statoil's estimate of oil in place at that time was 220 million barrels. Islandhas completed a programme of 2D and 3D seismic reprocessing which has led bothto a significant improvement in seismic imaging of the principle oil-bearingreservoirs in the field and to a better definition of faulting. This hasidentified areas of the field that are less faulted than the areas tested byprevious wells. In addition Island has completed a new reservoir study thatindicates that several of the principal oil-bearing sands are potentially morecontinuous than had formerly been interpreted. Based on these new insights thereis a strong possibility that the previous horizontal appraisal wells in thefield missed some of the key oil-bearing sands encountered in the originaldiscovery well 26/28-1. Paul Griffiths, Chief Executive of Island, commented: "We are delighted to announce the Cooperation Agreement with EnCore which, whencombined with the steps that we have announced today to increase our equityposition in FEL 1/04, allow us to accelerate our evaluation and potentialcommercialisation of our exploration and near development assets along theAtlantic margin. We look forward to developing an ongoing business relationshipwith EnCore and believe that the synergies between the companies can acceleratethe growth and development of our respective portfolios." Alan Booth, CEO of EnCore, said: "We are particularly pleased about this opportunity to work closely with Island.With this relationship, we believe we will be in a position to advance ourrespective portfolios through joint evaluations and where appropriate, to shareresources on exploration and near term development interests in the E&P sector." Enquiries: Lisa J Newman MCIPR MIRSNewman Consulting Tel: +44 (0)1252 878682 Notes to Editors: About Island Island was founded in 2003 and listed on AIM in December 2004. The Company hasinterests in eleven Irish offshore licences, (six as operator and two astechnical manager). The Company is involved in an active exploration andappraisal programme with three wells drilled in 2006, two of which weresuccessful gas discoveries. The Company has also secured the Petrolia rig forits planned 2007 drilling programme. Further information on Island can be found on the Company's website at http://www.islandoilandgas.com. About EnCore EnCore Oil plc is a UK focused exploration and production company listed on theAlternative Investment Market (AIM) on the London Stock Exchange. EnCore'sstrategy is to create shareholder value through the successful exploration andappraisal of prospects and discoveries, and the development of those assetsthrough to commercial sanction or beyond. Further information on EnCore can be found on the Company's website atwww.encoreoil.co.uk. This information is provided by RNS The company news service from the London Stock Exchange