IOG.L Regulatory News (IOG)

17 Apr 2007 12:30

Island Oil and Gas PLC17 April 2007 17 April 2007 ISLAND OIL & GAS CONCLUDES STRATEGIC ATLANTIC MARGIN AGREEMENT WITH OMV Island Oil & Gas plc ("Island") (LSE:IOG) today announces that, in line with itscurrent strategy of forming strategic industry relationships capable ofaccelerating the development and value of its portfolio of exploration andnear-development projects, it has concluded an asset swap agreement ("theAgreement") with OMV, the leading oil and gas group in Central Europe. TheAgreement will see Island assign OMV a 50% interest in deepwater FrontierExploration Licence 3/05 ("FEL 3/05"), which contains the Killala Prospect, inreturn for OMV's 50% interest in the Durresi Block, offshore Albania. Theassignment of the Durresi Block interest is subject to approval from thecompetent authorities in Albania and the assignment of the interest in FEL 3/05is subject to approval from the Minister for Communications, Marine and NaturalResources of Ireland. The Agreement is between Island Rockall JV Limited, a wholly-owned subsidiary ofIsland, and OMV (Albanien) Adriatic Sea Exploration GMBH ("OMV"), a wholly-ownedsubsidiary of OMV Exploration & Production GmbH. Under the terms of theAgreement, Island, will retain a 50% interest in FEL 3/05 and will continue toact as the Operator. In addition, and subject to the approval of the otherpartner in the Durresi Block (Lundin Netherlands BV), Island will also take overoperatorship of the Durresi Block. Island is currently finalising plans to acquire a 3D seismic survey in 2008 inFEL 3/05 in order to prepare the large Killala prospect for a drilling decision.OMV has a strong track record on the Atlantic Margin, with significantexploration success in both Irish and UK waters. FEL 3/05 covers an area of approximately 715 square kilometres and is located inthe Northeast Rockall Basin on the Atlantic Margin approximately 70 kilometresoff the west coast of Ireland and approximately 35 kilometres north of theCorrib gas field. The Licence area contains one very significant explorationprospect covering an area of up to 80 square kilometres (the "KillalaProspect"), together with a number of other prospects and leads. The Durresi Block in Albania covers an area of 4,200 sq. km. along the Adriaticcoastline of Western Albania. Discoveries made in similar play types in SouthernItaly (the Aquila Field and the Falco and Rovesti discovery wells) indicate thehigh potential of the southern Adriatic Sea for both oil and gas. Its locationputs it in an ideal position to meet the region's fast growing energy demand andto successfully develop even modest size discoveries. The Durresi Block contains the A4-1X gas/condensate discovery drilled by Agip in1993 at a time of lower oil price. The Chevron/Agip group quoted potential grossresources of 35 mm barrels of condensate and 151 bcf of gas. Several undrilledoil and gas prospects exist on the Durresi Block with potential mean grossrecoverable oil and gas of 35 million barrels and 410 to 540 bcf respectively(OMV's unrisked estimates). Paul Griffiths, Chief Executive of Island, commented: "We are delighted to announce the forging of a new strategic partnership forIsland on the highly prospective Atlantic Margin that will significantly advancethe development of our high risk:high reward exploration portfolio. OMV has asuccessful track record in exploring for and finding oil and gas in this area.OMV's participation in FEL 3/05 is further confirmation of the potential of theKillala Prospect and we look forward to working together to develop and evaluateother opportunities that may exist in this area. Acquisition of the interest in the Durresi Block offshore Albania allows Islandto acquire a potentially significant hydrocarbon discovery that fits ourstrategy of acquiring proven hydrocarbon discoveries with the potential for nearand medium term development, at a reasonable entry cost and in a favourableinvestment environment, through trading equity in our extensive portfolio ofhigh quality exploration and near-development projects." 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 (LSE:IOG). TheCompany has interests in eleven Irish offshore licences, as well as licences inthe Netherlands and Morocco. Island is involved in an exploration andappraisal programme which in 2006 saw successful Celtic Sea gas wells at the OldHead of Kinsale and the Seven Heads Sub-Area. The drilling programme is due tocommence in the second quarter of 2007 with an appraisal well at the Old Head ofKinsale gas field, followed by an appraisal well at the Schull gas field. Further information on Island can be found on the Company's website at http://www.islandoilandgas.com. This information is provided by RNS The company news service from the London Stock Exchange