Jersey Oil&gas Regulatory News (JOG)

Trap Oil Group plc

 ("Trapoil" or the "Company")

Acquisition of Reach Oil & Gas Limited

and Directorate Change

Trapoil is pleased to announce the acquisition of Reach Oil & Gas Limited ("Reach") for a total consideration of approximately £30 million (£20 million in cash and approximately £10 million in new ordinary shares to be issued at a deemed price of 43 pence per share). Reach's two wholly-owned subsidiaries, Reach Exploration (UK) Limited ("Reach UK") and Reach Petroleum Limited ("Reach Petroleum") (together, the "Reach Group"), currently hold mostly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UK Continental Shelf ("UKCS").

Acquisition highlights:

·; The Reach Group's asset portfolio (the "Reach Portfolio") comprises largely of appraisal assets and exploration prospects (with a range of risk profiles) with a small amount of near term production in the UKCS.

·; More than doubles the size of Trapoil's existing exploration portfolio and near term drilling activity, including increasing the Company's interest to 15% in the promising Orchid prospect to be drilled later in 2011.

·; Expected to increase the number of near term wells to be drilled by three additional wells in 2012 and four additional wells in 2013, providing the Company with potential net risked resources of approximately 15mmboe (unaudited estimate by Trapoil's management).

·; The Reach portfolio comprises predominantly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UKNS covering, in aggregate, an area of approximately 2,000km2.

·; Trapoil will benefit from Reach's existing carried interests with estimated carried drilling costs of approximately £17 million in respect of the eight initial wells currently expected to be drilled within the next two years.

·; Provides opportunities for further asset management to broaden the portfolio and manage risks, with potential to farm-out working interests in some of the assets acquired and increase equity positions in others.

Detailed information on the Reach Portfolio is set out below.

As part of the arrangements, Miles Newman, Exploration Director and co-vendor of Reach, will be appointed to the board of directors of Trapoil (the "Board") as a Non-Executive Director.

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:

"I am delighted to announce our first corporate acquisition, which greatly strengthens our existing portfolio, delivers the drilling opportunities envisaged at the time of our IPO and positions Trapoil as one of the more active exploration and appraisal companies in the UK North Sea, with the possibility of drilling up to 8 wells a year in 2012 and beyond.

The acquisition offers multiple benefits for Trapoil, including an increased interest in the promising Orchid well, due to spud this autumn. In addition, the acquisition brings significant existing carried drilling costs, while we anticipate valuable cash flow generation from near term production and effective portfolio management.

Having successfully secured this attractive portfolio to augment our existing assets, the Company's focus will turn to identifying and acquiring producing assets in order to provide sufficient cash flows to support the group's planned drilling programme with suitable tax synergies.

I welcome the appointment of Miles to the Board and I am delighted that he has agreed to accept a significant part of the purchase consideration in the form of new Trapoil shares, underlining his long-term commitment to the Company's future success."

Summary of the Acquisition

Trapoil (AIM: TRAP), the independent oil and gas exploration and appraisal company focused on the UKCS region of the North Sea, announces that it has today entered into a conditional sale and purchase agreement to acquire the entire issued share capital of Reach, an established private UK oil and gas company which owns an extensive portfolio of promising licence interests in the UKCS, for a total consideration of approximately £30 million (the "Acquisition").

The total consideration of approximately £30 million, payable on completion of the Acquisition, comprises a cash payment of £20 million and the allotment of 23,203,402 new ordinary shares of one pence each in the Company ("Ordinary Shares") (the "Consideration Shares") (together, the "Consideration"). The Acquisition is conditional on, inter alia, admission of the Consideration Shares to trading on AIM becoming effective ("Admission").

The Consideration will be funded from the Company's existing cash resources together with the issue of the Consideration Shares to the vendors at a deemed price of 43 pence per Consideration Share, being the Company's March flotation price. The Consideration Shares represent approximately 11.30 per cent. of Trapoil's issued ordinary share capital as enlarged by the Acquisition and will be fully paid and rank pari passu with the Company's existing Ordinary Shares. Application has been made to the London Stock Exchange for Admission and it is expected that Admission will become effective and that dealings in the Consideration Shares will commence at 8.00 a.m. on Tuesday 5 July 2011. The Company's issued ordinary share capital following completion of the Acquisition will consist of 205,373,117 Ordinary Shares, each with voting rights attached. Trapoil does not hold any Ordinary Shares in treasury and accordingly there are no voting rights in respect of any treasury shares.

The aforementioned figure of 205,373,117 Ordinary Shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest, or any change to their interest, in Trapoil under the Financial Service Authority's Disclosure and Transparency Rules.

Information on Reach

Reach is an established private UK oil and gas company with an extensive portfolio of promising licence interests in the UKCS across the spectrum from near term production to early stage exploration. The group was founded in 2003 with the incorporation of Reach Exploration (North Sea) Limited and was subsequently restructured in 2007. Reach has benefited from an experienced management team with strong subsurface skills and a proven track record for finding oil, and has developed long term relationships with a number of key industry partners including Suncor Energy Incorporated, Korea National Oil Corporation ("KNOC"), BG Group plc, Premier Oil plc ("Premier"), Summit Petroleum Limited ("Summit"), Centrica plc and Caithness Petroleum Limited.

Ernst & Young provided Mergers and Acquisitions advisory and transaction tax advice to the vendors.

Overview of Reach's assets

The Reach Portfolio comprises a balance of near term production, appraisal, low to modest risk/modest to high reward UKCS exploration prospects. It includes one field under development (Lybster), three discoveries awaiting near term development (Knockinnon, Surprise and Nutmeg) and a number of near term drillable exploration opportunities (Orchid, Whaligoe, String of Pearls, Minos, Lacewing and Kew). In addition to these drill ready opportunities, following completion of the Acquisition, Trapoil will have the potential to farm-out working interests in some of the assets acquired and to increase equity positions in others.

The Reach Portfolio comprises predominantly carried interests in a total of 14 exploration licences governing 24 Blocks and part Blocks in the UKCS covering, in aggregate, an area of approximately 2,000km2, as follows:

·; P.1270 Block 11/24 (Lybster), P.1286 Blocks 11/23, 11/27 & 11/28 and P.1287 Block 11/25b - Coastal Moray Firth

Reach UK holds a 35 per cent. carried interest in this acreage which contains imminent production from the Lybster field, near term, high value appraisal of the Knockinnon oil discovery and an extensive exploration portfolio. 2D seismic acquisition is planned for Q4 2011 followed by a well to be drilled in 2012 in order to satisfy the outstanding work obligation. Caithness Oil Limited ("Caithness") is the operator.

·; P.1266 Blocks 12/19b, 12/20b & 12/24a and P.1267 Blocks 12/25a & 13/21b - Inner Moray Firth

Reach UK holds a 5 per cent. working interest in these Blocks which contain the Surprise and Nutmeg discoveries and where KNOC is the operator.

·; P.1610 Block 13/23a (Minos) - Inner Moray Firth

Reach UK holds a 10 per cent. carried interest in this Block, operated by KNOC. The Block contains multiple prospects and, following completion of the ongoing technical evaluation of this acreage, a well is currently planned to be drilled in 2012 in order to satisfy the outstanding work obligation.

·; P.1701 Block 12/22b - Inner Moray Firth

Reach UK holds a 50 per cent. working interest and Caithness is the operator. The Block was acquired along with Block 12/23b in DECC's 25th seaward licensing round being part of the same play fairway.

·; P.1723 Block 12/23b (String of Pearls) - Inner Moray Firth

Reach UK holds a 50 per cent. working interest and Caithness is the operator. The Block contains a number of stacked pay prospects analogous to the nearby Surprise discovery. Trapoil envisages that drilling will take place on this asset in 2013.

·; P.1556 Block 29/1c (Orchid) - Central Graben

Reach UK holds a 5 per cent. carried interest in this Block which has an outstanding well obligation. The licence group, with Summit as the operator, plans to drill the multi target Orchid prospect in Q3/Q4 2011. Trapoil already has a 10 per cent. equity interest in this opportunity as a result of a farm-in agreed with Summit and announced on 19 April 2011.

·; P.1181 Block 23/22b, sub-areas D and E (Lacewing) - Central Graben

Reach Petroleum holds a 10 per cent. working interest in this Block which contains the Jurassic Corrie discovery and the Triassic Lacewing prospect that is currently planned to be drilled next year. Both Premier, the operator, and BG Group plc are partners in this Block which is situated adjacent to a large gas condensate discovery (Culzean, located in Block 22/25a) announced recently by Maersk Oil.

·; P.1624 Block 23/26c (Forties Prospect A) - Central Graben

Reach UK holds a 50 per cent. working interest in this Block and Caithness is the operator. The Block contains two four-way dip closures mapped at the Palaeocene Forties Sandstone Member level.

·; P.1864 Block 9/24d (Kew) - South Viking Graben

Reach UK acquired 100 per cent. of this Block in DECC's 26th seaward licensing round. The Block contains the highly prospective Kew prospect, a Brae style submarine fan play analogous to Devenick, the gas condensate discovery on trend to the south. The Block is a prime farm-out candidate to facilitate the drilling of a test well within the next two years.

·; P.1547 Block 110/3b - East Irish Sea

Reach UK has a 30 per cent. working interest in this Block, which is operated by Venture North Sea Gas Limited. The Block contains the Whitbeck discovery (well 110/3b-6) drilled in 2009.

·; PEDL 158 Blocks ND01a, ND02a, ND12, ND13a, ND23a and ND33

Reach UK holds a 35 per cent. carried interest in these onshore Blocks, operated by Caithness. This onshore acreage was acquired to allow for the siting of the rig to drill the onshore to offshore Lybster development well. The site will also accommodate temporary production facilities to process production from a single high angle production well.

In addition, the Reach Group has a further two outstanding licence applications (covering Blocks 113/28, 113/29a and 44/18c) currently under assessment by DECC in connection with its 26th seaward licensing round. The Acquisition will enable Trapoil to increase its existing interest in the Orchid prospect to be drilled in Q3/Q4 2011 and participate in the drilling of a projected three additional wells in 2012 and four additional wells in 2013. Net attributable risked resources associated with such a drilling programme are in the order of 15mmboe (unaudited estimate by Trapoil's management), comprising Reserves of 2.38mmboe, Contingent Resources of 1.23mmboe and Prospective Resources of 11.53mmboe, with considerable upside potential in the Kew prospect based on current mapping.

Trapoil will benefit from estimated carried drilling costs of approximately £17 million in respect of the eight initial wells currently expected to be drilled within the next two years. In addition, Trapoil should further benefit from short term cash flow that is anticipated to be derived from managing equity interests within the Reach Portfolio and from a modest near term production stream expected from the recently drilled Lybster well.

Competent Persons' Reports ("CPRs") on the Reach Portfolio

Independent CPRs have been prepared within the last nine months, on behalf of a number of different operators, in respect of the majority of the assets in the Reach Portfolio, save for the Reach Group's interests in licence P.1181 Block 23/22b (Corrie and Lacewing prospects), licence P.1556 Block 29/1c (Orchid prospect) and licence P.1864 Block 9/24d (Kew prospect). Further to a detailed review of all of the technical information made available to the Company during its due diligence process, Trapoil's unaudited management estimate of total net risked resources applicable to the eight initial wells currently planned to be drilled within the next two years is approximately 15mmboe, under the PRMS, as outlined above.

Summary financial information on Reach

The audited accounts of Reach for its latest financial year ended 31 July 2010, prepared in accordance with UK GAAP, disclosed revenues of £103,813 and a net loss after taxation of £25,395. Net assets were £569,755. Reach is the holding company for Reach Petroleum and Reach UK and these wholly owned subsidiaries form part of the Acquisition.

Directorate change

Under the terms of the Acquisition, Miles Newman, currently the Exploration Director and co-vendor of Reach, has been appointed to the board of directors of Trapoil as a Non-Executive Director with effect from completion of the Acquisition. Mr Newman began his career as a graduate geologist with Britoil PLC, following which he spent 14 years at Kerr-McGee Corporation, initially in the UKCS, most significantly driving the appraisal and development of the Gryphon Field and the Janice Field acquisition. Mr Newman proceeded to gain international experience working for Kerr-McGee on projects in the Far East, Middle East, South America and West Africa. He returned to the UK in 1999 as Kerr-McGee's UK Exploration Director before joining Reach in 2002. His role at Reach has been to manage its exploration programme and producing assets. Mr Newman has also been active on the PILOT programme between the UK government and UK oil & gas industry and chaired the UK Offshore Operators Association Exploration Committee. He holds a Bsc (Hons) degree in Geology from the Royal School of Mines, Imperial College London and is a Member of the Petroleum Exploration Society of Great Britain and Fellow of The Geological Society.

Mr Newman has been appointed as a Non-Executive Director pursuant to an appointment letter with the Company dated 4 July 2011. Mr Newman's appointment, which is conditional on completion of the Acquisition, is terminable in accordance with the Articles of Association of the Company and on either party giving three months' notice in writing. The annual fee payable to Mr Newman pursuant to his appointment letter is £40,000 per annum and is subject to annual review by the Board.

In connection with Mr Newman's appointment as a Non-Executive Director of Trapoil, he has been granted, conditional on completion of the Acquisition, an option to subscribe for up to 139,535 Ordinary Shares at an exercise price of 43 pence per Ordinary Share, exercisable at any time up to the tenth anniversary of the date of grant.

Martin David, Technical Director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person under the AIM rules. Mr David holds a BSc degree in Geology from the University of London and has over 37 years' experience in the oil industry.

Enquiries:

Additional information on the new director appointment:

Mr Miles St John Newman, aged 48, is a director or partner or has been a director or partner of the following entities during the previous five years:

Mr Newman will resign the directorships of Reach Oil & Gas Limited, Reach Exploration (UK) Limited and Reach Petroleum Limited on completion of the Acquisition. The resignations will take effect on the date of Admission, expected on Tuesday 5 July 2011.

Following completion of the Acquisition, Mr Newman will be interested in 23,203,402 Ordinary Shares, representing approximately 11.30 per cent. of the Company's issued share capital as enlarged by the Acquisition. Of these Ordinary Shares, 11,601,701 will be registered in the name of Mr Newman and 11,601,701 will be registered in the name of his wife, Isabel Davies. Conditional on completion of the Acquisition, Mr Newman will also have an option to subscribe for up to 139,535 Ordinary Shares as referred to above.

There is no other information that is required to be disclosed under paragraph (g) of Schedule Two of the AIM Rules for Companies of the London Stock Exchange.

Notes to editors:

·; The Trapoil group was created in 2008 by a team of experienced industry executives with a broad range of oil and gas technical, operational and financial expertise and professional skills.

·; Trapoil has developed long term relationships with key oil industry partners, notably Suncor Energy Incorporated, Norwegian Energy Company ASA and Challenger Minerals (North Sea) Limited, and major suppliers and consultants including CGGVeritas Services (UK) Limited ("CGGVeritas"), Applied Drilling Technology International and Exploration Geosciences Limited.

·; The Company utilises a research-led, knowledge-based approach to identify and deliver promising exploration and appraisal opportunities, and to this end has secured extensive long term access to CGGVeritas' state of the art 3D seismic database over the majority of the Central North Sea area on negotiated terms. CGGVeritas is a leading pure-play geophysical services and equipment provider. Access to such 3D seismic data serves to strengthen the group's ability to create opportunities on both open and held acreage in the UKCS.

Glossary of key technical terms:

**ENDS**