Iona Enters LOI for Staffa Stake in N. Sea

Iona has agreed through a Letter of Intent (LOI) to purchase, from Fairfield Cedrus Limited ("Fairfield"), a 100% interest in Block 3/8d containing the Staffa Oil Field. The transaction is subject to approval of the U.K.'s Department of Energy and Climate Change ("DECC"), finalization of certain terms and the signature and completion of a definitive sale and purchase agreement between Iona and Fairfield, which is expected on or about October 28, 2011 or such other date as the parties may agree.

The Staffa Field is located in Block 3/8d in the UK North Sea and lies approximately 14 kilometers south-east of the producing Ninian Central platform. The Staffa Field also lies due south of the Orlando Oil discovery within Block 3/3b in which a 35% working interest is held by Iona. The Staffa Field is a three-way fault closed structure approximately 4 km long by 2 km wide and has a 489ft (true vertical thickness) oil column in the Upper Brent sandstone reservoirs. The Staffa field produced at rates of between 10,000 and 5,800 barrels of oil per day ("bopd") between the years 1992 and 1994 and ceased production when the Brent crude oil price was approximately $13 to $15 per Barrel.

Through the purchase of Staffa from Fairfield, Iona will acquire full rights to an advanced development plan and associated equipment, including the engineering design, critical engineering facilities such as a subsea production tree, and an established pipeline survey route. This draft plan incorporates a subsea buried 'pipe in pipe' insulated flowline and will allow for chemical injection, as currently envisaged for the Orlando development.

As previously announced, the semisubmersible rig WilHunter has been contracted and is currently waiting on a weather window to locate to the Orlando Well within the next 72 hours. The well is expected to take 35 days to drill and an additional 4 or 5 days to conduct an extensive downhole fluid sampling program, to evaluate the well bore, and to suspend the well for later re-entry and completion as a development production well.

Iona's Chief of Business Development Robin Baxter commented "The acquisition of the Staffa Discovery will uniquely offer Iona opportunity to progress to development a 100% Operated project close to our 35% interest in the Orlando project. This allows Iona to explore synergies associated with operations, commerce and value. We are excited to be working toward our Operatorship of the project as soon as possible."

Additional details of the Staffa acquisition will be announced at the completion of a definitive sale and purchase agreement between Iona and Fairfield.

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