Beach Petroleum Reduces Stake in Anzon Energy

A cash injection of A$28 million has been announced by Beach Petroleum Limited after the sale of most of its direct 9.6% shareholding in Anzon Australia Limited.

The sale represents a 180% net profit by Beach Petroleum on its original investment in Anzon - the Operator of the new Basker-Manta-Gummy ("BMG") oil and gas fields in the Gippsland area of Bass Strait.

The sale represents a 180% net profit by Beach Petroleum on its original investment in Anzon the Operator of the new Basker-Manta-Gummy ("BMG") oil and gas fields in the Gippsland area of Bass Strait.

Proceeds from the A$28 million sale will be used by Beach Petroleum to fund in part, its acquisition last week of a further 12.5% direct holding in the BMG project itself. The remainder is expected to be funded from a combination of existing cash reserves, Beach's strong cashflow and debt.

The sale of Beach's Anzon shares was effected through the placement of 25 million shares at a placement price of $1.12 per ordinary Anzon Australia share.

"Our primary interest is through our 50% stake in the BMG oil and gas project, as distinct from being a long-term cornerstone investor in Anzon Australia itself," Beach Petroleum's Managing Director, Mr. Reg Nelson, said today.

"We have been delighted to have been part of Anzon Australia's successful growth story and look forward to continued success by a joint venture which has worked very harmoniously to develop the BMG project," Mr. Nelson said.

"It is a great tribute to Anzon Australia as Operator that the Extended Production Testing of Basker-2 has been achieved in such a short space of time."

Mr. Nelson said that the share transaction had delivered considerable upside on Beach's original investment but it was now more strategically sound from Beach's point of view, to increase its direct exposure in the BMG operation.

"In addition, we can deliver further benefits to shareholders because the capital gains on the transaction can be totally offset against capital losses held by Beach, adding to our profitability," he said.

"To achieve this milestone in capital adequacy so early in the life of such a major offshore development and exploration project, reflects the success of our growth modeling while ensuring there is a flow-on of benefits to our shareholders."

The A$28 million placement, handled by Euroz Securities in Perth, was to a range of institutional investors.

Beach Petroleum has retained 5.6 million shares in Anzon Australia, representing an ongoing 1.8% interest.

Mr. Nelson said last week Beach Petroleum had great confidence in the BMG project and in the ability of Anzon Australia, as Operator, to maximize its value.

The Basker and Manta fields have Proven and Probable (2P) recoverable oil reserves of 30.1 million barrels (mmb). In addition, a contingent gas/condensate resource of 19.2 million barrels of oil equivalent (mmboe) has been identified in the Manta and Gummy Fields.

The Basker-2 well moved last month to an Extended Production Testing regime - using a combination of the Crystal Ocean FPSO (Floating Production, Storage and Offtake vessel) and oil transfers to the 650,000 barrel capacity Basker Spirit tanker moored 1.5 kilometers away, for storage and subsequent sale.

Basker-2 is currently producing at around 10,000 barrels of oil a day, first oil sales are expected mid next month, along with the commencement of a full field development drilling program of four oil wells over six months. Full field production from Basker Manta is scheduled for the third quarter of 2006.

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