PetroWorld and NuCoastal to Merge Thai Assets

PetroWorld Corp. and NuCoastal (Thailand) Limited have signed a Letter of Intent to merge both companies' assets in Thailand.

It is proposed that PetroWorld will acquire all outstanding shares of NuCoastal, an oil and gas exploration company registered in Thailand. The purchase of 100% of the issued share capital of NuCoastal will be in exchange for the issue of new PetroWorld shares that, for the purpose of this transaction, will be valued at pnds stlg 0.37/share (US$.65). The value attributed to NuCoastal's assets, subject to valuation adjustments, includes US$56.75 million for the onshore assets and 100% of the current fully diluted share capital (70,414,353) of PetroWorld for the offshore assets.

PetroWorld currently holds a 50% equity interest in the offshore G5/43 block located in the Gulf of Thailand where three successful appraisal wells were drilled last year in the Bua Ban oil field. NuCoastal operates and currently holds the remaining 50% interest in the G5/43 block. In addition to its interest in the offshore asset, NuCoastal holds the following: a net 8.925% interest in blocks EU1 and E5N located in northeast Thailand which contain the Phu Horm gas field, currently under development and expected to commence production later this year; a net 25.5% interest in the L15/43 exploration block which surrounds the Phu Horm gas field; a 25.5% interest in the L27/43 exploration block located to the southeast of the Phu Horm gas field; and a net 15.3% interest in the newly awarded L13/48 exploration block located immediately east of the Phu Horm gas field.

The Phu Horm gas field received a Declaration of Commerciality by the Government of Thailand in May 2004 and has close to 1 trillion cubic feet of proven, probable and possible gas reserves according to a Natural Gas Reserves Certificate by Gaffney Cline & Associates dated August 1, 2005. A 15 year gas sales agreement was signed with the Petroleum Authority of Thailand in July, 2005 for approximately 500 billion cubic feet of natural gas for delivery to the Nam Phong Power Plant and production is expected to commence in the Q4 2006. In addition to the Phu Horm field, the L15/43 block is believed to contain the southern extension to the Phu Horm field. Based on its interpretation of current mapping, NuCoastal believes there is additional upside exploration and appraisal potential of blocks EU1 and E5N and for the L15/43 block which could add several trillion cubic feet of gas reserves. In addition, the L27/43 block has a number of identified exploration and appraisal opportunities that have been confirmed by the recently completed 2-D seismic acquisition. A well is due to be drilled later this year in the block to appraise an existing gas discovery.

As a consequence of the merger, PetroWorld would hold 100% of the offshore G5/43 block where previous exploration has confirmed three potential oil developments. Three wells were drilled by NuCoastal and PetroWorld in August, 2005 on the Bua Ban field which confirmed recoverable oil reserves in the range of 8 - 17 million barrels. An engineering development feasibility study is underway and is due for completion in April. Development feasibility work is also being undertaken on the smaller Songkhla field which was discovered in 1989 and originally tested 1,500 barrels of oil per day. Two Production Area applications are also currently being prepared (one for Songkhla and the other for Bua Ban). Plans for a 3-D seismic program have been temporarily delayed due to unavailability of a seismic vessel. The seismic program is expected to commence over the Bua Ban field and a large portion of the western part of the Songkhla basin in Q3 2006.

Company Structure

The resulting company will include directors from PetroWorld's current board, as well as up to five additional directors to be nominated by NuCoastal. Mr. Al Whitehead, PetroWorld's Chairman will continue in his role as will Frank Inouye, PetroWorld's Chief Executive Officer. William Phelps will become the Chief Financial Officer and it is anticipated that a Chief Operating Officer will be confirmed within the next few months.


Commenting on the merger, PetroWorld's Chief Executive Officer Frank Inouye, said, "This is a unique opportunity for both companies and the new entity will have the combined management and asset strength to become one of the most significant exploration and production companies operating in the Far East. We have enjoyed working with NuCoastal since earning an interest in the offshore block last year and this merger will enable both companies to accelerate our common growth objectives."

NuCoastal's, Chairman and CEO, Oscar S. Wyatt, Jr. said, "The quality of these properties will serve as an excellent foundation for an independent exploration and production company. Gas sales in 2006 from Phu Horm and sales of oil production from the Gulf of Thailand in 2007 should put this corporation into a substantial operating profit in a very short time".

Conditions to Completion

The LOI signed between PetroWorld and NuCoastal is non-binding and outlines the general terms of the proposed transaction. NuCoastal is a limited company registered in Thailand, whose sole shareholder is Oscar S. Wyatt Jr. from Houston, Texas.

The completion of the proposed transaction is subject to customary conditions, including finalization of a Share Sale and Purchase Agreement and other definitive documentation, due diligence, respective board and shareholder approvals and relevant stock exchange and regulatory approvals and satisfactory completion of a financing by PetroWorld, the proceeds of which would be used to fund further exploration, appraisal and development on the enlarged asset base of the combined company. The amount and terms of such financing have yet to be determined.

As this transaction will constitute a reverse takeover under the AIM Rules of the London Stock Exchange, it is expected that PetroWorld's common shares will be suspended from trading on AIM until a shareholder circular and re-admission document are published.


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