Venture Announces CH4 Acquisition

Venture Production plc, the Aberdeen, U.K.-based independent oil and gas production company, said that it has acquired the entire share capital of CH4 Energy Limited (CH4), a privately owned, U.K.-headquartered gas production company. CH4's operations are focused wholly on the southern North Sea gas basin. They include a manned platform in the Dutch North Sea (DNS) and an onshore operating base near Amsterdam.

The consideration paid for CH4 consisted of part-cash, part-equity and amounted to a value of 224.0 million (approximately 153.2 million) based on an effective date of 30th June 2006, a Venture share price of 7.60 and an exchange rate of 1 = 1.4618. The consideration consisted of 123.5 million in cash (approximately 84.5 million), plus 9.05 million newly issued Venture ordinary shares. The cash consideration was satisfied from Venture's existing bank facilities and included 16.5 million of working capital.

CH4's assets are concentrated around the UK/Dutch median line and are dominated by its operated interests in the producing Markham gas field (37.5% unitized interest) and the Chiswick gas field currently under development (95.0% interest).

The Markham gas field, which has been on stream since 1992, straddles the median line between the U.K. and Dutch sectors of the North Sea and is located in blocks 49/5a and 49/10b on the U.K. side and blocks J/3b and J/6 in the Dutch sector. It has two pipeline-linked fixed steel platforms, one of which is permanently manned. With the ongoing installation of a new compression tower, Markham is set to become an even more important processing and transportation hub for new gas production in the southern North Sea.

Chiswick, located in U.K. block 49/4a, was discovered in 1984 and has since been appraised by three further wells. FDP approval for development as a satellite to Markham was received in July 2006 and the first Chiswick development well is expected to come on stream during the first quarter of 2007. A second well is due on stream during the third quarter. Contracts for drilling rigs and all related development services are in place to cover both wells and the tie-back of the new field. Export terms have been agreed for transportation of the gas to the Den Helder terminal in the Netherlands.

In addition, CH4 has interests in the producing Windermere (20.0% interest) and J/3c fields (4.025% interest), both of which have been developed as tie-backs to the Markham facilities. Venture is also acquiring CH4's 25% interest in the ETS pipeline system in the southern North Sea, currently used by the Trent, Tyne, and Tors fields.

Venture estimates of total proven and probable reserves acquired amount to approximately 184 Bcfe (30.7 MMboe) as at 30 June 2006. CH4 is currently producing approximately 22 MMcfpd (3,700 boepd) and this is expected to rise to an average of approximately 67 MMcfpd (11,200 boepd) for calendar year 2007.

CH4's balance sheet Gross Assets at Dec. 31, 2005, were 97 million and CH4's Profit before Tax for the twelve months to Dec. 31, 2005, was 850,000.

CH4 was owned by 3i Group plc, Trust Company of the West and management and employees. In aggregate, the selling shareholders now own approximately 6.8% of the enlarged ordinary share capital of Venture. Completion of the acquisition took place on August 1, 2006.

"We are delighted to have secured the opportunity to combine such a high-quality business as CH4 with Venture's own gas operations," said Mike Wagstaff, Venture's chief executive. "This acquisition adds a fourth operated production hub to our portfolio and materially expands the scale and 'footprint' of our southern North Sea gas business. It is another significant step in implementing our proven strategy of acquiring and developing 'stranded' hydrocarbon reserves in the North Sea."

"CH4's assets will immediately increase Venture's proven and probable reserves by around 20% and, once Chiswick comes onstream, our production levels from 2007 onwards will be significantly higher. CH4 represents an outstanding fit with Venture's existing operations and our operatorship-led business model.

"The CH4 team has done an excellent job in both unlocking the untapped potential in the Markham area and driving forward the Chiswick development. We welcome them to Venture and look forward to working with them to deliver the Chiswick development and the Markham compression projects over the coming months."

"3i has supported CH4 from its start-up in 2002 and has provided capital and strategic support to develop CH4 into a significant business with a broad portfolio," said Graeme Sword, partner with 3i Oil, Gas and Power, CH4's principal shareholder.

"Coincidentally, 3i was also a founding shareholder in Venture where we were pivotal to the early development of the business until its IPO in 2002. We believe that CH4 is a compelling fit for Venture and will cement its position as the UK's leading North Sea independent."

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