--LGO to acquire 20% interest in Area 4 between Malta and Libya by funding 2D and 3D infill seismic surveys. --LGO can increase its interest to 50% in Area 4 by paying 80% of the cost of the first exploration well. --MOL has announced Best Estimate STOIIP (P50) total 5,745 million barrels of oil. --High Estimates STOIIP (P10) total 14,432 million barrels of oil. --Located within internationally recognized border of Malta, an EU member state, favorable fiscal terms and a political climate. --MOG will be operator of the licenses. --Negotiations with Seismic vessels to commence 2D infill program.
Mr David Lenigas, the Company's Chairman, commented:
"This first investment since listing on AIM on 16th March 2007, supports the Company's strategy to identify and acquire producing or previously explored prospective assets.
"Area 4 is an under-explored petroleum area which directly relates to the extension of the offshore hydrocarbon zones in Tunisia and Libya where several oil & gas majors (e.g. Exxon, Woodside, Petrobras and Gazprom), operate and have recently won exploration licenses.
"We look forward to working with the experienced management team of Mediterranean Oil and Gas Plc to develop this highly prospective asset into near term production."
AREA 4 – PROSPECTS
The prospectivity of Area 4 currently comprises of nine prospects and is located on the Mediterranean Pelagian shelf. Tarxien is the most worked-up prospect in the south east of Area 4 which is covered by 3D seismic and has Best Estimates STOIIP (P50) of 295 million barrels and High Estimates STOIIP of 499 million barrels. By far the largest prospect is Luzzu, which was identified last year and has Best Estimates STOIIP of 2,420 million barrels and High Estimates STOIIP of 6,860 million barrels.
LGO proposes to fund a 2D and 3D seismic survey for the 4 blocks on Area 4, during 2007 with a view of identifying drillable prospects by early 2008.
Under the terms of the agreement, which is subject to approval by the Government of Malta, LGO receives its entitlement to an assignment of a full 20% participating interest on signing the agreement. In consideration of this interest, LGO will contribute the costs towards acquiring about 3,000 line kilometers of 2D seismic and a detailed 3D seismic program.
LGO has an obligation to fund US$1,500,000 of the exploration study costs and thereafter subject to shareholder approval (if required) and compliance with the requirements of the AIM Rules (as required) to fund a further US$3,500,000. If LGO does not advance more than the initial US$1,500,000 then it is obliged to return a pro rata portion of the participating interest it received on signing.
Furthermore, in the event that a Production Sharing Contract is granted pursuant to provisions of the Maltese Exploration Study Agreement, LGO will have the right to further sole fund, 80% of the first exploration well cost to increase its participating Interest in Area 4 to 50% and MOL will maintain a participating Interest of 50% by funding 20% of the exploration well costs.
The timing of payments by LGO will be limited on the following basis:
DETAILS ON AREA 4
The 4 Maltese blocks on Area 4, cover an area in excess of 5,000 km2 and are covered by an Exploration Study Agreement ("ESA") dated 24 March 2005 (as extended by letter on 7 March 2007) between MOL and the Government of Malta in relation to four blocks with a prearranged Profit Sharing Contract ("PSC") with the Malta Government.
Area 4 has extensive historic 2D seismic data acquired by JNOC, Amoco and the Maltese Government and one 3D survey acquired by Shell and Nimir on Block 7 in 1994.
MOL's consultants RPS Group PLC ("RPS") concluded in their latest report as announced publicly by MOG on 10 May 2006, that within the 3D seismic area of Block 7, five prospects have now been identified (Hagar Qim, Skorba, Tarxien, Prospect D and Prospect E).
Best Estimates STOIIP (P50) on Hagar Qim, Skorba, Tarxien and Prospects D and E, all within the 3D seismic are, total 642 million barrels of oil with High Estimates STOIIP (P10) totaling 1,451 million barrel of Oil.
Outside the 3D seismic area, RPS also identified four new prospects from the historic 2D seismic (Luzzu, Prospects A, B and C).
Best Estimates STOIIP (P50) on the 2D seismic Prospects (Luzzu, A, B and C) total 5,103 million barrels of oil with High Estimates STOIIP (P10) totaling 12,981 million barrels of oil.
The Company's Chairman Mr David Lenigas is also a non-executive director of MOG and holds 40.03 percent. of the Company's issued share capital and holds options over a total of 1,100,000 Ordinary Shares in MOG representing 3.3 percent. of MOG's issued share capital and therefore did not participate in the vote for either company in relation to the Farm In Agreement and excused himself from those board meetings at which decisions were made with regard to the farm-in agreement. Both LGO's and MOG's Board (excluding David Lenigas) have unanimously resolved that this transaction is in the best interest of both Companies. The Board of LGO (excluding David Lenigas) having consulted Beaumont Cornish Limited with respect to the AIM Rules considers that the terms of the farm-in agreement are fair and reasonable insofar as the shareholders of LGO are concerned.
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