Nautical Petroleum Placing of Ordinary Shares

Nautical Petroleum has raised approximately £20 million before expenses through a placing of shares by KBC Peel Hunt Ltd.

190,476,191 new ordinary shares of 1p each have been conditionally placed with institutional investors at a price of 10.5p per Placing Share.

Nautical continues to build a broad base of heavy oil assets focused on the East Shetland Platform of the UKCS, augmented and complemented by carefully selected discoveries/blocks in the UKCS and Europe. Nautical remains the only UK listed company offering pure exposure to heavy oil development and near term, low risk exploration for considerable resources.

By the end of 2007, Nautical intends to have drilled its first two operated wells and participated in a third well. The Kraken appraisal well is expected to be drilled in October 2007 on the crest of the structure, with the intention of confirming the Company’s model of thicker reservoir development, hydrocarbon column and best estimate contingent resources of 23.9 million barrels net to Nautical. Kraken will be followed by an exploration well on the Mermaid prospect (directly south of the Mariner field). The well is planned to intersect hydrocarbons in the Maureen and Heimdal horizons confirming net best estimate resources of 64.5 million barrels. Concurrently an appraisal well is to be drilled on the Grenade discovery which, if the reservoir is as prognosed, is expected to yield first production in Spring 2008.

Nautical also plans to drill the Catcher Prospect in early 2008. It is intended that this will be followed by an exploration well on the Selkie Prospect. Assuming that the seismic data currently being acquired over block 3/27a firms up a target over the Hydra prospect, this will lead to a third well in 2008. Up to two further appraisal wells are expected to be drilled in 2008.

The above program together with other activities is estimated to lead to a net capital spend of approximately £9 million for the six months to 31 December 2007 and approximately £11 million for the twelve months to 31 December 2008.

The existing cash resources of the business together with the net funds raised through the Placing (estimated to be approximately £19 million) will be used to cover the estimated net capital expenditure set out above, and the other activities and expenses of the business. On the basis of current estimates, it is envisaged that £3 million would be used as a contingency against drilling cost overruns in 2007; £7.5m - £10m would be used to fund drilling in 2008, with the balance used to fund the Mariner field development programme, assess further license acquisition farm in opportunities and for working capital.

Under the terms of the Placing Agreement, KBC Peel Hunt, as agent for Nautical, has agreed conditionally to use its reasonable endeavors to procure subscribers for the Placing Shares at 10.5p per share. The complete terms and conditions of the Placing are set out at Appendix 1 to this announcement. The Placing Agreement is conditional, inter alia, upon Admission occurring. The Placing is not being underwritten.

Application will be made to London Stock Exchange plc for the Placing Shares to be admitted to trading on AIM, with Admission expected on 22 October 2007.

The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive dividends and other distributions declared following Admission.

Commenting on the Placing, Steve Jenkins, Chief Executive of Nautical said:

"I am pleased that Nautical has both secured funding, for our extensive appraisal and exploration programme and significantly strengthened our institutional shareholder base, through the Placing, which was oversubscribed. The Directors believe Nautical has assembled an exciting portfolio of assets, and we look forward to drilling up to 8 wells before the end of 2008 and progressing Mariner towards production."

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