In the light of the current and forecast global financial situation, Island has completed a comprehensive internal review of its extensive portfolio of Irish and international exploration and production assets and has analyzed its potential opportunities for short term, cash-generating, business growth.
The Company's objective remains the same: to grow the value of Island by intelligent corporate action and utilising Island's proven operator status to enter new projects and successfully monetize the current portfolio.
The main aims of the strategy will be to:
Reorganization of Irish Assets Base
Island has completed its objective of establishing an integrated 'Irish Gas' portfolio ofexploration, near development, production and infrastructure assets. This portfolio covers all aspects of the upstream spectrum in Ireland:
This portfolio is attracting interest from industry peers with a mandate to establish secure, politically stable, core areas with potential access to future gas resources. Island is seeking to work with industry players interested in taking an equity stake in this integrated gas business in order to progress additional international onshore oil and gas field rehabilitation projects that are being offered to Island on the basis of its proven track record as an operator.
International Portfolio Development
Island's management team has been progressing technical, commercial and legal due diligence on several potential rehabilitation projects in Eastern Europe and the former Soviet Union for several months. Part of this process also involves building strong local partnerships and sharing the investment required with industry peers with a similar strategy to Island's.
With assets in Albania, Island remains committed to identifying economically viable projects in the region, as the Board believes that it offers considerable geological prospectivity, combined with numerous commercial opportunities in the current economic climate.
Island has progressed its activities in Morocco to the stage where significant industry interest is being shown in its dominant acreage position in the highly prospective Tarfaya and Zag Basins, which already contain oil and gas discoveries.
Two significant value illustrations of Moroccan acreage can be seen in the substantial NAV certified by Netherland, Sewell & Associates on San Leon Energy's share of the Tarfaya Exploration Permits, based on San Leon's 30% equity interest and Best Estimate unrisked prospective resources of 192.9 mm boe and a High Estimate for unrisked prospective resources of 1,408 mm boe. Island, has a 40% interest in the Tarfaya Exploration Permits and also acts as Operator. Additionally, there has been considerable recent activity in and around this license area, with major energy companies including PetroCanada and Genting taking Licenses, which shows the considerable potential of the region.
There is very little opportunity for industry majors to acquire such large tracts of licensed acreage in similar basins in North Africa on the favorable fiscal terms available to Island. In the context of the security of European gas supplies these basins potentially offer another opportunity for industry peers to build a core area strategy.
Island has remarkable strength for a company of its size. On the operational side, top quality technical evaluation expertise is enhanced by its proven operator status. On the corporate side it has had notable success in attracting farm-in partners and also in the asset development and sales processes.
Whilst the current global financial situation remains complex we still anticipate that in the medium term oil and gas prices will strengthen. For a group such as Island, this presents the opportunity to become involved in valuable assets at basement valuations whilst this period of international financial distress prevails.
Island is pleased to announce that its annual report will be sent to shareholders next month and that it will be holding its Annual General Meeting in Dublin in March.
Paul Griffiths, Chief Executive of Island, commented, "The current economic climate dictates that all listed indpendent oil companies must have a strategy that can cope with the new economic realities. The simple fact is that with banks virtually unable to lend and institutional investors being hit very hard, management teams have to be both creative and aggressive to survive.
"We believe that our strong track record in corporate deals, as evidenced by our multi-million dollar profit arising from the Amstel transaction; ability to attract major partners such as OMV to our Irish exploration projects and our successful operating track record will allow us to execute our new strategy.
"Wider economic distress will create opportunities for Island. Our operational growth will be focused on our international portfolio. We are in a range of negotiations to enter new projects and are confident that we will be able to replicate our previous operational successes
"I am confident that with our proven top quality operational capabilities, combined with the opportunities available in both North West Africa and emerging Europe there is a strong successful future for Island Oil & Gas."
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