Encore Oil Reports on North Sea Developments, Onshore UK Assets

EnCore Oil provided an update on its offshore North Sea and onshore UK activities.

OFFSHORE ACTIVITIES

Breagh: Following the successful testing of the Breagh horizontal well in January 2009, located in block 42/13a in the UK Southern North Sea, the company confirms that along with its partners, it is now in exclusive negotiations with a third party with regards to the sale of an aggregate 70 percent equity interest in the Breagh gas discovery. EnCore intends to sell the whole of its 15 percent equity in this and the adjacent licenses. A sale and purchase agreement is expected to be signed in the coming weeks and a further announcement will be made at that time.

Cladhan: (formerly known as Bowstring East) Plans are underway for an appraisal well to be drilled on the Cladhan light oil discovery located in block 210/29a in the UK Northern North Sea. Timing of the well is still to be finalised, but it is likely that this will be Q4 2009 or Q2 2010. EnCore holds a 16.6 percent interest in the discovery and the license operator is Sterling Resources Ltd. The initial well, drilled in November 2008, confirmed the presence of a stratigraphically trapped 110 ft light oil column with no apparent oil-water contact.

Ceres (formerly known as Barbarossa): Located in the UK Southern North Sea block 47/9c, Ceres is expected to begin first production in Q4 of this year. EnCore has a 10 percent interest in Ceres subject to a 5 percent buy back right by a previous owner. The well is being developed as a subsea tieback jointly with the nearby Eris discovery.

Catcher (EnCore 15%): In May, the Company assumed operatorship of blocks 28/9 and 28/10c following licence operator Oilexco being placed into administration. The Company is now working with partners, Premier Oil, Nautical Petroleum and Wintershall, to finalize a plan for a well on the Catcher prospect which is likely to be drilled in 2010.

Cobra (EnCore 25% Operator): Following the drilling of the Cobra appraisal well (48/2c-5) in 2008 the Group has undertaken a number of subsurface geotechnical studies and is currently carrying out a fracture stimulation study with a view to redrilling the 48/2c-5 well as a horizontal well and completing it with fracture stimulation.

Bennett (EnCore 70%): In 2008, 525 km of 2D seismic data was acquired and 150 square km of 3D data was reprocessed to better image the Bennett prospect, located in block 43/15a. The new data has now been interpreted and the Company is seeking an additional farm-in partner with a view to drilling a well on the Bennett prospect possibly in 2010.

Ireland: Following the acquisition and interpretation of new seismic data in 2008, Island Oil and Gas (operator) has commenced a scoping reservoir engineering study to evaluate injection and withdrawal rates for conversion of the Old Head gas field (EnCore 15%) to a gas storage facility early in the future production life of the field. Subject to the results of the engineering and facilities study, Island will also investigate the potential conversion of the Schull gas field (EnCore 12.5%) to a gas storage facility.

25th Offshore Licencing Round: EnCore, together with a number of co-venturers, was awarded four licenses in the UK 25th Round. Consistent with our capital management strategy, we did not commit to significant work programs on any of the licences awarded. Additionally the Company holds an option (but not an obligation) to participate at up to 30 percent equity on a ground floor basis in a firm well program on a licence awarded to a another party.

 ONSHORE ACTIVITIES

EnCore welcomes the recent decision by the Court of Appeal in the Bocardo vs Star case, relating to claims for sub surface trespass. Subject to any future appeal decision in favor of Bocardo, the result is regarded as a positive clarification for our onshore license portfolio.

Markwells Wood and Havant: The Operator, Northern Petroleum has advised that the access track and site build for the well at Markwells Wood (PEDL126, EnCore 10%) began in March 2009 and it is expected that the well will be drilled in Q4 2009 or Q1 2010 depending upon rig availability, and possibly in conjunction with a well on the Havant Prospect.

Kirkleatham (EnCore 20%): Progress has been made at the Kirkleatham gas discovery in license PEDL068 operated by Egdon Resources, with the outline agreement in January 2009 of terms for gas sales for power generation on the Wilton site. A planning application has been submitted and Egdon is targeting first gas sales by the end of 2009.

Biscathorpe: 3D Seismic reprocessing work has now been completed on our recently awarded Biscathorpe licence (PEDL 253, EnCore 60% and Operator) and the partnership will be seeking farm-in partners with a view to drilling a well to appraise the Biscathorpe structure in 2010 or 2011. The structure, located updip of the Keddington and Saltfleetby fields, was originally drilled by BP in 1987 and is interpreted to have encountered thin hydrocarbon bearing sands. Biscathorpe represents one of the larger remaining unappraised onshore structures, with significant stratigraphic upside potential.

PEDL 089 and 1153: EnCore and Northern Petroleum (Operator) have both agreed to reassign all their respective interests in onshore licenses PEDL 089 (EnCore 20%) and P1153 (EnCore 20%) to Wessex Exploration, in return for Wessex settling their outstanding cash calls. Following additional seismic studies which were performed on the licenses, and under the relevant terms of the farm-in agreements with Wessex, both EnCore and Northern concluded that we did not wish to progress any further activity on this license.
 

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