Magellan Farms Out Stake in Two UK Exploration Licenses

Magellan Petroleum has reached agreement with Black Rock Oil & Gas whereby Black Rock will acquire a 10% equity in two of its Southern England licenses, Petroleum Exploration and Development Licenses (PEDL) 125 and 126.

The two licenses are north of PEDL 98 and PEDL 113 which are located on the Isle of Wight, and in which Magellan and Black Rock will participate in the drilling of the Sandhills-2 well during 2004. This appraisal well in PEDL 113 will investigate an untested potential oil column intersected by Sandhills-1.

Under the terms of the farmin, Black Rock will fund part of Magellan's drilling costs for the first two exploration wells, which may be located on either of the PEDL 125 or PEDL 126 licenses. Any subsequent long term production testing, well completion on or other joint venture costs shall be borne by the parties in proportion to their respective interests in the licenses. It is expected that drilling will occur during the 2005 calendar year.

PEDLs 125 and 126 were granted to Magellan and Northern Petroleum (GB) Limited (operator of the joint venture) in 2003 pursuant to the United Kingdom Petroleum Act 1998, and cover portions of the onshore Weald and Wessex Basin in Southern England, adjacent to the Horndean and Singelton oil fields.

This area is considered to have good potential for the discovery of small to medium sized oil fields which are close to markets. Although there are a number of producing fields in the vicinity, the area is still seen as under-explored. Recent technical evaluation has enhanced the geological understanding of the region. In particular, it has high-graded the potential of the Jurassic carbonates, the under-exploited main producing horizons of the Weald Basin.

The main play in these blocks is the Great Oolite carbonate reservoir section, which has been demonstrated to be effective at both Horndean and Singelton oil fields. Several drilling prospects have already been identified from seismic mapping, which have estimated potential recoverable reserves ranging from around 1 million to in the order of 10 million barrels of oil.

This is the Magellan's second farmin with Black Rock. In March, the Company announced it had farmed out 15% and 10%, respectively, in PEL 94 and PEL 110 in the Cooper Basin of South Australia.