Oilexco Offered Out of Round License in UK Central North Sea

Oilexco reports that the UK Department of Trade and Industry has offered 100% of an Oil and Gas Production License for the eastern part of Block 15/25e (east of Longitude 0 deg 52 minutes east) to Oilexco's wholly owned subsidiary Oilexco North Sea Limited. This new License will cover the balance of the seismically defined limits of the "Brenda" oil accumulation in the adjacent block to the east, 15/25b. In addition, an additional out of round offer was also made to both Oilexco North Sea Limited and CNR International under a marriage arrangement for the area of Block 15/25e west of the defined line of Longitude.

Oilexco also announces that it has exercised its option with Transocean for two of the three option wells under the drilling contract awarded to Transocean in June. Under Oilexco's contract with Transocean, the election of the third option well by Oilexco must occur no later than the point in time when total depth is achieved in the first option well.

Transocean has indicated the mid-water semi-submersible Transocean John Shaw will come under contract to Oilexco on or after September 15th 2004. The first well to be drilled by the Transocean John Shaw will be to a bottom-hole location on the new Oil and Gas Production License offered to Oilexco North Sea Limited over eastern part of Block 15/25e. This will be the seventh appraisal well drilled by Oilexco on the "Brenda" oil find since commencement on December 28, 2003 of Oilexco's UK North Sea drilling program.

Oilexco is in the second phase of its "Brenda" appraisal drilling program on License P1042 (100% working interest), Block 15/25b in the Outer Moray Firth, targeting oil in the Paleocene Forties Sandstone, which will now be extended to the newly offered Oil and Gas Production License covering the eastern part of Block 15/25e. The "Brenda" appraisal drilling program has elevated Oilexco to the most active operator of appraisal/exploration wells in the UK North Sea. To date Oilexco has drilled eight holes inclusive of sidetracks, six of which have intersected oil on Block 15/25b. Six of the eight holes are "Brenda" appraisal wells, five of these intersected oil, of which four were drill stem tested at flow rates between 2,685 bbl/d and 4,785 bbl/d of 40 degrees API sweet crude oil.