Oilexco Acquires Stake in Central UK North Sea Property

Oilexco has agreed to acquire the interests of Pentex Oil UK Ltd. for cash in the currently producing Balmoral and Glamis light oil fields, and the Balmoral Floating Production Vessel, Block 16/21 in the Outer Moray Firth area of the central UK North Sea. The agreement to purchase was subject to, amongst other things, waiver of Partners' pre-emptive rights, Government, and regulatory approvals, all of which have been satisfied. Closing of the transaction effective January 1, 2004 is expected to occur in early September.

Interests to be acquired by Oilexco North Sea are: 9.714% in Production License 201, as it relates to the Balmoral Field, the Glamis Field, and the Second Residual Area within block 16/21a; 7.994% in the Unitization and Unit Operating Agreement relating to the Balmoral Field; and 7.910% in the Balmoral Floating Production Vessel (a production facility). Oil production relating to the interests to be acquired by Oilexco amounts to 245 bbl/d.

The interests to be acquired by Oilexco North Sea are strategic to Oilexco's UK North Sea business plan. The Balmoral Floating Production Vessel is located 8 kilometers northeast of Oilexco's "Brenda" oil find located in the adjoining Block, 15/25b. Oilexco views a subsea "tie back" to Balmoral as a logical option for early production of a portion of the "Brenda" oil accumulation, as there is in excess of 50,000 bbl/d of unutilized oil treating capacity on the Balmoral production facility. In addition, the Balmoral Floating Production Vessel carries significant residual value as it can be remobilized to other locations upon decommissioning of the Balmoral producing field.