Petroceltic Increases Stake in ELSA 1 Discovery

Petroceltic International has exercised its option and increased its interest from 15% to 40% in the shallow water Italian license B.R.268. RG. The license contains the 1992 discovery well ELSA 1 which was drilled by a consortium of oil companies operated by AGIP. Following this discovery, AGIP drilled the nearby successful onshore Miglianico 1 and 2 wells which are now producing oil from the same oil reservoir as that encountered in ELSA 1.

After ELSA 1 was drilled Enterprise Oil plc, one of the partners in the consortium, estimated proven and probable reserves ("P2") in the ELSA 1 structure to be 108 million barrels. In addition, a recent published independent expert's report from Petrel Robertson commissioned by Vega Oil S.r.l. (our partners in the block) concluded that the P2 reserves are 182 million barrels. Given:

  • the location of the prospect in an established EU oil producing country;
  • the excellent regulatory and fiscal regime in Italy; and
  • the fact that there is significant facility and refinery infrastructure in very close proximity

The Company believes the value of proven and probable oil reserves in the license area to be commercially very attractive.

The Company has certain pre-emption rights over any sale of its Italian's partner's 60% interest in the License.

The Company has been informed that there will be drilling in 2006 on an adjacent block to the east on a prospect similar to Elsa. There are also a number of suitable rigs currently operating in this region of the Mediterranean and Petroceltic with its partner is planning to drill an appraisal well to the Elsa 1 discovery in 2006. Under the terms of the option, Petroceltic will pay 60% of the cost of this first well and thereafter its 40% share.

John Craven, CEO of Petroceltic said:
"I am delighted to have increased our stake in this exciting discovery area with independently assessed P2 reserves in excess of 100 million barrels of oil. It is immediately adjacent to two recent discoveries which are now on-stream and producing from the same oil reservoir."

"This License is now becoming a very substantial asset of the Company and there is, I believe very significant value in the ELSA 1 discovery."