Equator Acquires Interest in Block 2 of Nigeria-Sao Tome JDZ

Equator has, together with its co-venturers, signed a Production Sharing Contract with the Nigeria/Sao Tome and Principe Joint Development Authority. A 15% interest in the highly sought after JDZ Block 2 of the Joint Development Zone has been awarded to Equator and its joint bidding partner ONGC Videsh Limited.

Based on a 3D seismic survey funded and acquired by Petroleum Geo-Services and Equator in 2003, the block has estimated recoverable reserves of 1 billion barrels. JDZ Block 2 is adjacent to Nigerian Block OML 130 which hosts the 700 million barrel Akpo field and another series of discoveries totaling an additional 500 million barrels and several TCF of gas. Other stakeholders in the block include the consortium of Sinopec, ERHC Energy and Addax Petroleum, who together have 65% with Sinopec acting as operator of the block. In addition, Nigerian firms A & Hatman (10%), MoMo Petroleum (5%) and Foby Engineering (5%) were allocated interests in JDZ Block 2.

Under terms of the JDZ joint bidding agreement between Equator and OVL ("the OVL/Equator Venture"), any allocations will be shared on a 60%-OVL and 40%-Equator basis. This results in a net 6% participation in the block for Equator. The signing bonus for JDZ Block 2 is US$71 million. Equator's share of the signing bonus is US$4.26 million which will be funded from Equator's existing cash reserves.

Mr. Wade Cherwayko, CEO of Equator stated "We are pleased to be among the small number of companies worldwide to be awarded participation in a block in this highly prospective deep water exploration play offshore Nigeria and Sao Tome. The allocation further expands Equator's portfolio of high potential exploration acreage in the Gulf of Guinea, the world's premier deep water basin."

The JDZ was created through an agreement between the governments of Nigeria and Sao Tome and Principe in 2001 whereby revenues derived from the JDZ will be shared 60:40 between these governments respectively. The JDZ is governed by the JDA who also signed Blocks 3 and 4 this week. Block 3 was allocated to Anadarko (51%) who was designated as operator. Other participants in Block 3 are ERHC, Addax and several Nigerian firms. Block 4 was allocated to a consortium led by ERHC and Addax, who together have 60% and operatorship. The additional equity in Block 4 was allocated to Nigerian firms and Hercules, a company partnered with Canadian-based Centurion Energy. JDZ Block 1 was signed in early 2005 to a consortium which comprised ChevronTexaco, ExxonMobil and Dangote Energy Equity Resources, for a signature bonus of US$123 million. Drilling of the first well in JDZ Block 1 is currently underway.

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