Granby Oil Inks Farm-out Deal with Albion for North Sea Acreage

Granby Oil and Gas has signed a Heads of Agreement to farm out a number of North Sea licenses to Albion Petroleum Ltd in a deal valued at around £5million (C$10million). Under the farmout arrangements, Albion will earn interests in a minimum of three and a maximum of five Licenses or License Groups by funding a share of the costs of wells, one to be drilled on each of the Licenses or License Groups.

The assignment of interests to Albion shall be made by both Granby and its co-venturer, Elixir Petroleum, who are farming out on the same basis and in proportion to their interests in each License. In Licenses or License Groups where Albion contributes to the cost of a well, Albion will earn 12.5% by funding 25% of the well cost, except in the case of blocks 15/13b and 13/25, where a 6.25% interest would be earned by paying 12.5% of the exploration well costs. The agreement covers Granby's and Elixir's Licenses in quads 9, 13, 14, 15, 16 only.

It is anticipated that further farmouts will be completed prior to drilling on any of the licenses. The first well is expected to be drilled later this year on Block 15/13b, which contains Granby's Guinea prospect, a robust 4 way dip closed Palaeocene structure, which lies on trend with fields such as Balmoral and Dumbarton. The block is located some 20km north east of the Piper Field in a water depth of approximately 150m.

Block 15/13b was awarded as a promote license to Granby Enterprises and Team Oil (both subsidiaries of Granby Oil & Gas plc) in the 22nd License Round in 2004. The Guinea prospect was identified in a study undertaken by Granby of open acreage in the Central North Sea during 2004. A 35% interest was subsequently assigned to Elixir Petroleum Limited under an alliance agreement which funded Granby's technical work and license applications.

Assignment of the license interests to Albion is subject to the approval of the Secretary of State for Trade & Industry, to execution of a fully termed farm-in agreement to be completed shortly, and to Albion demonstrating financial capacity no later than June 30, 2006.

David Grassick, Managing Director of Granby Oil and Gas, said:
'This is an excellent deal for Granby, Elixir and Albion. We are extremely pleased to have achieved a multi-well farmout of this type, which contributes significantly to funding an extensive exploration drilling program on our North Sea prospects.'