Granby Farms Out Stake in Block 15/13b in the North Sea

Granby Oil and Gas, through two Group companies, has executed a Farm-out Agreement with Nexen Petroleum U.K. Limited (a wholly owned subsidiary of Nexen Inc.), and Heads of Agreement with Gas Plus Italiana S.p.A. to farm out UKCS Block 15/13b. As previously announced on 15 May, Albion Petroleum has already signed a Heads of Agreement for a multi-well farm in including this block. The Block 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.

Under the farm out arrangements, Nexen, Gas Plus and Albion will together fund the full cost of drilling an exploration well on the Guinea prospect. Nexen will become operator of the license and earn a 50% interest in the block. Albion and Gas Plus will each earn 6.25% interests. The Granby Group will retain a total 24.375% interest in the block and its share of the well costs will be carried by Nexen, Albion and Gas Plus. Elixir Petroleum (UK) Limited ('Elixir') will retain a 13.125% interest.

The exploration well will be operated by Nexen, which has already conducted the site survey and has a rig under contract to drill the well in the last quarter of this calendar year. The exploration well will be drilled to a depth of approximately one thousand six hundred meters (1,600m) true vertical depth subsea to target Granby's Guinea prospect.

Block 15/13b was awarded as a promote license to Granby Enterprises and Team Oil (both now wholly owned 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 under an alliance agreement which funded Granby's technical work and license applications. Elixir is also farming out part of its interest on the same terms as Granby.

Assignment of the license interests and transfer of operatorship to Nexen are subject to the approval of the Secretary of State for Trade & Industry. Assignment of the license interests to Albion and Gas Plus are subject to the execution of fully termed farm-in agreements, execution of the Joint Operating Agreement and approval of the Secretary of State for Trade & Industry.

David Grassick, Managing Director of Granby Oil and Gas, said:
"We are delighted to have successfully farmed out this block and retained a material interest in a fully funded well to be drilled during the last quarter of this calendar year. We very much look forward to working with our new partners, Nexen, Gas Plus and Albion, who are joining with us to drill the exciting Guinea prospect."

Richard Moreton, Executive Director, said:
"This prospect arose from our application of both traditional and high technology state-of-the-art evaluation methods to progressively mature through to drilling a feature we identified on 1987 2D seismic data – some sixteen years after the survey had first been acquired."

Following completion of the farm-out arrangements and the assignment of interests in the license, the participating interests will be Nexen Petroleum UK Limited with 50%; Granby with 24.375%; Elixir Petroleum with 13.125% Gas Plus Italiana with 6.250%; Albion Petroleum Limited with 6.250%.