Saga Oil to Fast-track Development of the Rodnikovsky Field

SAGA has launched a revised Rodnikovsky Field Development program encompassing the 24 sq. km. East-Shaltinsky oil field on the Orenburg block in Russia close to the Kazakhstan border. The number of wells to be drilled has been increased to 37, of which 4 are injection wells. Significant production is expected by early 2007, and all wells are scheduled for production by first quarter 2008. Infrastructure developments such as pipeline and separation station have been paced accordingly and will now commence by July this year.

SAGA Oil and Promgeotek status: The 3D seismic program has been enlarged to encompass 75 km2 of the extended 93 km2 license and is in good progress. The design for roads and power lines construction is expected to be completed within the next 3-4 weeks whereupon construction will commence.

The East-Shaltinsky oil field (field no.1 on the Rodnikovsky license): The first rig is currently being mobilized and expect to spud the first well by the end of this month according to plan. Rig No. 2 is to commence drilling in 3d week of August and rig No. 3 the 4th week of September. The first 6 wells will be put on production from November through December this year and this will enable the company to start export sales of its crude oil. The Petrovsky oil field (field no.2 on the Rodnikovsky license): The development of the Petrovsky oil field might commence as additional drilling and completion activity after the 3D seismic have been interpreted. This will not require large additional investments into infrastructure as the present plan cater for the main components apart from additional pipelines to connect the 2 oil fields.

Finance matters: The Board of Directors has today resolved to propose for the upcoming AGM a bond issue of up to mNOK 300 at 10 % coupon for the Rodnikovsky Field Development program. The bondholders will additionally receive separate share warrants corresponding to a 1/3 bond conversion ratio. Terra Securities ASA has been appointed manager of the bond issue. Reference is also made to the AGM notice published on the OTC today.

Malvin Hoydal, CEO of SAGA Oil says: "We are very pleased with our revised schedule, which is a result of close cooperation with our experienced partners Geoservice Engineering LLC and Petromanagement LLC, and high-volume production has moved considerably closer. The bond financing represents a possibility for fully funding the ongoing development program."