Granby Looks to Accelerate North Sea Projects

Granby, the oil and gas exploration and production company with interests in the UK North Sea and the Philippines, announced the placing by KBC Peel Hunt Ltd of 10,714,286 ordinary shares of 0.5p ('New Ordinary Shares') at a price of 84p per share to raise £9,000,000 (approximately £8,640,000 after expenses). The New Ordinary Shares have been placed with certain institutional and other investors, including Directors.

Reasons for the placing and use of proceeds

The proceeds will be used to:

--Secure rig slots for both development and exploration drilling, which often requires the ability to make decisions and demonstrate financial capacity at short notice
--Fund Granby's share of the costs of the Tristan project, announced on 2 August 2006, including an equity contribution of approximately £0.75m and up to approximately £2.5m of additional commitments which need to be made prior to funds becoming available to draw down from the financial partner, at which time these commitments will be re-financed on a non-recourse basis
--Fund Granby's share of the Galoc project, full approval of which is expected shortly. Granby will make an equity contribution of approximately £1.2m towards the Galoc project. Granby will provide guarantees for recourse debt and completion support of approximately £3.3m from its existing resources. The remainder of Granby's contribution to the project will be funded by non-recourse project finance debt.

The net funds raised, together with existing cash resources which totaled approximately £7.254 million at 31 March 2006, will be sufficient, in the opinion of the Directors and on the basis of current estimates, to fund the exploration and development program and to cover the Company's overheads at least until the expected commencement of material cashflows from the Tristan and Galoc developments during 2008.

Further details of the placing

Application will be made to London Stock Exchange plc for the New Ordinary Shares to be admitted to trading on AIM. Admission of the New Ordinary Shares is expected to become effective on 7 September 2006, subject to shareholder approval at an Extraordinary General Meeting ('EGM') on 6 September 2006.

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the existing ordinary shares, including the right to receive all dividends and other distributions declared or paid thereon following admission.

The placing is conditional upon the placing agreement between KBC Peel Hunt Ltd and the Company having become unconditional in all respects and not having been terminated prior to admission of the New Ordinary Shares, and admission of the New Ordinary Shares becoming effective by 9am on 7 September 2006 or such later date (not being later than 30 September 2006) as the Company and KBC Peel Hunt may agree.

David Grassick, Managing Director of Granby Oil and Gas, said:

"The proceeds of this placing will provide us with the necessary funds to bring our two development projects to fruition and to accelerate our planned exploration program through improved access to the rig markets."

Overview of Granby

Granby Oil and Gas plc (ticker symbol GOIL) is an oil and gas business focused on exploration in carefully selected areas in the North Sea and elsewhere, and also on securing oil and gas production and developments. The Group's strategy is to build a significant portfolio of assets through both discovery and exploitation of oil and gas reserves.

Granby's portfolio and plans

Granby is planning a multi-well exploration program in the North Sea for 2006 and 2007, and is in the advanced stages of farming out several licenses awarded in the 22nd and 23rd Rounds to enable this to proceed. Granby aims to participate in drilling three firm fully funded exploration wells by mid 2007. All these wells, two offshore and one onshore, are 100% funded by other companies.

The current asset base of Granby includes interests in 13 UK offshore licenses spanning a total of 23 blocks and part blocks in the Central and Southern North Sea and the Forth Approaches (703,099 acres), containing multiple prospects generated by the Company with a net unrisked potential of 362 million barrels.

Granby announced on 2 August 2006 that it has earned a 35% interest in the Tristan North West gas development in block 49/29b in the UK Southern North Sea subject to acceptance of the license assignment by the Department of Trade and Industry ('DTI') and final approval of the finance package. The development is expected to produce in excess of 30bcf, with first gas potentially as early as Autumn 2007 and an economic field life of approximately 5 years.

In addition, Granby has a 9.14% indirect interest in the Galoc field, offshore Philippines, through its 15.69% shareholding in the Galoc Production Company ('GPC') which operates the field. Formal sanction of the development and approval of the Work Program and Budget up to first oil was announced on 10 August 2006. First oil production from the field is expected in late 2007 at an initial rate of approximately 15,000 bopd.

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