European Gas Completes Sale of Assets to ARC Energy

European Gas Limited said that it has received final approval under sections 72 and 78 of the Petroleum Act in relation to the dealings of the permits for the sale of several permits in the Canning Basin, Western Australia to ARC Energy Limited.

The Permits include EP371, EP390, EP391, EP428, EP431, EP436 (each 100%), L98-1 (12%), EP104 (8%) and R1 (8%) covering 28,700 square kilometers.

The agreed consideration includes:

--1,500,000 fully paid ordinary shares in ARC Energy (current market value of A$2.0 million); and
--2% Net Well Head Royalty.

The Net Well Head Royalty of 2% is calculated on the same basis as the Department of Industry and Resources, Western Australia (DoIR) royalty. In the event the DoIR royalty is reduced to below 2.5% to facilitate the economic viability of any project, the European Gas royalty shall reduce to 1%.

The transaction forms part of European Gas' strategy of divestment of its Australian assets whilst maintaining considerable leverage in any future discoveries in the Canning Basin. The entry of ARC Energy into the Canning Basin is a significant step in this large under explored basin.

ARC Energy Limited is an Australian energy company that owns and operates oil and gas interests in the Perth Basin and internationally. Listed on the Australian Stock Exchange with a market capitalization of approximately A$300 million, ARC has an aggressive onshore and offshore exploration and development drilling program.

European Gas Limited is a hydrocarbon explorer/developer with projects in western Europe. The strategy of the company is to develop Coal Bed Methane and Coal Mine Methane projects, in particular, in France where the company holds a significant competitive advantage with major holdings under license.

The European natural gas market is substantial with advanced infrastructure, including extensive pipeline networks and a free and open market.