Albion Petroleum Ltd.

May 31, 2006 13:36 ET

Albion's UK Partner Announces Farm-in of North Sea Block 15/13b

CALGARY, ALBERTA--(CCNMatthews - May 31, 2006) - ALBION PETROLEUM LTD. ("Albion") (TSX VENTURE:ABP.P) is pleased to announce that its joint venture partner, Granby Oil and Gas plc, through two Granby 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 May 16, 2006, Albion had already signed a Heads of Agreement for a multi-well farmout which includes this block. The entering into of the Heads of Agreement is subject to various approvals and is intended to constitute Albion's Qualifying Transaction ("Proposed Qualifying Transaction"). 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 20 km north east of the Piper Field in a water depth of approximately 150m.

Under the farmout 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 licence 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 of 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 metres (1,600m) true vertical depth subsea to target Granby's Guinea prospect.

Block 15/13b was awarded as a promote licence to Granby Enterprises and Team Oil (both now wholly owned subsidiaries of Granby Oil & Gas plc) in the 22nd Licence 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 licence applications. Elixir is also farming out part of their interest on the same terms as Granby. In addition, Albion's participation under the Heads of Agreement is subject to TSX Venture Exchange approval (the "Exchange").

Assignment of the licence interests and transfer of operatorship to Nexen are subject to the approval of the Secretary of State for Trade & Industry. Assignment of the licence 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 and Industry.

David Shaw, President of Albion Petroleum Ltd., said:

"We are very pleased with these new developments on this prospect within the mult-well farm-out announced by Albion on May 16, 2006. For Granby Oil to have successfully farmed out this block with partners of the quality of Nexen and Gas Plus, we feel this confirms the quality of the inventory of prospects represented by the farm-in program in which Albion will be participating. We very much look forward to working with our new partners to drill the exciting Guinea prospect."

Participating Interests

Following completion of the farmout arrangements and the assignment of interests in the licence, the participating interests in Block 15/13b will be:

Company Participating Interest %

Granby Group 24.375
Nexen Petroleum U.K. Limited 50.000
Elixir Petroleum Ltd 13.125
Gas Plus Italiana S.p.A. 6.250
Albion Petroleum Ltd. 6.250
Total 100.000

Cautionary Statements

The shares of Albion will remain halted until certain filings are made with the Exchange, including the filing of an independent geological report respecting the properties subject to the Proposed Qualifying Transaction. Upon a satisfactory filing being made, a further news release will be issued summarizing that report.

Completion of the Proposed Qualifying Transaction is subject to a number of conditions, including but not limited to, Exchange approval and if applicable pursuant to Exchange Requirements, shareholder approval. Where applicable, the Proposed Qualifying Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Qualifying Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Proposed Qualifying Transaction, any information released or received with respect to the Proposed Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

The Exchange has in no way passed upon the merits of the Proposed Qualifying Transaction and has neither approved nor disapproved of the contents of this press release.

The TSX Venture Exchange does not accept responsibility for the accuracy or adequacy of this release.

Contact Information

  • Albion Petroleum Ltd.
    Colin B. Christensen
    (403)264-4811 or (403) 410-1303
    (403)444-9494 (FAX)