Iona Energy Inc.

January 19, 2012 13:38 ET

Iona Closes Staffa Oil Field Acquisition Doubling Proven Plus Probable Reserves

CALGARY, ALBERTA--(Marketwire - Jan. 19, 2012) -


Iona Energy Inc. ("Iona" or the "Company") (TSX VENTURE:INA) is pleased to announce that its UK Subsidiary, Iona Energy Company (UK) Limited has effective 19th January 2012 completed on the previously-announced Staffa Sale and Purchase Agreement and has taken full ownership and operatorship from Fairfield Cedrus Limited ("Fairfield") of a 100% interest in Block 3/8d containing the Staffa Oil Field. The transaction was also approved by the U.K.'s Department of Energy and Climate Change ("DECC").

Under the terms of the Sale and Purchase Agreement, Iona reimbursed Fairfield on closing for $8.6 million in pre-development expenditures related to the Staffa field. In addition, upon the approval by DECC of a field development plan ("FDP") in respect of Staffa, Iona will be obligated to make a cash payment of $5 million to Fairfield and pay a net price of $2.50 per barrel of production commencing upon first oil from Staffa.

The Staffa Field is located in Block 3/8d in the UK North Sea and lies approximately 14 kilometers south-east of the producing Ninian Central platform. The Staffa Field also lies due south of the Orlando Oil discovery within Block 3/3b in which a 35% working interest is held by Iona. The Staffa Field is a three-way fault closed structure approximately 4 km long by 2 km wide with an observed oil column of 568ft (true vertical thickness) in Upper Brent sandstone reservoirs. The key Staffa discovery wells 3/8b-10 and 3/8b-14z flowed 40° API Oil at stabilized rates of 3,500 and 8,600 barrels of oil per day ("bopd") respectively. The Staffa field subsequently produced 4.2 MMstb at rates of up to 12,000 bopd between the years 1992 and 1994 and was decommissioned when the Brent crude oil price was approximately US$13/bbl to US$15/bbl.

With this acquisition of block 3/8d, Iona has also acquired 100% of an additional discovery known as Ossian. Located 7.5 KM to the SW of Staffa, well 3/8c-12 drilled by BP in 1986 encountered an approximate 33 ft oil column within the Brent formation and flowed oil of API 42 degrees at a restricted rate of 650 bopd. Iona has also acquired the Fingal (Brent level) exploration prospect located immediately to the west of the Staffa Field. Iona's initial focus is on the Staffa field development, however plans for the re-evaluation of the Ossian Discovery and Fingal prospects with newly reprocessed 3D seismic, and a study on the 3/8d-12 test results, will commence shortly.

Iona engaged Gaffney, Cline & Associates Ltd. ("GCA") to prepare an independent reserves and contingent resources evaluation of the Staffa Field, based on the Draft Field Development Plan (FDP) for Staffa as planned by Fairfield (the "GCA Report"). The GCA Report was prepared in accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities and has an effective date of October 31, 2011. GCA estimated proved oil reserves of 2.6 MMbbls, proved plus probable oil reserves of 4.2 MMbbls and proved plus probable plus possible oil reserves of 5.3 MMbbls with corresponding estimated proved gas reserves of 4.6 Bcf, proved plus probable gas reserves of 13.9 Bcf and proved plus probable plus possible gas reserves of 22.8 Bcf. GCA has considered that a single water injection well could be drilled about 12 months after the initial production well, however, the drilling of this well would be contingent upon the performance of the initial production well. Thus, in the GCA Report, GCA classified the associated further incremental recoverable volumes from a single water injection well as Contingent Resources of oil with a low estimate, best estimate and high estimate of 1.1, 2.1 and 3.4 MMbbls respectively, and Contingent Resources of gas with a low estimate, best estimate, and high estimate of 2.0, 7.0 and 14.6 Bcf respectively as given in table 1 below.



Proved 1P (MMbbl) Proved+Probable 2P(MMbbl) Proved+Probable+Possible 3P (MMbbl)
2.6 4.2 5.3
Proved 1P (Bcf) Proved+Probable 2P (Bcf) Proved+Probable+Possible 3P (Bcf)
4.6 13.9 22.8
1C Low Case (MMbbl) 2C Best Case (MMbbl) 3C High Case (MMbbl)
1.1 2.1 3.4
1C Low Case (Bcf) 2C Best Case (Bcf) 3C High Case (Bcf)
2.0 7.0 14.6

Table 2 given below summarizes GCA's evaluation of the NPVs of the Proved and Proved plus Probable and Proved plus Probable plus Possible Reserves for Iona's acquisition of a 100% Working Interest in the Staffa field. The dollar amounts appearing in this table have been expressed in millions of US$ (US$ MM).





STAFFA 0% 5% 10% 15% 20%
Proved Undeveloped 101.4 69.1 43.5 23.6 8.2
Total Proved 101.4 69.1 43.5 23.6 8.2
Probable 168.4 141.2 121.3 106.3 94.7
Proved+Probable 269.9 210.4 164.9 130.0 102.9
Possible 203.2 133.1 92.5 67.5 51.4
Proved+Probable+Possible 473.1 343.5 257.3 197.5 154.3

Since October 31st 2011, the FDP has been revised by Iona and both the FDP and Environmental Statement (ES) are in final stages of preparation to include two phased production wells tied back through a subsea completion. Iona expect the technical and economic reserve input to the Final FDP to be greater than those effective of 31st of October 2011 based upon a two well development.

As previously announced, Iona has acquired full rights to an advanced development plan and associated equipment, including the engineering design, critical engineering facilities such as a subsea production tree, and an established pipeline survey route. To enable production to start as early as possible, Iona had in November further contracted project management, environmental services, drilling management, commercial advisory, subsurface studies, seismic data acquisition, and production chemistry studies. Iona plans to enter into further agreements for subsea and topsides FEED studies, and make critical commitments to include line pipe, and the provision of a drilling rig slot for Q3 2012.

Iona's Chief Executive Officer, Neill Carson commented: "We are delighted that Iona is now an established Operator within the North Sea through this acquisition. With the addition of the Staffa Field, Iona has more than doubled its proved plus probable reserves to approximately 14 MMboe when added to our reserves in the Orlando and Trent & Tyne fields since our listing on the TSX Venture Exchange in June 2011. We have made great progress already towards early first oil on Staffa and continue to build on the operational and commercial opportunities offered by both the Staffa and the Orlando Projects."

Additional information relating to the Company is available on SEDAR at

About Iona Energy:

Iona Energy Inc. and its wholly owned subsidiary Iona Energy Company (UK) Limited (collectively, "Iona" or the "Company"), is an oil and gas exploration, development and production company focused on oil and gas development and exploration in the United Kingdom's North Sea.

Forward-looking statements

Some of the statements in this announcement are forward-looking, including statements regarding Iona's plans with respect to development of the Staffa property, estimates of the quantities of proved reserves, probable reserves, possible reserves and contingent resources, as well as estimates of the net present value of future net revenue of proved reserves, probable reserves, and possible reserves. Forward-looking statements include statements regarding the intent, belief and current expectations of Iona Energy Inc. or its officers with respect to various matters, including reserves, production, first oil, drilling activity or otherwise. When used in this announcement, the words "expects," "believes," "anticipate," "plans," "may," "will," "should", "scheduled", "targeted", "estimated" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, are based on various assumptions by Iona's management and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements. These forward-looking statements speak only as of the date of this announcement. Iona Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws.

Notes Regarding Oil and Gas Disclosure

As used in this press release, "boe" means barrel of oil equivalent on the basis of 6 mcf of natural gas to 1 bbl of oil. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The boe conversions used in this press release have been calculated by Iona.

It should not be assumed that the present worth of estimated future net revenue represents the fair market value of the reserves disclosed in this press release. The reserve and related revenue estimates set forth in this press release are estimates only and the actual reserves and realized revenue may be greater or less than those calculated. The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

As used in this press release, "possible reserves" are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.

"Contingent Resources" is defined in the Canadian Oil and Gas Evaluation Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political, and regulatory matters, or a lack of markets. It is also appropriate to classify as contingent resources the estimated discovered recoverable quantities associated with a project in the early evaluation stage. Contingent resources are further classified in accordance with the level of certainty associated with the estimates and may be subclassified based on project maturity and/or characterized by their economic status.

The contingent resources estimates are estimates only and the actual results may be greater than or less than the estimates provided herein. There is no certainty that it will be commercially viable or technically feasible to produce any portion of the resources.

Additionally, this press release uses certain abbreviations as follows:

Oil and Natural Gas Liquids Natural Gas
bbls barrels Bcf billion cubic foot
MMbbls millions of barrels MMcf million cubic feet
MMboe million barrels of oil equivalent

Neither the TSX Venture Exchange Inc. nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • Iona Energy Inc.
    Neill A. Carson
    Chief Executive Officer
    +011 (44) 7919 057989

    Iona Energy Inc.
    Brad G. Gunn
    Chief Financial Officer
    (403) 775-7442