Iona Energy Inc.
TSX VENTURE : INA

February 03, 2012 12:48 ET

Iona Energy Signs Definitive Agreement to Acquire West Wick, Updates Orlando Drilling and Adds to Management Team

CALGARY, ALBERTA--(Marketwire - Feb. 3, 2012) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION IN UNITED STATES

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 31st January 2012 signed a binding Sale and Purchase agreement to complete by March 31st 2012 the acquisition from Centrica Venture Production Company ("VPC") of a 58.73 % interest in Block 13/21a containing the West Wick Oil Field. The completion of this transaction and assignment is subject to approval by the U.K.'s Department of Energy and Climate Change ("DECC").

Under the terms of the Sale and Purchase Agreement, Iona paid to Centrica a holding deposit of USD 3.15 million, and on completion will pay to VPC a sum of USD 5 million.

Upon completion of the acquisition of Centrica's interest in the West Wick Field, the working interests on Block 13/21a will be 58.73% Iona and 41.27% Idemitsu Petroleum UK Ltd.

The West Wick discovery is located with block 13/21a and is an oil accumulation lying in the inner Moray Firth area of the North Sea, some 3.75 km west of the Captain field Producing Platforms. Oil was discovered within the Cretaceous Upper and Lower Captain sandstone reservoirs and correlates to the same reservoirs of the Captain field that have produced since 1997. The West Wick field has remained undeveloped since discovered by Amoco in 1990 with the drilling of well 13/21a-1A. Since that time four delineation wells have been drilled appraising the accumulation. The last wells (13/21a-5 and 13/21a-6) were drilled by Enterprise Oil in 2001. The West Wick field is a three-way dip closed structure approximately 3 km long by 2 km wide with an observed oil column of 228 ft (true vertical thickness) with oil proven though wire-line sampling that gives an API range of 13 - 21°, with an estimated 100cp viscosity crude in the reservoir. A Field Development Plan (FDP) was created in 2007 by VPC, and Iona intends to update this plan for development.

Block 13/21a has been covered by 3D seismic. Iona believes the deeper Jurassic stratigraphy offers further exploration potential underlying the block and an evaluation of this potential is planned to commence post acquisition completion.

Iona engaged Gaffney, Cline & Associates Ltd. ("GCA") to prepare an independent reserves report of the West Wick field, based on the Draft Field Development Plan (FDP) for West Wick as planned by Centrica VPC (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 December 31st, 2011. GCA has estimated net proved oil reserves of 5.1 MMbbls, net proved plus probable oil reserves of 9.71 MMbbls and net proved plus probable plus possible oil reserves of 12.18 MMbbls. Both Gross and Net Reserve estimates are given in table 1 below.

TABLE 1

SUMMARY OF WEST WICK RESERVES AS AT DECEMBER 31st, 2011

GROSS OIL RESERVES (MMbbls)

Proved Developed Producing Proved Developed Non-Producing Proved Undeveloped Total Proved
- - 8.68 8.68
Probable Proved+Probable Possible Proved+Probable+Possible
7.85 16.53 4.21 20.74

NET OIL RESERVES

Proved Developed Producing Proved Developed Non-Producing Proved Undeveloped Total Proved
- - 5.10 5.10
Probable Proved+Probable Possible Proved+Probable+Possible
4.61 9.71 2.47 12.18

Table 2 given below summarizes GCA's evaluation of the NPVs of the Iona Proved and Proved plus Probable and Proved plus Probable plus Possible Reserves for Iona's intended acquisition of a 58.73% Working Interest in the West Wick field, using forecast prices and costs of GCA as of December 31st, 2011. The dollar amounts appearing in this table have been expressed in millions of USD (USD MM).

TABLE 2

NET PRESENT VALUES APPLICABLE TO 58.73% WORKING INTEREST WEST WICK FIELD DISCOUNTED AT (1% PER YEAR) AS AT DECEMBER 31st, 2011

(USD MM) (BEFORE INCOME TAXES)

Pre-Tax

0% 5% 10% 15% 20%
Proved Undeveloped 297.13 208.87 146.59 101.8 69.04
Total Proved 297.13 208.87 146.59 101.8 69.04
Probable 408.57 301.72 236.17 193.18 163.19
Proved+Probable 705.70 510.59 382.76 294.98 232.23
Possible 244.71 124.03 66.35 36.64 20.24
Proved+Probable+Possible 950.41 634.62 449.11 331.62 252.47

Iona's Chief Executive Officer, Neill Carson commented: "The addition of West Wick field with Operatorship compliments our development portfolio nicely. We set out to build a fast flowing development sequence to follow developments at Trent & Tyne, Staffa, and Orlando, whilst maintaining a disciplined approach to competitive acquisition metrics. West Wick on completion of the acquisition will increase our proved plus probable reserves to approximately 22 MMboe."

DRILLING UPDATE FOR ORLANDO WELL 3/3b-13

Since Iona's operational update on the Orlando appraisal well of December 21st, 2011, a 9-5/8 inch casing was successfully set at 11,230 feet, from which point an 8-1/2 inch hole has continued to a current measured depth of 13,206 feet, putting the well approximately 50 feet above the targeted Brent reservoir within the planned trajectory for the development well. In addition to the weather-related delays mentioned in the prior operational update, there have been additional weather delays and most recently mechanical issues that have curtailed drilling activities. Rig repairs are currently being effected and it is expected that drilling activities could resume within approximately 7 days subject to the satisfaction of all parties that operational integrity is assured. At present, drilling is suspended. Operational options are being considered, which include suspending the well for completion on final development at a later date should any technical integrity have been compromised by the failure. To date, Iona has met all of its cash commitments to the project, now totaling USD$19.2MM.

IONA WELCOMES NEW FINANCIAL CONTROLLER

Iona Energy is also very pleased to announce the appointment of Ann Livingston as group Financial Controller. Based in Aberdeen, Mrs. Livingston comes to Iona most recently from Dana Petroleum plc ("Dana") where she spent 7 years managing external public company reporting and audits, and was a key member of numerous corporate and asset acquisitions and integrations, including the integration of Dana with the Korean National Oil Company. Prior to Dana, Ann spent 11 years at Ernst & Young LLP, ending her time there as the Senior Manager of a portfolio of US and UK energy related clients for whom she directed statutory, multi-venture, and royalty audits.

Brad Gunn, Iona's CFO commented, "On behalf of Iona, I am very excited to welcome Ann to our growing team of exceptionally talented people. Ann's prior experience and participation in the growth of Dana is very well suited for Iona's stage of development as we become an increasingly active company in the UK North Sea."

Additional information relating to the Company is available on SEDAR at www.sedar.com.

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 the Orlando well, the anticipated closing of the West Wick acquisition, and estimates of the quantities of proved reserves, probable reserves, and possible reserves, as well as estimates of the net present value of future net revenue of proved reserves, probable reserves, and possible reserves for West Wick. 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, including without limitation, the risk that Iona does not receive DECC approval or does not close the West Wick acquisition in a timely manner or at all. 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

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.

Additionally, this press release uses certain abbreviations as follows:

Oil and Natural Gas Liquids
bbls barrels
MMbbls millions of barrels

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