Iona Energy Inc.
TSX VENTURE : INA

June 12, 2012 12:02 ET

Iona Energy to Increase Ownership Interest in Orlando Oil Field to 100%

CALGARY, ALBERTA--(Marketwire - June 12, 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 signed a binding Sales and Purchase Agreement for the purchase of its partners' interests, MPX Resources (30%) and Sorgenia (35%), in the Orlando Oil field ("Orlando Sale and Purchase Agreement") in exchange for the payment of historical costs and future payments out of production. Under a transition agreement, Iona will become the effective Operator immediately. Iona expects final Field Development Plan approval for the field in Q3 2012 with a first oil target date of Q3 2013. As a result of this transaction, Iona will:

  • Increase its working interest from 35% to 100%;
  • Gain Operatorship of the asset and control of potential development synergies with its 100% owned Kells Development;
  • Add a Proved plus Probable ("2P") reserve volume of 7.2 MMbbls of Brent quality crude oil, giving Iona an Orlando Net 2P reserve volume of 11 MMbbls of oil;(1)
  • Acquire 2P reserves at approximately $6.7/bbl of historical development cost plus an effective acquisition cost of $4.0/bbl;
  • Assume all past capital expenditures for income tax sheltering purposes;
  • Add Pre-Tax Net Present Value, discounted at 10% ("NPV10"), of USD$264 million and Post-Tax NPV10 of USD$121 million;(1)
  • Assume all Orlando development contracts with respect to equipment and services; and
  • Grow total 2P reserves to 22.1 MMboe, with a Pre-Tax NPV10 of over USD$804 million(2).

The Orlando Oil field lies in the UK sector of the North Sea within Block 3/3b, approximately 10 km north east of the Ninian Central Platform and was successfully appraised with the 3/3b-11 (1989) and 3/3b-13 (2012) and sidetrack wells. Based on its previous NI 51-101 reserve report effective Dec 31, 2011 at 100% working interest Iona calculates Proved ("1P") reserves for the field of 6.8 MMbbls, Proved plus Probable ("2P") reserves of 11.1 MMbbls, and Proved plus Probable plus Possible ("3P") reserves of 16.2 MMbbls. Early analysis by Iona of the results of the 3/3b-13 well and sidetrack are consistent with previously reported year end reserve volumes. Iona intends to update its NI 51-101 Orlando reserve report upon Orlando Field Development Plan approval by the UK's Department of Energy and Climate Change ("DECC").

It has been agreed within the Orlando Sale and Purchase Agreement that upon Orlando Field Development approval by DECC, Iona will refund to Sorgenia and MPX, their historical costs of the Orlando Development to-date, approximating USD$48.25 million. Future staged payments will be made by Iona to Sorgenia and MPX commencing six months after first production from Orlando. The first payment will be USD$ 7.0 million with additional payments of USD$7.0 million, USD$7.0 million, USD$4.0 million, and USD$4.0 million made every six months thereafter respectively, amounting to a total payment of USD$29.0 million over 3 years. The final completion of the sale is conditional on the approval of the assignment of the license interests and operatorship by DECC. Request to approve this assignment has already commenced and it is expected that transfer of the license interest and operatorship will occur before December 31st 2012.

Iona's Chief Executive Officer, Neill Carson commented: "The acquisition of our partners' interests in Orlando makes sense as Iona will now operate both key developments, Orlando and Kells, to realize operational and portfolio synergies that are uniquely offered to Iona due to our dominant ownership in these satellite developments. A first oil date in 2013 is important to us and Iona is well placed to achieve this through having an advanced FDP, Environmental Statement, pipeline surveys, ownership of critical equipment such as subsea trees, and pipeline procurement contracts."

Notes:

(1) Based on reserves and net present value information attributed to the Orlando field by Iona's reserves evaluators, Gaffney Cline & Associates Ltd. ("GCA") using forecast prices and costs effective as of December 31, 2011 (as disclosed in Iona's Form 51-101F1 for the year ended December 31, 2011.).

(2) Based on reserves and net present value information attributed to Iona's interests in the Orlando and Trent & Tyne fields by GCA, using forecast prices and costs effective as of December 31, 2011 (as disclosed in Iona's Form 51-101F1 for the year ended December 31, 2011.), together with reserves and net present value information attributed to Iona's interests in the Kells field by GCA, using forecast prices and costs effective as of March 31, 2012 (as disclosed in Iona's press release dated June 7, 2012).

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 completion of the acquisition of Iona's partners' interests in the Orlando field, Iona's plans with respect to development of the Orlando property, 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. 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 complete the acquisition for any reason, including the risk that DECC does not approve the assignment of the licenses and/or operatorship. 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.

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 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)(0)1224 228400

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