July 15, 2005 13:17 ET

Oilexco Updates UK North Sea Activities

CALGARY, CANADA--(CCNMatthews - July 15, 2005) - Oilexco Incorporated (TSX:OIL) (AIM:OIL) is pleased to update its activities in the UK North Sea. Oilexco's operations in the UK North Sea, through its wholly owned subsidiary Oilexco North Sea Limited, are currently focused on the development of the Brenda and Nicol Paleocene oil accumulations located in Blocks 15/25b and 15/25a respectively, and on drilling new exploration/appraisal opportunities utilizing the Transocean semi-submersible the Sedco 712 which is contacted to the Company to the end of March 2007.

Brenda Development

Today Oilexco North Sea Limited signed a "Heads of Agreement" with CNR International (UK) Limited a subsidiary of Canadian Natural Resources Ltd., of Calgary Alberta Canada, and operator of the Balmoral Facility. This Heads of Agreement relates to the construction and tie-in of the Brenda Field to the Balmoral Facility, and the provision of production and operating services to the Brenda Field utilizing the Balmoral Facility. This agreement allows Oilexco to finalize its Field Development Plan for the Brenda development.

"This agreement is beneficial to the owners of the Balmoral Production Facility in which Oilexco holds a 7.91% equity interest, as well as Oilexco for its 100% owned Brenda development" said Arthur Millholland, President of Oilexco. "Balmoral is a straight forward 10 kilometer subsea tie-back from the proposed Brenda production manifold. In addition, the owners of the Balmoral Facility benefit by increasing oil throughput which extends the life of facility and also by equitably spreading the burden of the Balmoral Facility's operating costs which will be apportioned to oil throughput".

The Sedco 712 is expected to move to the Brenda field area in the first quarter 2006 to begin the drilling of the Brenda horizontal production wells. First oil production from Brenda is currently being targeted for the 3rd quarter 2006.

Nicol Development

At Nicol, the location of the well 15/25a-13 which tested 4,194 bbl/d in May of this year, Oilexco has proposed to its partners that a single horizontal production well be used to develop the oil accumulation. Also, Oilexco has proposed this production well be tied back to the Brenda production manifold, which will be located approximately 10 km to the southeast, and that development proceed concurrently with the development at Brenda, with oil production currently targeted for the 3rd quarter 2006.. Oilexco's interest at Nicol is 70%.

Exploration/Appraisal Drilling

Oilexco's 2005/2006 North Sea exploration/appraisal drilling program is focused on the central UK North Sea. Currently Oilexco has drilling projects scheduled through August 2006. At present the Sedco 712 is on the well 15/18b-11 at the Yeoman prospect, located 40 km northwest of Brenda. Oilexco is participating as to a 2.5% working interest in the 15/18b-11 well which operations are expected to conclude in the next 14 days.

After drilling operations conclude at Yeoman, the Sedco 712 is scheduled to move to the Black Horse appraisal well which will offset the Blackhorse 15/22-16 discovery well which tested 6,583 bbl/d of 38 degrees API oil in 2002. As announced previously, Oilexco is acquiring 40% of the Black Horse field area for paying 60% of the costs of this Black Horse appraisal well.

Oilexco intends to drill two or three additional exploration/appraisal opportunities in the fourth quarter 2005, after completion of drilling operations at Black Horse, Oilexco has signed a Memorandum of Understanding with Premier Oil plc the operator of Block 21/6a located in the UK Central North Sea. Under the letter agreement, Oilexco will acquire a 50% interest and will operate the Palomino well in Licence P.1048, Block 21/6a; by paying 84.211% of the cost of a 11,000 foot test well to evaluate the Jurassic Fulmar and the Triassic Skaggerak sands on a 4 way dip closure, defined by 3D seismic. The arrangement with Premier at Palomino is subject to the conclusion of an acceptable formal agreement, as well as the approval of the UK Department of Trade and Industry ("DTI").

Oilexco has also signed a letter agreement with Sterling Resources Ltd, where-by Oilexco will acquire a 65% interest in, and become operator of Block 21/23a located in the UK central North Sea. Oilexco will acquire the interest by paying 95% of the costs of a 5,200 foot well to evaluate an oil prospect in an Eocene channel sand that is defined with 3D seismic. The Tay prospect is on geologic trend with and located between the Pict field to the northwest, and the Clapham field to the southeast. The arrangement with Sterling is subject to the conclusion of an acceptable formal agreement, as well as the approval of the DTI. The initial well at Tay targeting oil could also be drilled in the 4th quarter 2005.

Oilexco is currently evaluating several additional drilling opportunities to carry the Sedco 712 through its contracted period ending in March 2007. To this end the Company is currently evaluating a number of additional exploration/appraisal drilling opportunities in the UK North Sea on acreage held by third parties. In addition Oilexco has bid on Blocks offered in the current 23rd UK Offshore Licencing Round.

Oilexco is listed on the Toronto Stock Exchange ("TSX"), and on the Alternative Investment Market of the London Stock Exchange plc ("LSE-AIM") trading under the symbol OIL.

Forward Looking Statements

This disclosure contains certain forward-looking estimates that involve substantial known and unknown risks and uncertainties, certain of which are beyond Oilexco's control, including: the impact of general economic conditions in the areas in which the Company operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations, therefore Oilexco's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. No assurances can be given that the transactions or activities anticipated will transpire or occur, or, what benefits, including the amounts of proceeds, which Oilexco will derive therefrom. All statements included in this press release that address activities, events or developments that Oilexco expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, completion and production timetables and costs to complete wells and production facilities. These statements are based on assumptions made by Oilexco based on its experience perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.

Contact Information

  • Oilexco Incorporated
    Arthur S. Millholland
    (403) 262-5441
    Oilexco Incorporated
    Brian L. Ward
    Chief Financial Officer
    (403) 262-5441
    Oilexco Incorporated
    Gerry L. Roe
    Chief Operating Officer
    (403) 262-5441
    Website: www.oilexco.com