Lgx Oil & Gas fka OIL

[bcjt]

Oilexco to buy interests in U.K. North Sea blocks


Oilexco Inc (TSX-V:OIL)
Shares Issued 149,802,602
Last Close 7/14/2005 $3.17
Friday July 15 2005 - News Release

Mr. Arthur Millholland reports

OILEXCO UPDATES UK NORTH SEA ACTIVITIES

Oilexco Inc. has provided current information about its activities in the U.K. North Sea. Oilexco's operations in the U.K. North Sea, through its wholly owned subsidiary, Oilexco North Sea Ltd., 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 using the Transocean semi-submersible the Sedco 712 which is contracted to the company to the end of March, 2007.

Brenda development

Today Oilexco North Sea Ltd. signed a heads of agreement with CNR International (UK) Ltd., a subsidiary of Canadian Natural Resources Ltd., of Calgary, Alta., 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 using 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-per-cent equity interest, as well as Oilexco for its 100-per-cent-owned Brenda development," said Arthur Millholland, president of Oilexco. "Balmoral is a straight-forward 10-kilometre 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 third quarter 2006.

Nicol development

At Nicol, the location of the well 15/25a-13, which tested 4,194 barrels per day (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 kilometres to the southeast, and that development proceed concurrently with the development at Brenda, with oil production currently targeted for the third quarter of 2006. Oilexco's interest at Nicol is 70 per cent.

Exploration/appraisal drilling

Oilexco's 2005/2006 North Sea exploration/appraisal drilling program is focused on the central U.K. 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 kilometres northwest of Brenda. Oilexco is participating as to a 2.5-per-cent 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 Black Horse 15/22-16 discovery well which tested 6,583 bbl/d of 38 degrees American Petroleum Institute standard (API) oil in 2002. As announced previously, Oilexco is acquiring 40 per cent of the Black Horse field area for paying 60 per cent 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 U.K. central North Sea. Under the letter agreement, Oilexco will acquire a 50-per-cent interest and will operate the Palomino well in licence P.1048, block 21/6a; by paying 84.211 per cent of the cost of a 11,000-foot test well to evaluate the Jurassic Fulmar and the Triassic Skaggerak sands on a four-way dip closure, defined by 3-D seismic. The arrangement with Premier at Palomino is subject to the conclusion of an acceptable formal agreement, as well as the approval of the U.K. Department of Trade and Industry (DTI).

Oilexco has also signed a letter agreement with Sterling Resources Ltd, whereby Oilexco will acquire a 65-per-cent interest in, and become operator of, block 21/23a located in the U.K. central North Sea. Oilexco will acquire the interest by paying 95 per cent of the costs of a 5,200-foot well to evaluate an oil prospect in an Eocene channel sand that is defined with 3-D 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 fourth quarter of 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 U.K. North Sea on acreage held by third parties. In addition Oilexco has bid on blocks offered in the current 23rd U.K. offshore licencing round.

© 2005 Canjex Publishing Ltd.