Trapoil to Dispose Interest in Knockinnon and Lybster Prospects, UK

Trapoil, the independent oil and gas exploration, appraisal and production company focused on the UK Continental Shelf region of the North Sea, announces that it has entered into legally binding Heads of Agreement with Caithness Oil Limited, its parent company, Caithness Petroleum Limited and IGas Energy plc.

Under the terms of the Agreement, Trapoil has agreed to enter into certain other definitive legal agreements (the “Legal Agreements”) the effect of which will be to dispose of its interests in the Knockinnon and Lybster prospects and certain other assets (together, the “Licence Interests”) to Caithness Oil. The Legal Agreements will be conditional on, inter alia, IGas completing its proposed conditional acquisition of the entire issued share capital of Caithness Oil from Caithness Petroleum (the “Acquisition”), details of which were announced separately by IGas.

The total consideration payable to Trapoil on completion of the Acquisition (“Completion”) is US$7.5 million to be satisfied via the allotment or transfer of 4,177,011 fully paid ordinary shares of 10p each in the capital of IGas (the “Consideration Shares”), based on IGas’s volume weighted average share price on the 30 dealing days preceding signature of the Agreement. Trapoil has agreed not to dispose of US$4.0 million of the Consideration Shares (equivalent to approximately 2.3 million shares at the prevailing market share price and USD/GBP exchange rate) for a period of three months from the date of allotment or transfer and in the three month period thereafter only in accordance with the reasonable requirements of IGas and its broker. The balance of the Consideration Shares may be sold by the Company following Completion in accordance with certain orderly market provisions set out in the Agreement and through IGas’ broker. The net proceeds from any future sale of any of the Consideration Shares will be used by Trapoil for general working capital purposes.

The Licence Interests to be sold under the terms of the Legal Agreements are summarised below:

· Trapoil’s 70 per cent. interest in the offshore Knockinnon Sub Area (Licence P.1270, Block 11/24) (“Knockinnon”) of which it is currently the operator. The remaining 30 per cent. of Knockinnon is currently held by Caithness Oil.

· Trapoil’s 35 per cent. interest in the offshore Lybster Sub Area (Licence P.1270, Block 11/24) (“Lybster”). The remaining 65 per cent. of Lybster is currently held by Caithness Oil which is the operator. For the period ended 31 December 2012, the revenue and loss before taxation attributable to Trapoil’s share of Lybster production was approximately £675,000 and £770,000 respectively, after taking account of higher than anticipated maintenance costs and well downtime

· Trapoil’s 35 per cent. interest in the onshore blocks under Petroleum Exploration and Development Licence No. PEDL 158 (Blocks ND/1a, ND/2a, ND/12, ND/13a, ND/23a and ND33/a), the remaining 65 per cent. and operatorship of which is currently held by Caithness Oil.

Completion of the proposed disposal will result in a net impairment charge for the Company in respect of the Licence Interests of approximately £9.2 million (at the prevailing USD/GBP exchange rate), reflecting their current aggregate carrying value of approximately £14 million.

Under the terms of the Legal Agreements, Trapoil will also release Caithness Oil from certain obligations due to Trap Oil Limited in respect of the Forse Sub Area (Licence P.1270, Block 11/24) (“Forse”).

The Trapoil group’s original interests in Knockinnon, Lybster, Forse and PEDL were acquired as part of the Company’s acquisition of Reach Oil & Gas Limited as announced previously in July 2011. The current interests reflect certain equity swaps and revised arrangements entered into with Caithness Oil details of which were announced in November 2012.

Mark Groves Gidney, Chief Executive Officer of Trapoil, commented:

“In light of Caithness’ anticipated exit from the North Sea region and the fact that they have had limited finances to apply to the development of the Licence Interests, I am pleased that this transaction will, on completion, provide the Company with share consideration to the value of US$7.5 million.”

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