UK: Trapoil Provides Operational Update on Its 2012/13 Drilling Programme

Trapoil, the independent oil and gas exploration and appraisal company focused on the UK Continental Shelf (“UKCS”) region of the North Sea, provides an operational update in relation to its 2012/13 drilling programme, its proposed acquisition of a working interest in the Trent East Terrace (“TET”) and its Athena acquisition.

2012/13 Drilling Programme

It is currently anticipated by the operator, Suncor Energy UK Limited (“Suncor”), that the next exploration well in Trapoil’s 2012 drill programme will be spudded in late September/early October 2012 on the Romeo prospect (Licence P.1666, Block 30/11c), in which Trapoil holds a 12.5 per cent. carried interest. The Scotney exploration well (Licence P.1658, Block 20/5b) also operated by Suncor, and in which Trapoil also holds a 12.5 per cent. carried interest, will be drilled immediately after Romeo using the same drill rig.

Drilling of the Magnolia prospect (Licence P.1610, Block 13/23a), operated by Dana Petroleum (BVUK) Limited, in which Trapoil holds a 10 per cent. carried interest, is now expected to be delayed until Q4 2012, which will have a knock-on effect in respect of the timing for the spudding of the Crazy Horse exploration well (Licence P.1650, Block 14/13), as the drilling rig “Ocean Nomad” has been contracted for both of these wells.

Crazy Horse is currently scheduled as the fifth well in a six well sequence starting with Magnolia. The operator of Crazy Horse, Norwegian Energy Company UK Limited (“Noreco”), now expects this well to spud in the first half of 2013 and is currently in discussions with the Department of Energy and Climate Change (“DECC”) seeking to obtain the necessary licence extension to enable a well on Crazy Horse to be drilled to this revised timetable. Trapoil holds a 22 per cent. interest (17 per cent. working interest and 5 per cent. carried interest) in Crazy Horse.

Trapoil’s planned 2012 drilling programme also included the Knockinnon appraisal and Burrigill prospects (Licence P.1270, Block 11/24), both operated and wholly funded by Caithness Oil Limited (“Caithness”). Trapoil holds a 35 per cent. carried interest in these prospects. Environmental considerations relating to an earlier seismic survey have resulted in a drilling postponement. In addition, interpretation of new seismic data has also led to a switch from Burrigill to instead drill a well on the Forse prospect. Trapoil understands that Caithness has applied for, and recently received from DECC, a formal extension of the relevant licences to allow these wells to be drilled during 2013.

Caithness has recently notified Trapoil that it considers the effect of the environmental delay and certain other events to constitute a force majeure, thereby allowing it to postpone its pre-existing commitment to Trapoil to drill two wells by 31 December 2012. Trapoil is currently engaging with Caithness to consider these issues with respect to the various force majeure notices.

Excluding the three delayed wells referred to above, Trapoil anticipates drilling a further five wells next year.

Proposed Trent East Terrace Acquisition

Following the announcement of 7 June 2012, Trapoil remains in advanced stage discussions with Perenco UK Limited (“Perenco”) to potentially acquire a 33.33 per cent. working interest in the Licence P.685 (Block 43/24a) gas discovery. The Company has recently acquired a 30 per cent. working interest in two adjacent blocks on Licence P.1859 and Licence P.1923 (Blocks 43/24b and 43/20c respectively) from Hollywell Resources Limited, for minimal consideration. Completion of the acquisition of an interest in Licence P.685 remains subject, inter alia, to negotiation and finalisation of a binding sale and purchase agreement and requisite DECC approval to enable Trapoil to assume the role of operator. Such DECC approval is currently anticipated to be achieved by the end of this year.

Athena Acquisition

Further to the announcement of 19 March 2012, Trapoil confirms that it has received consent from the Secretary of State for Energy and Climate Change for the proposed transfer of an initial 10 per cent. working interest in the Athena Oil Field (“Athena”) from Dyas UK Limited (“Dyas”), completion of which is now solely conditional upon approvals from Dyas’ partners’ and BW Offshore Limited (contractor of the BW Athena FPSO), which are expected to be received shortly.

Trapoil has until 31 October 2012 to complete the potential acquisition of an additional 5 per cent. working interest in Athena from Dyas, subject to the receipt of similar consents and approvals, the effective net cost of which will depend on the field’s production and the oil price achieved to the end of October.

Ithaca Energy Inc. (“Ithaca”), the operator of Athena, announced first oil from Athena in late May 2012 at an initial production rate of 22,000 barrels of oil per day (“bopd”). On 21 June 2012, Ithaca announced a revised gross production rate of 12,000 bopd in light of certain production start up issues with one of the four production wells.

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

“The Company is well positioned and, I believe, will continue to make strong progress in the remainder of 2012. In the near term, we have two high impact wells, either of which, if successful, could potentially generate returns to the Company significantly in excess of its current market capitalisation as we seek to maximise shareholder value from our existing exploration portfolio. As importantly, we are nearing completion of the first part of Athena acquisition which at the current flow rate of 12,000 bopd (gross) will generate strong cash flows of over £1 million per month. This, together with the Group’s cash balances currently over £33 million ensures the Company has the financial base to fund its objectives.

We are also pleased to be making good progress on our plans for the TET gas discovery. This potential development, which on completion of the proposed acquisition of a working interest in Licence P.685 from Perenco will be under our control as an operator, is estimated to contain between 32 and 60bcf (gross) of gas and offers the prospect of good returns for the Company from 2014 onwards.”

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Press Release, July 24, 2012