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Tuesday, April 26, 2011

Ithaca Inks Earn-In Agreement on Hurricane Discovery

Tuesday, April 26, 2011
Ithaca Energy Inc.

Ithaca has signed an Earn In agreement with Challenger Minerals (North Sea) Limited ("CMI") on the Hurricane discovery ("Hurricane") in Block 29/10b, within the Ithaca operated Greater Stella Development Area.

Hurricane was discovered in 1995 by well 29/10-4Z which tested the western lobe of a mapped structure and encountered light oil (41 degrees API) in a 62 foot section of reservoir sands; no drill stem test was undertaken at that time. The Hurricane appraisal well is being designed to confirm hydrocarbons in the eastern lobe of the structure characterized by high porosity (up to 30%) channelized Paleocene Rogaland sandstones. On successful appraisal of Hurricane by the initial well, the intention is to drill a sidetrack 'keeper' well up structure in anticipation of future development and tie back to the Stella hub.

Under the terms of the Earn In agreement, CMI is committed to pay a share of costs of the initial well in Block 29/10b. In consideration for this commitment CMI is provided with an option, exercisable no later than 90 days following abandonment or suspension of the initial appraisal and any sidetrack well, to take an interest in Block 29/10b. Under the Earn In arrangements, CMI will pay 40% of gross Hurricane initial appraisal well costs in exchange for a 31% equity interest in Block 29/10b, thereby carrying a part of Ithaca's share of all costs of drilling an initial appraisal well. In addition, upon successful appraisal, CMI will pay 40% of gross costs of a drill stem well test of any sidetrack. All additional costs, including those for planned sidetrack drilling, shall be apportioned such that CMI shall pay its 31% pro rata share.

The transaction is subject to agreeing 'turnkey' terms with Applied Drilling Technology International ("ADTI") (a subsidiary of Transocean Inc.) for the provision of a suitable drilling unit and well management services. Upon agreement of 'turnkey' terms and provision of a suitable rig, Ithaca anticipates that the appraisal well will be commenced in Q4 2011.

Ithaca currently holds 100% equity interest in the Hurricane discovery and Block 29/10b.

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