Ithaca ready to spud Stalla appraisal well in UK North Sea

Ithaca Energy Inc. (IAE) and its wholly owned subsidiary Ithaca Energy (UK) Limited announced that the Galaxy II heavy duty jackup rig contracted by Ithaca to drill an appraisal well on the Stella field in the UK North Sea has now come on hire and been mobilized to the spud location. The Galaxy II jackup will commence drilling this month.

In November 2009, Ithaca Energy became operator of the rich gas-condensate, Stella field and two additional discoveries, namely Hurricane and Harrier. The Company has since contracted the Galaxy II jackup, owned by Transocean, and the services of ADTI to manage appraisal well operations under 'turnkey' contract arrangements.

Drilling and Field Development

The well program, which is scheduled to take around 79 days to complete, has been designed to satisfy three primary objectives that will influence development.

First, the appraisal well should confirm Ithaca's assessment of the in-place volume of hydrocarbons Additionally, it should clarify changes in composition of hydrocarbon fluids with depth. Also, it should verify the distribution and quality of the reservoir.

The drilling schedule includes drill stem testing and a contingent sidetrack to ensure that the well objectives are fully satisfied and field upside is appraised prior to development. A further update will be provided when the initial bore has been completed and prior to commencement of any sidetrack.

The appraisal well is planned to reach total depth in the Cretaceous chalk layers which lie below the principal Stella (Andrew) reservoir target. An earlier well (30/6-3Z) encountered hydrocarbons in the Ekofisk chalk reservoir and tested further rich gas-condensate reserves which could be developed at the same time as the main pool.

Timely development of Stella will allow the Company to consider the potential development of the neighboring Harrier and Hurricane discoveries as additional tiebacks to Stella in this prolific gas-condensate area.

Changes in Participating Partners

As reported in October 2009, Challenger Minerals Inc. will pay 27% of gross Stella appraisal well costs in exchange for an 18% equity interest in the Stella and Harrier discoveries, thereby carrying a part of Ithaca's share of drilling costs and leaving Ithaca with a 50.33% interest. Upon successful appraisal, Challenger will also disproportionately fund a further Stella or Harrier development well.

The latest reserves report issued by Sproule International Limited for year ended December 31 2009, ascribed Proved and Probable reserves to Stella (both Andrew and Ekofisk reservoirs) of 8.94 million barrels of oil equivalent net to Ithaca after consideration of the CMI farmout.

Current Joint Venture Partners in block 30/6 (Stella and Harrier) are Ithaca with 68.33 percent, Dyas UK Ltd with 31.67 percent; but post completion of the farm-out to Challenger will be Ithaca 50.33 percent, Dyas UK Ltd 31.67 percent, and Challenger with 18 percent.

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