30 May 2006 - Farmout Agreement - PEDL071 - Fraisthorpe Prospect

Egdon Resources Plc, the onshore UK focused energy company, is pleased to announce that Egdon and Joint Venture partner Sterling Resources (UK) Ltd ("Sterling") have reached agreement to farm-out their combined 90% interest (Egdon 50%, Sterling 40%) in North Yorkshire licence PEDL071, which contains the Fraisthorpe Gas Prospect, to Granby Enterprises Limited ("Granby") and two UK subsidiaries of Gas Plus Italiana S.p.A, Gas Plus E & P UK Limited and Gas Plus O & G UK Limited (together "Gas Plus").   Both Granby and Gas Plus are new entrants to the onshore UK. 

Under the farm out arrangements, Gas Plus and Granby will fund Egdon and Sterling's full share of the drilling and testing costs for the proposed Fraisthorpe-1 exploration well, up to a limit of £1.8 million, to earn a 35% and 10% interest in PEDL071 respectively.  Following the farm-out, Egdon will retain a 25% interest and operatorship of PEDL071.  Under the terms of the farm-in, Granby will also provide Egdon with some technical assistance for the Licence on behalf of itself and the joint venture.

The Fraisthorpe-1 well will target a Permian Leman Sandstone prospect at a depth of around 1800 metres located some 7 kilometres to the south of the Caythorpe gas field which produces from the same formation.  A 2D seismic survey was acquired over the prospect in May 2005.  The interpretation of these data has indicated that the prospect has potential for up to 56 billion cubic feet ("Bcf") of gas in place.  

A planning application is currently being prepared and, subject to planning approval and operational constraints, the Fraisthorpe-1 well is anticipated to be drilled by early 2007.

 Assignment of the licence interests to Gas Plus and Granby are subject to the approval of the Secretary of State for Trade & Industry.