Syntroleum receives approval of Nigerian assignment of interest

Offshore staff

Syntroleum Corp. has received approval from the Federal Government of Nigeria for the assignment of interest to it and other participants in Oil Mining Lease (OML) 113, offshore Nigeria. Additionally, the participants previously received approval of their required drilling permit for the first appraisal well. Syntroleum last year acquired the rights to the 413,000-acre block, including the Aje field, a discovered oil and gas accumulation from Yinka Folawiyo Petroleum Co. Ltd., the Nigerian operator of record. The company views Aje as a potentially significant commercial opportunity for its gas-to-liquids (GTL) technology.

As a result of receipt of the approval, Syntroleum shall receive from certain of the other participants a cash payment of $5.7 million as part of the consideration for joining the Aje project.

"Receipt of the approval of this assignment is the final administrative step required to allow for the drilling of our first appraisal well on the Aje structure at OML-113," says Jack Holmes, president and CEO of Syntroleum. "We and the other participants have made a commitment for a drilling rig that should allow us to spud our first appraisal well in August or September 2005. The cash bonus that we will receive as a result of the assignment is expected to cover our share of the drilling and testing of this well and the majority of costs of the second appraisal well at Aje."

As previously announced, under a joint development agreement between the two companies, Sovereign Oil & Gas and Syntroleum identified a potentially major accumulation of oil and natural gas during previous testing of Aje's geology and reservoir at two pre-existing wells. This accumulation could be confirmed with one or more delineation wells. As currently interpreted, the crude oil and natural gas reservoirs are separate and can be produced independently.

Syntroleum has attracted a group of companies into the Aje project to serve as working interest participants. The group consists of Lundin Petroleum, Challenger Minerals Inc., Providence Energy, Howard Energy Co. Inc., and Palace Exploration Co.

Syntroleum will pay 10% of the cost to drill, log, and test the first two wells to earn a 32.5% cost bearing interest in the project. In addition to the initial payment of $5.7 million from certain of the participants, the company would receive a $2.8 million payment at first commercial production.

04/14/05