CNOOC-NEI Joint Venture Success Fees & Options

Altona Energy Plc / Index: AIM / Epic: ANR / Sector: Exploration & Production

30 March 2010

Altona Energy Plc ('Altona' or 'the Company')

CNOOC-NEI Joint Venture Success Fees

Issue of Options

Altona Energy Plc, the AIM listed Australian based energy company, announces the agreement of success fees in respect of the CNOOC Joint Venture ('the JV'), as well as the issue of options to advisors, employees and consultants.

CNOOC-NEI Joint Venture Success Fees

The Company has agreed success fees, based on value accretive milestones, payable to Mr Qiang (Michael) Zheng, a non-executive director of the Company, in respect of the achievement of the JV with CNOOC-NEI, a subsidiary of CNOOC, one of China's largest oil companies. Mr Zheng was instrumental in the introduction of CNOOC and the negotiation of the JV terms with CNOOC-NEI. Under the terms of the JV, CNOOC-NEI will fund the completion of a bankable feasibility study ('BFS') for the Arckaringa Project, with the view to develop and commercialise, the estimated 7.8 billion tonne coal resource, of which 1.287 billion tonnes is JORC compliant. 

The success fees payable to Mr Zheng are summarised as follows:

Milestone 1 - Satisfaction of JV Conditions Precedent

i) The issue of 2,500,000 fully paid ordinary shares of 0.1p each ('Ordinary Shares') on the satisfaction of all conditions precedent of the JV, including Australian Foreign Investment Review Board ('FIRB') approval.

ii) The payment of £100,000 cash on the satisfaction of all conditions precedent of the JV, including FIRB approval.

Milestone 2 - Completion of Stage 1 of JV

iii) The issue of 3,000,000 options to subscribe for Ordinary Shares ('Options') exercisable at 0.1p vesting on the completion of Stage 1 of the JV1, or a comparable stage of the BFS. 

iv) The payment of £100,000 cash on completion of Stage 1 of the JV, or a comparable stage of the BFS. The parties can mutually agree that this cash sum be settled by the issue of fully paid Ordinary Shares to be issued at a price equivalent to the volume weighted average price per Ordinary Share during the 10 day period immediately prior to the date for payment.

Milestone 3 - Completion of Stage 2 of JV

v) The issue of 3,500,000 Options exercisable at 0.1p vesting on the completion of Stage 2 of the JV, or a comparable stage of the BFS.

vi) The payment of £200,000 cash on completion of Stage 2 of the JV2, or a comparable stage of the BFS. The parties can mutually agree that this cash sum be settled by the issue of fully paid Ordinary Shares to be issued at a price equivalent to the volume weighted average price per Ordinary Share during the 10 day period immediately prior to the date for payment.

The independent directors of Altona consider, having consulted with the Company's nominated adviser, Evolution Securities Ltd, that the terms of the above success fees are fair and reasonable insofar as the Company's existing shareholders are concerned.

Altona Chairman Chris Lambert said, "The Board would like to thank Michael Zheng for his instrumental role in facilitating the transformational joint venture with CNOOC-NEI. The success fee consideration to Michael is structured on the achievement of very significant value accretive milestones towards commercialisation of Arckaringa."

Issue of Options

The Company has issued a total of 4,884,246 Options to advisors in settlement of success fees relating to investments in Ordinary Shares of the Company by Tongjiang International Energy Co. Ltd in 2008 totalling £3.61 million. The terms of these options are summarised as follows:

·; 3,256,164 Options exercisable at 4.75p, with a term of five years

·; 1,628,082 Options exercisable at 0.1p, with a term of five years

Altona has also issued a total of 1,300,000 Options to employees and consultants, exercisable at 10p with a term of three years, with 325,000 Options vesting every six months on continuation of service to the Company.

1 Stage 1: complete a BFS in relation to a project to develop a mine to extract coal from the Arckaringa Leases and a further pre-feasibility study in relation to at least one other value added project, such as a CTL, SNG and integrated power generation project ('Nominated Project').

2 Stage 2: complete a BFS in respect of the Nominated Project(s) identified in Stage 1 to enable both parties to secure debt funding for the costs of the Nominated Project(s).

**ENDS**

For further information visit www.altonaenergy.com or please contact:

Notes

Altona Energy Plc is an AIM listed Australian based energy company. Its asset is an estimated 7.8 billion tonne coal resource (non-JORC) in the Arckaringa Basin of South Australia (JORC-compliant: 1.287 billion tonnes). This is considered by the Board to be one of the world's largest untapped energy banks. Per Jacobs Engineering's study for the Company, assuming a 50% conversion of CTL fuels and 50% to synthetic gas ('Syngas'), Arckaringa total coal resources (both JORC and non-JORC) would represent respectively 28% and 29% of current North Sea remaining proven reserves of 10,900mb of oil and 114,800 bcf of natural gas.

Altona has already accomplished a number of key phases in its development:

·; The Company has agreed the terms of a joint venture agreement with CNOOC-NEI, a subsidiary of Chinese oil major China National Offshore Oil Corporation, to accelerate the Arckaringa Project towards commercialisation. 

·; Under the terms of the agreement, CNOOC-NEI will fund the bankable feasibility study ('BFS') for a coal mine and an integrated value-added project. 

·; The current base case for the BFS is a 10mb per year CTL plant and 560MW co-generation power facility.

·; CNOOC-NEI will also act as the operator and take responsibility for assessing the full potential of the coal resource, in return for a 51% interest in the exploration licences. 

·; It is envisaged that numerous new additional projects may also be opened up to create a multi-project, multi-national business. 

CTL

The quality of the Company's coal is suitable for conversion to synthetic gas ('Syngas'), using existing commercial CTL technologies. The process involves two major stages;

1. gasification to produce Syngas rich in hydrogen and carbon

2. a liquefication stage where the Syngas is reacted over a catalyst to produce high quality, ultraclean synthetic fuels and chemical feedstocks. 

CTL is a prime example of clean coal technology - the associated combined cycle units produce negligible sulphur oxides, significantly less nitrogen oxides and 10-20% less CO2 per unit of power generated than a conventional coal fired plant, whilst carbon capture and storage offers the potential to reduce the overall greenhouse gas emissions from CTL to below the 'well to wheel' level of fuels derived from crude oil. The technology is best demonstrated in South Africa, where currently 30% of the country's gasoline and diesel fuel needs are met through CTL plants.