Panoro Energy ASA — M&A Activity 2011

Jan 24, 2011

Panoro Energy ASA signs farm-out agreement for blocks SM-1035, SM-1036 and SM-1100 in the Santos Basin offshore Brazil

Panoro Energy ASA signs farm-out agreement for blocks SM-1035, SM-1036

and SM-1100 in the Santos Basin offshore Brazil

Panoro Energy ASA ("PEN", OSE ticker code), the independent oil and gas

company with assets in West Africa and Brazil, is pleased to announce

that the Company has reached agreement to farm out 35% of Panoro's 50%

interest in its three shallow water exploration licenses SM-1035,

SM-1036 and SM-1100 in the Santos Basin offshore Brazil.  Panoro's

partner in the blocks (Brasoil with 50 % interest) is also farming out

under identical terms. In line with Brazilian petroleum legislation, the

transaction is subject to approval from the National Petroleum Agency

("ANP").

After this transaction, Panoro Energy ASA will, through its Brazilian

subsidiary, retain a 15% working interest in the licenses. The buyer,

Vanco Brasil Exploração e Produção de Petróleo e Gas Natural Ltda, a

wholly owned Subsidiary of Vanco Overseas Energy Ltd ("Vanco", see

http://www.vancoexploration.com (http://www.vancoexploration.com/) for

more information), will assume Operatorship and hold a 70% working

interest in the three licenses. Upon completion, Brasoil's interest will

also be reduced to 15%.

Upon ANP approval, Panoro Energy will receive net proceeds of

approximately USD 15 million, covering Panoro's historical costs on the

licenses. Vanco will finance Panoro's share of drilling costs for three

exploration wells, one on each license. Furthermore, Vanco will be

entitled to recover the financed portion of successful wells and half

the financed portion of unsuccessful wells from Panoro's share of future

production from discoveries made on the licenses.

The transaction includes an option for Panoro Energy to increase working

interest in the licenses to 20%, prior to commencement of drilling the

first exploration well. In that event, Panoro will have to fund 5% of

the past costs, work program costs and future drilling costs of the

wells.

"We are very pleased to attract Vanco as an Operator with considerable

experience and financial strength. Our new partner shares Panoro's view

of the Santos Basin as an exciting exploration region, and we are now

ready to enter the second exploration period for the licenses and commit

to drilling three exploration wells.  We have retained significant

exposure to high impact exploration, whilst simultaneously strengthening

our balance sheet and limiting our future financial commitments",

comments CEO Kjetil Solbrække.

Panoro Energy estimates these licenses hold gross unrisked volumes of

880 MMBOE (best estimate) with an upside case of 1,100 MMBOE.

Stellar Energy Advisors acted as advisors for the farm-out process.

For further information, please contact:

Anders Kapstad, CFO

Tel: +47 23 01 10 0

Cell: +47 918 17 442

Email:

anders.kapstad@panoroenergy.com (anders.kapstad@panoroenergy.com) 

Jonas Gamre, Finance & Investor Relations Manager

Tel: +47 23 01 10 02

Cell: +47 971 18 292

Email: jonas.gamre@panoroenergy.com (jonas.gamre@panoroenergy.com)