Genel To Take Control Of Longford’s Interests In Iraq Chia Surkh Block

To acquire additional 40% WI in Chia Surkh Block in Kurdistan region of Iraq.

Genel Energy Plc, Ankara, Turkey, (London: GENL) plans to acquire a 40% interest in the Chia Surkh block in the Kurdistan region of Iraq from Longford Energy Inc., Calgary, (Toronto Venture: LFD) for US$68 million in cash.

Of the consideration, US$42 million in cash will be paid to Longford and US$26 million will be paid directly to the Kurdistan Regional Government as settlement for Longford’s outstanding capacity-building bonus payments, and related interest, due under the production-sharing contract.

Genel already holds a 20% interest in the Chia Surkh block.

Longford acquired a 40% interest in the PSC in 2009. The three-year first exploration term of the PSC was set to expire on June 11, 2012. Longford has an outstanding commitment for the drilling of two exploration wells, and a commitment to a minimum expenditure of US$20 million during the next five months, which Longford reports it cannot fulfill (financially as well as operationally) in a timely manner. This expected non-performance, and the risk of contract expiration and cancellation, was a key consideration in the transaction.

Longford chief executive and president Ahmed Said says, “At the time of the acquisition of its interest in 2009, the company expected to spend in excess of US$100 million over three years on the exploration of the Chia Surkh Block, however due to challenging market conditions Longford was not able to fully capitalize this project to meet the commitments.”

Canaccord Genuity Corp. is financial advisor to Longford with respect to the proposed transaction, and in connection therewith has delivered a preliminary opinion to the board of directors of Longford confirming that the proposed Transaction is fair, from a financial point of view, to the security holders of Longford.