Longreach Oil and Gas Limited, a Morocco focused oil & gas company, reports that a formal agreement has been entered into between Longreach and Maghreb Petroleum Exploration S.A (MPE) to farm-in for a 50% operated stake in the Sidi Moktar development licence located in the Essouaria Basin in Central Morocco. Longreach is also pleased to announce the filing of a preliminary prospectus in each of the provinces of Canada, except for Québec, Newfoundland and Labrador and Prince Edward Island, to raise a minimum of CDN $ 25.0 million through the issue of new ordinary shares ("Ordinary Shares") by way of a "best efforts" prospectus offering (the "Offering") through a syndicate of agents led by Paradigm Capital Inc. and including Fraser Mackenzie Limited (collectively, the 'Agents'). The Company has also engaged VSA Capital Limited as a special selling agent in Europe. The Offering will be priced in the context of the market (the 'Issue Price') with the final terms of the Offering to be determined at the time of pricing.

Highlights

Proceeds from the Offering are expected to provide necessary funds for the implementation of the Company's exploration and development programme of up to 5 wells across the Longreach portfolio. The Sidi Moktar agreement is anticipated to be transformational for Longreach and enhances its existing Moroccan-focused asset portfolio by providing a 50% working interest and operatorship of 3 additional exploration licences. The Sidi Moktar licences have produced to date 30.5Bcf according to ONHYM. An independent resources study, completed in March 2011 by AJM Petroleum Consultants, Calgary, Canada, covering five existing fields within Sidi Moktar, attributed undiscovered gas initially in place of approximately 111 (low), 292 (best) and 776 (high) Bcf for Silurian sourced Triassic targets. The onshore Sidi Moktar licence surrounds the existing producing Meskala field, with gas pipeline infrastructure in place that runs through the permit area. Tie in to this pipeline is believed to be achievable, with gas expected to be piped to the town of Youssoufia, where major phosphate plants exist with unmet natural gas demand. Longreach currently has interests in four exploration licences in southern onshore and offshore Morocco, covering 11.8 million acres.

Financing The Offering will be offered in all the Provinces of Canada, except for Quebec, Newfoundland and Labrador and Prince Edward Island. The Ordinary Shares may also be issued on a private placement in the United States with certain institutional accredited investors pursuant to Regulation D under the United States Securities Act of 1933, as amended, as well as other eligible foreign jurisdictions pursuant to applicable exemptions from prospectus or other similar requirements under applicable securities laws in such jurisdictions.

The Agents will be paid a cash commission equal to 6.0% of the gross proceeds raised in the Offering. The Company shall issue to the Agents broker warrants ('Broker Warrants') entitling the Agents to purchase up to the number of Ordinary Shares that equals 6.0% of the number of Ordinary Shares sold in the Offering. Each Broker Warrant will have an exercise price equal to the Issue Price and expire 24 months after the closing date of the Offering.

The Offering is expected to close on or about June 30th, 2011 and is subject to certain customary conditions, regulatory approvals, including but not limited to the approval of the TSX Venture Exchange.

Proceeds of the Offering are expected to be primarily used to pursue the Sidi Moktar transaction as described in further detail below, and further development of the Company's existing portfolio. The Sidi Moktar programme is expected to include the acquisition of 100 km² of 3D seismic data and a two well drilling programme. The Company expects to conduct seismic acquisition programmes on the Company's Zag and Tarfaya licences to further identify drilling targets of which the seismic programme is fully funded with existing cash balances. Subject to available funding, the exploration programme also allocates a portion of the proceeds of the Offering to fund the drilling of one exploration well on the Company's Zag licence, an exploration well on the Company's Tarfaya licence and one exploration well on either of the Sidi Moussa or Foum Draa licences.

Bryan Benitz, Chairman and CEO of Longreach commented, 'We are delighted to announce this Offering which we believe will enable us to implement an exploration programme which marks a significant progression of Longreach. The team we have working with us on the share placing is highly experienced and well respected in the sector and I am confident we will be successful.

'The Sidi Moktar licence is an exceptional asset and the farm-in agreement is transformational for the Company which will see Longreach become operator of this prospective licence. The finalisation of the agreement is a credit to the strength of Longreach's relationships within Morocco and we look forward to implementing our planned exploration programme.'

Details of the Farm-in Longreach has agreed to acquire a 50% interest by farming into the onshore Sidi Moktar licences located in the Essaouira Basin in Central Morocco. An independent resource study, completed in March 2011 by AJM Petroleum Consultants covering the four existing fields within Sidi Moktar, attributed undiscovered gas initially in place of approximately 111 (low), 292 (best) and 776 (high) BCF for Silurian sourced Triassic targets, which will be the targets of Longreach's planned development programme. The terms of the agreement are for Longreach to fully fund MPE's commitment programme which includes the shooting of 100km2 of 3D seismic, and the subsequent drilling of 2 wells.

The Kechoula field located in the Sidi Moktar licence which is currently shut-in, was discovered in 1957 and has produced 19 BCF of gas from the Jurassic formation. It surrounds the Meskala field which is one of Morocco's major producing fields, currently producing 3.5mmscfd, based on information provided by the current operator, Office National des Hydrocarbures et des Mines of Morocco (Moroccan National Office of Hydrocarbons and Mining, 'ONHYM'). Four other fields within Sidi Moktar have also discovered gas from Jurassic aged reservoirs, of which 3 have produced but are now also shut in. There is well, geological, and geophysical data available from previous operators that is expected to help in identifying further opportunities in the licence.

Tags: Longreach Oil and Gas Limited