Response to Sterling Release

Fusion Oil & Gas PLC 20 October 2003 Fusion Oil & Gas plc ('Fusion' or 'the Company') Sterling Energy plc ('Sterling') statement Re: Offer The Fusion Board notes Sterling's announcement this morning and comments as follows: • Fusion has developed a high quality portfolio of exploration assets in West Africa. The drilling programme on these assets has recently commenced and Fusion believes that this programme will result in the creation of material value to its Shareholders. • Fusion continues to believe that Sterling's offer is opportunistic and undervalues the Company. As a result, Fusion remains in active discussions, the nature and terms of which remain subject to confidentiality restrictions at this stage, to seek a better deal for all Fusion shareholders. • Sterling states that it has support for the Offer in respect of approximately 41.5% of Fusion's shares. The Fusion Board notes that 9.5% of this support is conditional on the absence of a higher offer. A further 11.6% relates to letters of intent and are not a legally binding undertaking to accept the Offer. • Sterling states that Fusion has 'no declared proven or probable oil or gas reserves after drilling 6 wells over the past three years.' Fusion has participated in 7 wells (not 6) over the last three years and has been involved in two discoveries, two successful appraisal wells and one appraisal/early development well which is currently under extended well test, the results of which are imminent. Fusion has commissioned an independent technical review of its assets which will establish the quantum of the proven, probable and possible reserves that can be reasonably attributed to Fusion at this point in time. This review is nearing completion. • Sterling states that a merger between the two companies would create a 'geographically focused portfolio of production, appraisal and exploration assets'. Fusion believes a merger between it and Sterling would create an unfocused mix of shallow water Gulf of Mexico assets and West African exploration acreage, mainly located in deep water. The Fusion Board does not believe that combining these disparate portfolios would enhance the value of either. • Fusion believes that Sterling's statement that Fusion has 'no production income, with none expected before the latter part of 2005 - over four years after its first discovery well' shows an apparent lack of understanding by Sterling of the realities and timeframes required to explore and develop frontier acreage. • Sterling argues that a merger between Sterling and Fusion would create a company with 'the greater resources needed to develop and exploit' these assets. The Board of Fusion believes that Sterling's producing assets do not generate sufficient free cash flow to have a material effect on the development of Fusion's assets. Chairman of Fusion, Peter Dolan, said: 'Fusion believes that Sterling's announcement today demonstrates a lack of understanding of the process of exploration in frontier areas and the incompatibility of the two companies. Fusion remains in discussions to seek a better deal than Sterling's inadequate and opportunistic offer. As a result the Board of Fusion continues to recommend shareholders to take no action in relation to Sterling's offer.' 20 October 2003 Enquiries Fusion Oil & Gas plc Peter Dolan, Chairman Tel: 020 8891 3252 Email: pdolan@fusionoil.co.uk Alan Stein, Managing Director Tel: 00 61 89226 3011 Email: astein@fusionoil.com.au College Hill Associates Tel: 020 7457 2020 James Henderson Email: james.henderson@collegehill.com Phil Wilson-Brown Email: phil.wilson-brown@collegehill.com Canaccord Capital (Europe) Ltd Toby Hayward Tel: 020 7518 7393 Email: toby_hayward@canaccordeurope.com The Directors of Fusion (other than Mr Williams and Mr Levison, who have not participated in these deliberations on the proposed offer) accept responsibility for the information contained in this announcement and to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information. Canaccord Capital (Europe) Limited ('Canaccord'), which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Fusion and is acting for no one else in connection with the Offer and will not be responsible to anyone other than Fusion for providing the protections afforded to clients of Canaccord nor for giving advice in relation to the Offer. This information is provided by RNS The company news service from the London Stock Exchange
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