Formation of Strategic Partnership

Venture Production plc, the Aberdeen based, UK independent oil and gas production company, today announces that it has formed a strategic partnership with a group of North American based investors to acquire and develop 'stranded' gas assets in the southern sector of the UK North Sea. The partnership, known as North Sea Gas Partners, will initially have a total of $300 million in commitments, which will invest alongside Venture in acquisition and development opportunities. Venture will provide 33.3% of the total commitments to the partnership - $100 million, which will be satisfied out of Venture's cash resources.

The North American investors are led by ArcLight Capital Partners, a US based private equity firm that specialises in investment in the upstream E&P and power generation sectors. ArcLight will commit $125 million to the joint venture with $75 million being provided by two further North American institutional investors in equal amounts.

North Sea Gas Partners will acquire and develop assets in the Southern North Sea alongside Venture Production, which will act as the field development and production operator of the developments. In return, Venture will receive an enhanced rate of return if the projects NSGP participates in exceed a specified return on investment.

Forming the partnership enables Venture to achieve three key objectives:

pursue larger opportunities than would be possible alone;
enables Venture to benefit from the value that it creates as operator; and
further diversifies Venture's portfolio while retaining operational control.

Commenting on the news, Mike Wagstaff, Chief Executive of Venture said:

"North Sea Gas Partners represents a fantastic opportunity for Venture to deploy additional resources in developing 'stranded' gas assets in the North Sea at a time when bringing gas onstream is a strategic priority for the UK. We are delighted to have attracted a lead investor of ArcLight's calibre and resources. We are currently looking at a range of opportunities in the Southern North Sea and North Sea Gas Partners will provide us with an ability to develop a larger portfolio of assets whilst also providing an enhanced return on each Venture pound invested."

Enquiries

Notes to Editors

southern gas area of mutual interest map

ArcLight Capital Partners

ArcLight Capital Partners is a leading energy investment firm with more than $4.6 billion under management. ArcLight invests across the energy industry value chain in hard assets that produce high current income and capital appreciation. Founded in 2001, ArcLight has its headquarters in Boston and an office in New York City. ArcLight has 21 investment professionals and is led by its founders Daniel R. Revers and Robb E. Turner. ArcLight's investment team has extensive energy investing experience, industry relationships, and asset level knowledge.

ArcLight will be investing in North Sea Gas Partners from its $1.6bn ArcLight Energy Partners Fund II raised in 2004. This fund has a portfolio of upstream oil and gas and power generation investments across Europe, Canada and the USA.

Joint Operating Arrangements

Venture will directly hold a stake in each asset in which North Sea Gas Partners invests. Venture will, therefore, have a net interest in the asset that will be the sum of its directly held stake and its indirect stake through its investment in North Sea Gas Partners. The direct stake will allow Venture to be appointed as Operator of the asset and a standard joint operating agreement has been agreed between Venture and North Sea Gas Partners.

Venture's Enhanced Return

Venture has contributed 33.3% of the $300m commitments to North Sea Gas Partners. If, however, the projects within North Sea Gas Partners deliver or exceed a specified return on investment to ArcLight and the Investors then, above this threshold, Venture will receive greater than a 33.3% share of profits from the joint venture. This upside potential is designed to reward Venture for its value added as operator. It provides Venture with the potential to generate a greater return on its investment than would be the case if Venture were to develop these assets through standard industry joint operating arrangements. This type of mechanism is common in other industries such as fund management and real estate.

Venture Production plc

FTSE 250, fast growing, independent oil and gas producer.
Based in Aberdeen.
Venture had 161 million barrels of oil equivalent proven and probable reserves at 31 December 2005, an increase of 29% on 31 December 2004.
Venture will announce its full year results for 2005 on 25th April 2006.

Venture Production plc in the Southern North Sea

Venture entered the Southern North Sea ('SNS') in 2001 through the acquisition of interests in the Audrey, Ann and Alison gas fields.
Venture has built its SNS business through serial acquisition, multiple major commercial transactions and a portfolio of development, appraisal and exploration wells within the 'A' Fields hub over the period 2001 - 2006. Most recently Venture announced the acquisition of the large Ensign gas discovery (300 - 400 Bcf gas initially in place) in November 2005.
Venture has interests in eight discovered SNS gas fields:
- five in production (Audrey, Ann, Alison, Annabel and Saturn).
- two near-term developments with the potential to be on stream by end 2006 (Mimas and Rhea).
- five further near term exploration and appraisal opportunities (Amanda, Agatha, Adele, Channon and Ensign).
- at the end of 2005, total net proved and probable gas reserves from these interests amounted to 314 Bcf with a further 200 Bcf of additional possible net reserves.
Venture is currently producing approximately 180 MMcfd net from these assets (c 30,000 boepd).