Key Petroleum acquires private UK exploration and development company, Zeta Petroleum

Key Petroleum has agreed to acquire 100% of the issued capital and assets of Zeta Petroleum, a private UK exploration and development company with significant assets located onshore Romania.

Key will acquire 100% of Zeta through an all share acquisition for a total initial consideration of US$12.74 million with two additional considerations payable upon operational milestones. The acquisition will see two Key directors step aside and be replaced with three Zeta directors undertaking the roles of Managing Director, Technical Director and Non-Executive Chairman.

According to the Key Petroleum Board of Directors and Corporate Advisors, this acquisition, which is subject to a number of conditions and approvals, offers considerable short and long term growth opportunities for the Company.

Zeta is a private UK oil and gas exploration and production company, established in 2005 with a focus on Romania. Zeta has a balanced Romanian asset portfolio with a significant near term gas development project (the Bobocu gas field). Zeta estimates its assets have remaining gas reserves of up to 58 BCF, contingent oil resources of 1 to 4 MMBO and further prospective resources of over 300 BCF.

Zeta has an equity funding agreement with ASX-listed Cooper Energy to fund up to US$13.4 million towards the development of Zeta's most advanced asset, the Bobocu gas field. Zeta comes with an experienced management team, established operations and strong in-country presence in Romania.

Stephen West, Managing Director of Zeta Petroleum, commented that from Zeta's perspective, Key is an excellent fit. Zeta has reached a stage where it is looking at expanding and stepping out into new countries and Key's current asset portfolio and existing UK production complements its existing portfolio in Romania, said West.

This acquisition, which is pricing Key at 4 cents per share, represents the start of a rejuvenation of the Company with fresh personnel and ideas. Zeta looks forward to taking the enlarged group to another level in the foreseeable future, said West.

Ken Russell, Managing Director of Key, noted that it has always been Key's intention to look for new opportunities and the acquisition of Zeta presents a significant opportunity for all shareholders.

Russell said Key is impressed with Zeta's management and the portfolio of assets they have in Romania as well as their ambitions to grow a substantial oil and gas company through further ventures.

Cooper Energy's commitment on Zeta's Bobocu project is also a major positive, said Russell.

3rd May 2011