Mediterranean Oil & Gas Announces Start Up of Production on Guendalina Gas Field

Mediterranean Oil & Gas has announced that gas production commenced on the offshore Guendalina gas field on 25th October 2011. The commencement of production at Guendalina will have a material positive impact on the Company's revenues. In 2012, MOG's share of gas sales at Guendalina is likely to be approx. three times the Company's last reported annual revenues of €3.49m for the year ended 31 December 2010.

Eni has also notified the Company that the anticipated final project cost is likely to be approx. 7% higher than original estimates provided by them. As a consequence, the final project capex, net to MOG, is expected to be approx. €15.5m (VAT excluded).

Background:

• The Guendalina gas field is located 47km offshore of the northeast coast of Italy, in 42m of water;
• The field has independently certified 2P gas reserves of 22 Bcf (4.5 Bcf net MOG);
• The aggregate gas production from the field is approximately 20 MMcf/day (100% basis); 4MMcf/day net to MOG;
• In June 2011, MOG signed a contract with the Italian utility, Elettrogas SpA. The term of the contract is one year, commencing from October 1, 2011 and is automatically renewed by a further year unless terminated by either party;
• Under the contract's gas price formula, the average annual gas price for the next 11 months is expected to be approximately €0.306 /cubic meter (US$11.50 /thousand cubic feet).

Sergio Morandi, Chief Operating Officer of Mediterranean Oil and Gas, commented:

'We are extremely pleased to announce that gas production at the Guendalina field has commenced. The start up of Guendalina gas production is a key milestone in the development of the Company's business plan that will significantly increase the Company's net gas production and revenue.'