Elixir said Hunter Petroleum Ltd had agreed to sell its 100% working interest in North Sea Block 211/22b, subject to approval by the UK government authorities.

The block is in the Northern North Sea within the prolific Viking Graben of the East Shetlands Basin. The company said it was surrounded on all sides by producing oil fields, many of them classified as giant fields (>500 mmb reserves) and lies immediately east of Shell’s North Cormorant oil field.

Hunter won the block in October 2003, which has a well-defined Upper Jurassic stratigraphic prospect, Swaledale, supported by good quality 3D seismic data with a reserves potential in excess of 200 mmb, if hydrocarbons are present. It is a relatively high risk but potentially very high return target of company-maker size, according to Elixir.

Although Elixir is acquiring a full 100% interest in the block, it said it was confident it could farm-down its interest to a more appropriate level given the high risk-high reward nature of the play.

Elixir said Hunter would be issued with 250,000 Elixir ordinary shares and £100,000 cash reimbursement for sunk costs on the block.

Hunter will also receive 500,000 options (exercisable at $1.00 before December 2007) in the case of a successful farmout.

There are a further 10 million options to be issued to Hunter in the case of a commercial discovery. These are exercisable before December 2007 at the 90-day weighted average trading price of Elixir shares prior to spudding of the discovery well.