The Board of Mediterranean Oil & Gas says that its subsidiary Medoilgas Italia SpA has signed a gas sales contract with the Italian utility Elettrogas SpA covering the entirety of the Company's net gas production from the Guendalina gas field.

The term of the contract is one thermal year, commencing from October 1, 2011 and is automatically renewed by a further year unless terminated by either party. First production from the Company's Guendalina gas field is expected in late September 2011.

Based on the contract's gas price formula, the current and forecast average gas price is €0.306/cubic meter (US$11.50 /thousand cubic feet). Management expect net revenues to MOG to be approximately €12 million per annum, based on anticipated production of approximately 20 MMcf/day (20% net to MOG) and forecast gas prices.

Michael Bonte-Friedheim, the Company's CEO, stated, "We are very pleased to have concluded the gas sales contract with Elettrogas. The contract's flexibility allows us to manage possible variations to the development plan that might emerge, substantially mitigating our volume and price risk.

The Guendalina development is progressing well and on schedule. The development represents one of the key milestones of the Company's business plan that will allow it to significantly increase net gas production and revenues once this comes on stream in late September."

Tags: Mediterranean Oil & Gas Plc