RNS Number:5754R
Fusion Oil & Gas PLC
03 November 2003

                             Fusion Oil & Gas plc

                          ("Fusion" or "the Company")

                     Offer Discussions & Operational Update

The Board of Fusion has posted a letter to Shareholders providing the following
update on the status of discussions between the Company and other parties
regarding a potential alternative offer to that recently received from Sterling
Energy plc ('Sterling') as well as on other operational matters.

This update was mailed to Shareholders on 1 November.

1. Offer Discussions

Following Sterling's announcement of its intention to make a formal Offer,
Fusion's management established a data room for third parties. This process
involved the collation of commercial information and the loading of computer
data from several 3D seismic surveys.

The first company to take advantage of these facilities commenced work on 29
September 2003, two days before Sterling made its formal offer to Shareholders.
Since then visits by teams of 3 to 5 people for 4 to 5 days each have been
taking place, with the latest visit finishing on 31 October. The evaluation of
large quantities of technical data, the assessment of exploration potential and
the final investment decision-making process takes weeks, not days. Following
these data room visits, two companies have decided that they are not in a
position to make an offer for Fusion within the context of the Offer timetable.
However, while the Company is unable to confirm their identities at this stage,
due to confidentiality agreements, discussions are continuing with substantial
companies (from North America, Europe and the Far East) and there is continuing
demonstrable interest in the Fusion portfolio of licence interests.

2. Shareholders

Fusion has received notices from certain shareholders, including some of the
Directors, who own Fusion Oil & Gas NL Partly Paid Shares ('Fusion NL Shares')
that they wish to pay up the 19.9 Australian cents due per Fusion NL Share to
convert them to ordinary shares in Fusion. The number of new ordinary shares to
be issued will be 2,181,000, thereby increasing the total issued share capital
of Fusion from 98,205,224 to 100,386,224.

On 23 October, Sterling stated that it owned or had received valid acceptances
for an aggregate of 46,682,594 shares representing approximately 47.54 per cent.
of the issued ordinary share capital of Fusion. With the conversion of the
Fusion NL Shares, this percentage figure is reduced to approximately 46.5 per
cent.

3. Operations

On 28 October, Fusion released a statement on the successful testing of the
Chinguetti-4-5 appraisal/early development well. The well has flowed at a
maximum rate of 15,680 barrels of oil per day plus 6.6 million standard cubic
feet of gas per day constrained by a 112/64 inch choke. Currently the well is
flowing at a stable rate of approximately 11,500 barrels of oil per day in the
main flow period constrained by a 72/64 inch choke.

These are excellent flow rates and as a result, the Fusion Board now anticipates
that a decision on commerciality of the field will be made by the end of this
year. Subject to a declaration of commerciality, production at the Chinguetti
Field is expected to begin in late 2005 at a rate of approximately 75,000 bopd.

In addition to the drilling of the Chinguetti-4-5 well, two (2) exploration
wells are to be drilled in the Woodside operated PSC B by the West Navigator
drillship, which arrived in Mauritanian waters on 27 October. The Tiof well,
Chinguetti-4-6, was spudded on 28 October and, based on recent experience in
Mauritania, the Board of Fusion anticipates on the basis of current progress
that the well could intersect the reservoir interval within the next two weeks.
The Tiof well is being drilled to evaluate a prospect similar in its geological
character and oil potential to the Chinguetti Field.

After drilling the Tiof well, it is intended that the Poune well will be drilled
to evaluate a prospect with different geological characteristics and greater
potential than that of Chinguetti and Tiof.

The active work programme in Mauritania is of interest to the companies with
which Fusion is currently in discussions, and the Fusion Board expects that any
further positive news would be taken into account by these potential bidders who
might be considering making an offer.

As previously announced on 28 May 2003, the Company has entered into an
agreement with Premier Oil plc regarding the disposal of its interests in
Mauritania. Subject to fulfilment of certain conditions, Fusion will receive
cash payments linked to future production attributable to Fusion's interests in
PSC A and PSC B.

4. Independent Valuation

The Company has received an independent valuation report of Fusion's West
African licence interests from Scott Pickford Ltd ("Scott Pickford"), a leading
firm of oil and gas valuation experts. The summary of the estimated reserves and
resource base along with the associated unrisked and risked valuations was
announced on 31 October 2003.

The Company notes the following headline figures which include values as at 1
July 2003 and which are based on the following basic economic assumptions:

Base Oil Price: US$20.00 per barrel in 2003 (compared to current price of
approximately US$27 per barrel).
Inflation Rate: 2.5% per annum
Discount Rate: 10% per annum


                                           Risked Volume                          Risked Value
                                   (Million stock tank barrels)                   (US$ million)

Reserves
(Net to Fusion)

Proved                                                4.7                                 3.2
Probable                                              4.6                                 2.8
Possible                                              6.6                                 3.2
                                                     ____                                 ___

                                                     15.9                                 9.2 (NPV)

Prospective Resources
(Net to Fusion)
Defined Prospects                                   298.0                               346.7
Notional Prospects                                   69.0                                93.1
                                                    _____                               _____

                                                    367.0                               439.8 (EMV)


Note:

NPV means Net Present Value and is the total present value of a series of cash
flows discounted at a specified rate (in this case 10%), to a specified date (in
this case 1st July 2003).

EMV means Expected Monetary Value which is risked Net Present Value (NPV) of
success minus risked Net Present Value (NPV) of failure.

The risked values stated above provide one independent expert firm's opinion of
the potential value to Fusion of the reserves established in Mauritania and the
undrilled prospects in the Company's licence portfolio. As further exploration
data and information become available, these risked values may increase or
decrease.


5. Recommendation

In the Board's opinion, the active drilling in Mauritania, together with the
conclusions of the independent valuation report, reinforce its view that the
Offer from Sterling is opportunistic and undervalues Fusion.

It is inevitable that the process of evaluation of Fusion's exploration assets
by third parties and the taking of a decision by any of them as to whether to
make an alternative offer is a time consuming process. As a result, Shareholders
are strongly urged to continue to exercise patience by not taking any action in
respect of the Sterling Offer, thereby allowing these parties adequate time to
consider their position and the terms of any offer they may wish to make.

The Board will keep Shareholders informed of how discussions with third parties
progress.


                                                                 3 November 2003


Enquiries
Fusion Oil & Gas plc
Alan Stein, Managing Director           Tel:       +61 8 9226 3011
                                        Fax:      +61 8 9226 3022
                                        Email:   astein@fusionoil.com.au
Peter Dolan, Chairman                   Tel:      020 8891 3252
                                        Fax:      020 8891 1555
                                        Email:   pdolan@fusionoil.co.uk

College Hill Associates                 Tel:       020 7457 2020
                                        Fax:      020 7248 3295
James Henderson                         Email:   james.henderson@collegehill.com
Phil Wilson-Brown                       Email: phil.wilson-brown@collegehill.com


The Directors of Fusion (other than Mr Williams and Mr Levison, who have not
participated in these deliberations on the Offer) accept responsibility for the
information contained in this announcement and to the best of their knowledge
and belief (having taken all reasonable care to ensure that such is the case),
the information contained in this announcement is in accordance with the facts
and does not omit anything likely to affect the import of such information.

Canaccord Capital (Europe) Limited ("Canaccord"), which is regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively for
Fusion and is acting for no one else in connection with the Offer and  will not
be responsible to anyone other than Fusion for providing the protections
afforded to clients of Canaccord nor for giving advice in relation to the Offer.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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