Petroceltic has awarded the contract for its 2006 drilling programme in Algeria to the US-based oilfield services company Schlumberger, and announced a $25 million (€20.5 million) fundraising.

Under the terms of the contract, Schlumberger will drill and test two appraisal wells on the company's Isarene blocks in Algeria.

Drilling is expected to begin by the end of June.

Petroceltic also announced plans to raise around $25 million through the placing of 102 million new ordinary shares at a price of 14 pence each.

The placing is being underwritten by RAB Capital and is expected to be completed by the end of this month.

Shares in Petroceltic, which are listed on London's Alternative Investment Market (AIM), closed 0.26 pence, or 1.72 per cent higher, at 15.36 pence yesterday.

The company said the $25 million fundraising, along with the award of the drilling contract, gave it the capacity to complete its 2006 drilling programme, which includes the two wells in Algeria and one well offshore Ireland.

Petroceltic said plans were underway to increase the level of its drilling activity in 2006 and 2007, which could include drilling additional wells in Algeria and offshore Italy and re-entering, as well as testing the Sidi Toui 3 prospect in Tunisia.

Schlumberger is currently drilling for the Russian group Rosneft on a block immediately adjacent to the north-east of Petroceltic's block.

Its drilling rig will be available to Petroceltic after the Rosneft drilling programme is completed. This is expected to occur by the end of June.

Aside from its interests in Algeria, Petroceltic has prospects in the Celtic Sea and the Adriatic.