1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ___________ TO _______________
COMMISSION FILE NUMBER 0-9147
CANARGO ENERGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 91-0881481
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
CanArgo Services (UK) Limited
150 Buckingham Palace Road, London, England SW1W 9TR
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(44) 207 808 4700
(REGISTRANT'S TELEPHONE NUMBER)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares of registrant's common stock outstanding on August 3, 2001
was 91,596,528. An additional 411,918 shares of common stock are issuable at any
time without additional consideration upon exercise of CanArgo Oil & Gas Inc.
Exchangeable Shares.
2
CANARGO ENERGY CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PAGE
----
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
Consolidated Condensed Statements of Operations 4
Consolidated Condensed Statements of Cash Flows 5
Notes to Unaudited Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition,
Results of Operations and Cash flows 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
PART 2. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index 22
(b) Reports on form 8-K 25
Signatures 26
FORWARD-LOOKING STATEMENTS
The United States Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. Such forward-looking
statements are based upon the current expectations of CanArgo and speak only as
of the date made. These forward-looking statements involve risks, uncertainties
and other factors. The factors discussed elsewhere in this Quarterly Report on
Form 10-Q are among those factors that in some cases have affected CanArgo's
historic results and could cause actual results in the future to differ
significantly from the results anticipated in forward looking statements made in
this Quarterly Report on Form 10-Q, future filings by CanArgo with the
Securities and Exchange Commission, in CanArgo's press releases and in oral
statements made by authorized officers of CanArgo. When used in this Quarterly
Report on Form 10-Q, the words "estimate," "project," "anticipate," "expect,"
"intend," "believe," "hope," "may" and similar expressions, as well as "will,"
"shall" and other indications of future tense, are intended to identify
forward-looking statements.
Few of the forward-looking statements in this Report deal with matters that are
within our unilateral control. Acquisition, financing and other agreements and
arrangements must be negotiated with independent third parties and, in some
cases, must be approved by governmental agencies. These third parties generally
have interests that do not coincide with ours and may conflict with our
interests. Unless the third parties and we are able to compromise their various
objectives in a mutually acceptable manner, agreements and arrangements will not
be consummated.
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PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS
Unaudited
-------------
JUNE 30, December 31,
2001 2000
------------- -------------
ASSETS
Cash and cash equivalents $ 10,901,909 $ 28,627,013
Accounts receivable 1,319,982 786,570
Advances to operator 1,295,086 1,146,584
Inventory 1,171,880 695,909
Other current assets 582,029 334,402
------------- -------------
Total current assets $ 15,270,886 $ 31,590,478
Capital assets 63,294,123 50,477,344
Investments in and advances to oil and gas and other
ventures - net 756,362 696,374
------------- -------------
TOTAL ASSETS $ 79,321,371 $ 82,764,196
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 4,350,058 $ 2,691,118
Advances from joint venture partner 177,573 5,888,573
Accrued liabilities 535,903 323,936
------------- -------------
Total current liabilities $ 5,063,534 $ 8,903,627
Provision for future site restoration 57,290 40,990
Minority interest in subsidiaries 3,304,404 1,393,915
Stockholders' equity:
Preferred stock, par value $0.10 per share -- --
Common stock, par value $0.10 per share 7,595,069 7,595,069
Capital in excess of par value 139,071,031 139,071,031
Accumulated deficit (75,769,957) (74,240,436)
------------- -------------
Total stockholders' equity $ 70,896,143 $ 72,425,664
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 79,321,371 $ 82,764,196
============= =============
See accompanying notes to unaudited consolidated condensed financial statements.
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4
PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Unaudited Three Months Ended Unaudited Six Months Ended
--------------------------------- ---------------------------------
JUNE 30, June 30, JUNE 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating Revenues:
Oil and gas sales $ 869,711 $ 1,346,495 $ 2,617,906 $ 3,231,171
Refining and marketing 2,093,925 -- 3,943,533 --
Other -- 168,600 -- 364,900
------------ ------------ ------------ ------------
2,963,636 1,515,095 6,561,439 3,596,071
------------ ------------ ------------ ------------
Operating Expenses:
Field operating expenses 611,260 259,532 1,113,477 632,128
Purchases of crude oil and products 1,471,760 -- 2,629,484 --
Refinery operating expenses 76,619 -- 197,025 --
Direct project costs 321,625 247,220 571,205 383,529
General and administrative 1,019,697 392,145 2,047,586 766,019
Depreciation, depletion and amortization 916,524 803,590 2,102,312 1,879,080
------------ ------------ ------------ ------------
4,417,485 1,702,487 8,661,089 3,660,756
------------ ------------ ------------ ------------
OPERATING LOSS (1,453,849) (187,392) (2,099,650) (64,685)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest, net 112,057 67,128 503,213 101,463
Other 20,949 7,054 16,670 274
Equity income (loss) from investments 65,861 (69,154) 28,861 (82,154)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 198,867 5,028 548,744 19,583
------------ ------------ ------------ ------------
NET LOSS BEFORE MINORITY INTEREST (1,254,982) (182,364) (1,550,906) (45,102)
Minority interest in income of consolidated
subsidiaries 51,542 (97,388) 21,385 (134,188)
------------ ------------ ------------ ------------
NET LOSS AND COMPREHENSIVE LOSS $ (1,203,440) $ (279,752) $ (1,529,521) $ (179,290)
============ ============ ============ ============
Weighted average number of
common shares outstanding 75,950,681 40,467,113 75,950,681 38,944,248
------------ ------------ ------------ ------------
NET LOSS PER COMMON SHARE - BASIC $ (0.02) $ (0.01) $ (0.02) $ (0.00)
------------ ------------ ------------ ------------
NET LOSS PER COMMON SHARE - DILUTED $ (0.02) $ (0.01) $ (0.02) $ (0.00)
------------ ------------ ------------ ------------
See accompanying notes to unaudited consolidated condensed financial statements.
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PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
Unaudited
----------------------------------
JUNE 30, June 30,
2001 2000
------------ -----------
Operating activities:
Net loss $ (1,529,521) $ (179,290)
Depreciation, depletion and amortization 2,102,312 1,879,080
Issuance of common stock for services -- 112,700
Equity loss (income) from investments (28,861) 82,154
Loss (gain) on disposition of equipment -- --
Allowance for doubtful accounts 100,000 --
Minority interest in income of consolidated subsidiaries (21,385) 134,188
Changes in assets and liabilities:
Accounts receivable (366,896) 25,583
Advances to operator (148,502) (810,973)
Inventory (475,971) 119,819
Other current assets (235,772) 63,457
Accounts payable 229,671 62
Accrued liabilities (60,428) (63,353)
Receipt (use of) advances from joint venture partner (5,711,000) --
------------ -----------
NET CASH GENERATED BY (USED IN) OPERATING ACTIVITIES (6,146,353) 1,363,427
------------ -----------
Investing activities:
Capital expenditures (8,876,420) (2,437,281)
Acquisitions, net of cash acquired (4,044,973) --
Proceeds from disposition of investment 125,000 --
Investments in and advances to oil and gas and other
ventures (589,232) (95,801)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (13,385,625) (2,533,082)
------------ -----------
Financing Activities:
Proceeds from sales of common stock -- 3,186,762
Share issue costs -- (252,238)
Advances from minority interest 1,806,874 --
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,806,874 2,934,524
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,725,104) 1,764,869
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,627,013 3,534,983
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 10,901,909 $ 5,299,852
------------ -----------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
See accompanying notes to unaudited consolidated condensed financial statements.
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PART I - FINANCIAL INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 30, 2000 (UNAUDITED)
(1) Basis of Presentation
The interim consolidated condensed financial statements and notes
thereto of CanArgo Energy Corporation and its subsidiaries
(collectively, CanArgo) have been prepared by management without audit.
In the opinion of management, the consolidated condensed financial
statements include all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results for the
interim period. The accompanying consolidated condensed financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the CanArgo's Annual
Report on Form 10-K for the year ended December 31, 2000 filed with the
Securities and Exchange Commission. All amounts are in U.S. dollars.
Certain items in the consolidated condensed financial statements have
been reclassified to conform to the current year presentation. There
was no effect on net loss as a result of these reclassifications.
(2) Need for Significant Additional Capital, Possible Impairment of Assets
Development of the oil and gas properties and ventures in which CanArgo
has interests involves multi-year efforts and substantial cash
expenditures. Full development of these properties will require the
availability of substantial funds from external sources. CanArgo
believes that it will be able to generate funds from external sources
including quasi-governmental financing agencies, conventional lenders,
equity investors and other oil and gas companies that may desire to
participate in CanArgo's oil and gas projects.
Ultimate realization of the carrying value of CanArgo's oil and gas
properties will require production of oil and gas in sufficient
quantities and marketing such oil and gas at sufficient prices to
provide positive cash flow to CanArgo. This is dependent upon, among
other factors, achieving significant production at costs that provide
acceptable margins, reasonable levels of taxation from local
authorities and the ability to market the oil and gas produced at or
near world prices. In addition, CanArgo must mobilize drilling
equipment and personnel to initiate drilling, completion and production
activities. If one or more of the above factors, or other factors, are
different than anticipated, CanArgo may not recover its carrying value.
CanArgo generally has the principal responsibility for arranging
financing for the oil and gas properties and ventures in which it has
an interest. There can be no assurance, however, that CanArgo or the
entities that are developing the oil and gas properties and ventures
will be able to arrange the financing necessary to develop the projects
being undertaken or to support the corporate and other activities of
CanArgo or that such financing as is available will be on terms that
are attractive or acceptable to or are deemed to be in the best
interests of CanArgo, such entities or their respective stockholders or
participants.
The consolidated financial statements of CanArgo do not give effect to
any additional impairment in the value of CanArgo's oil and gas
properties and ventures or other adjustments that would be necessary if
financing cannot be arranged for the development of such properties and
ventures or if they are unable to achieve profitable operations.
Failure to arrange such financing on reasonable terms or failure of
such properties and ventures to achieve profitability would have a
material adverse effect on the financial position, including
realization of assets, results of operations, cash flows and prospects
of the CanArgo.
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7
(3) Foreign Operations
CanArgo's future operations and earnings will depend upon the results
of CanArgo's operations in the Republic of Georgia and the Ukraine.
There can be no assurance that CanArgo will be able to successfully
conduct such operations, and a failure to do so would have a material
adverse effect on the CanArgo's financial position, results of
operations and cash flows. Also, the success of CanArgo's operations
will be subject to numerous contingencies, some of which are beyond
management control. These contingencies include general and regional
economic conditions, prices for crude oil and natural gas, competition
and changes in regulation. Since CanArgo is dependent on international
operations, CanArgo will be subject to various additional political,
economic and other uncertainties. Among other risks, CanArgo's
operations may be subject to the risks and restrictions on transfer of
funds, import and export duties, quotas and embargoes, domestic and
international customs and tariffs, and changing taxation policies,
foreign exchange restrictions, political conditions and regulations.
(4) Acquisitions
In April 2000, CanArgo acquired approximately 82% (77% on a fully
diluted basis) of the outstanding common shares of Lateral Vector
Resources Inc. ("LVR") pursuant to an unsolicited offer to purchase all
of its outstanding common shares. According to publicly available
information at the time CanArgo made its offer in March 2001, LVR
negotiated and concluded with Ukrnafta, the Ukrainian State Oil
Company, a Joint Investment Production Activity agreement in 1998 to
develop the Bugruvativske Field in Eastern Ukraine. In July 2001,
CanArgo completed the acquisition of the remaining outstanding common
shares and LVR became a wholly owned subsidiary of CanArgo.
Under purchase accounting, LVR's results have been included in
CanArgo's consolidated financial statements since April 30, 2001 the
date of the initial acquisition of the LVR shares. Including
acquisition costs, total cash consideration paid was allocated to the
net assets of LVR as follows:
Cash $ 52,618
Other current assets 273,251
Accounts payable and accrued liabilities (1,662,880)
Capital assets (a) 5,009,825
Minority interest --
------------
Total cash consideration paid $ 3,672,814
============
(a) Includes $4,308,885 of unevaluated properties.
In April 2001, CanArgo acquired the remaining 50% interest it did not
own in CanArgo Power Corporation ("CanArgo Power") for cash
consideration of $425,000. On completion of the acquisition, CanArgo
Power became a subsidiary of CanArgo. Under purchase accounting,
CanArgo Power's results have been included in CanArgo's consolidated
financial statements since the date of acquisition. Total cash
consideration paid was allocated to the net assets of CanArgo Power as
follows:
Cash $ 223
Other current assets 69
Accounts payable and accrued liabilities (33,733)
Capital assets 458,441
Minority interest --
------------
Total cash consideration paid $ 425,000
============
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8
(5) Capital Assets, Net
Capital assets, net of accumulated depreciation and impairment, at June
30, 2001 and December 31, 2000 include the following:
JUNE 30, DECEMBER 31,
2001 2000
------------------------------------------------------- -----------
ACCUMULATED
DEPRECIATION
AND NET NET
COST IMPAIRMENT CAPITAL ASSETS CAPITAL ASSETS
---- ---------- -------------- --------------
OIL AND GAS PROPERTIES
Proved properties $ 31,124,963 $ (7,289,509) $23,835,454 $22,702,703
Unproved properties 18,255,981 -- 18,255,981 13,897,096
------------ ------------ ----------- -----------
49,380,944 (7,289,509) 42,091,435 36,599,799
PROPERTY AND EQUIPMENT
Oil and gas related
equipment 16,592,046 (3,372,576) 13,219,470 8,895,300
Office furniture, fixtures
and equipment and other 1,166,067 (621,983) 544,084 462,502
------------ ------------ ----------- -----------
17,758,113 (3,994,559) 13,763,554 9,357,802
REFINING AND MARKETING 7,834,816 (395,682) 7,439,134 4,519,743
------------ ------------ ----------- -----------
$ 74,973,873 $(11,679,750) $63,294,123 $50,477,344
============ ============ =========== ===========
Oil and gas related equipment includes new or refurbished drilling rigs
and related equipment, substantially all of which have been transported
to the Republic of Georgia for use by CanArgo in the development of the
Ninotsminda field.
(6) Investments in and Advances to Oil and Gas and Other Ventures
CanArgo has acquired interests in oil and gas and other ventures
through less than majority interests in corporate and corporate-like
entities. A summary of CanArgo's net investment in and advances to oil
and gas and other ventures at June 30, 2001 and December 31, 2000 is
set out below:
JUNE 30, DECEMBER 31,
INVESTMENTS IN AND ADVANCES TO OIL AND GAS AND OTHER VENTURES 2001 2000
---------- ----------
Ukraine - Stynawske Field, Boryslaw
Through 45% ownership of Boryslaw Oil Company $6,636,254 $6,086,254
Republic of Georgia
Through 50.0% effective ownership CanArgo Power Corporation -- 676,583
Republic of Georgia - Ninotsminda
Through an effective 50% ownership of East Georgian Pipeline Co. 152,500 90,500
Uentech International Corporation
Through an effective 45% voting interest -- 304,943
Other Investments 75,001 75,001
---------- ----------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES $6,863,755 $7,233,281
---------- ----------
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EQUITY IN PROFIT (LOSS) OF OIL AND GAS AND OTHER VENTURES
Ukraine - Stynawske Field, Boryslaw (535,600) (626,461)
Republic of Georgia - CanArgo Power Corporation -- (186,074)
Republic of Georgia - East Georgian Pipeline Co. (112,000) (50,000)
Uentech International Corporation -- (214,579)
---------- -----------
CUMULATIVE EQUITY IN PROFIT (LOSS) OF OIL AND GAS
AND OTHER VENTURES $ (647,600) $(1,077,114)
IMPAIRMENT - STYNAWSKE FIELD (5,459,793) (5,459,793)
---------- -----------
TOTAL INVESTMENTS IN AND ADVANCES TO OIL AND GAS
AND OTHER VENTURES, NET OF EQUITY LOSS AND IMPAIRMENT $ 756,362 $ 696,374
========== ===========
In April 2001, CanArgo acquired from a wholly owned subsidiary of Terrenex
Acquisition Corporation the remaining 50% interest it did not own in
CanArgo Power for cash consideration of $425,000. In a related but separate
transaction, CanArgo sold in April 2001 all of its voting and non voting
shares of Uentech International Corporation to a wholly owned subsidiary of
Terrenex Acquisition Corporation. Proceeds from the sale of Uentech
International Corporation were $125,000. On completion of the acquisition,
CanArgo Power became a subsidiary of CanArgo. At the time of the
transactions, two directors of CanArgo were also directors of Terrenex
Acquisition Corporation. Accordingly, the transactions were approved by an
independent committee of the Board of Directors.
CanArgo's ventures are in the development stage. Accordingly, realization
of these investments is dependent upon successful development of and
ultimately cash flows from operations of the ventures.
Advances received by CanArgo from joint venture partners, which are to be
spent by CanArgo on behalf of the joint venture partners, are classified
within operating inflows on the basis they do not meet the definition of
finance or investing activities. These advances do not contribute to
CanArgo's operating profits and are accounted for/disclosed as balance
sheet entries only ie within cash and payable to joint venture partner.
When the cash advances are spent, the payable is reduced accordingly.
(7) Accrued Liabilities
Accrued liabilities at June 30, 2001 and December 31, 2000 include the
following:
JUNE 30, DECEMBER 31,
2001 2000
----------- -----------
Professional fees $ 270,487 $ 175,000
Office relocation 126,666 126,666
Other 138,750 22,270
----------- -----------
$ 535,903 $ 323,936
=========== ===========
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(8) Stockholders' Equity
COMMON STOCK
-----------------------------
NUMBER OF
SHARES ADDITIONAL TOTAL
ISSUED AND PAID-IN ACCUMULATED STOCKHOLDERS'
ISSUABLE PAR VALUE CAPITAL DEFICIT EQUITY
----------- ----------- ------------- ------------ ------------
TOTAL, DECEMBER 31, 2000 75,950,681 $ 7,595,069 $ 139,071,031 $(74,240,436) $ 72,425,664
Less shares issuable at
beginning of period (423,791) (42,379) (795,712) -- (838,091)
Issuance of common stock upon
exchange of CanArgo Oil &
Gas Inc. Exchangeable Shares 8,633 863 16,209 -- 17,072
Net income (loss) -- -- -- (1,529,521) (1,529,521)
----------- ----------- ------------- ------------ ------------
BALANCE, JUNE 30, 2001 75,535,523 $ 7.553,553 $ 138,291,528 $(75,769,957) $ 70,075,124
Shares issuable upon exchange
of CanArgo Oil & Gas Inc.
Exchangeable Shares without
receipt of further consideration 415,158 41,516 779,503 -- 821,019
----------- ----------- ------------- ------------ ------------
TOTAL, JUNE 30, 2001 75,950,681 $ 7,595,069 $ 139,071,031 $(75,769,957) $ 70,896,143
=========== =========== ============= ============ ============
(9) Net Income (Loss) Per Common Share
Basic and diluted net income (loss) per common share for the six month
periods ended June 30, 2001 and 2000 are based on the weighted average
number of common shares outstanding during those periods. The weighted
average numbers of shares issued and issuable without receipt of
additional consideration for the six month periods ended June 30, 2001
and 2000 are 75,950,681 and 38,944,248 respectively. Options to
purchase CanArgo's common stock were outstanding at June 30, 2001 but
were not included in the computation of diluted net income (loss) per
common share because the effect of such inclusion would have been
anti-dilutive.
(10) Commitments and Contingencies
OIL AND GAS PROPERTIES AND INVESTMENTS IN OIL AND GAS VENTURES
CanArgo has contingent obligations and may incur additional
obligations, absolute and contingent, with respect to acquiring and
developing oil and gas properties and ventures. At June 30, 2001,
CanArgo had the contingent obligation to issue an aggregate of 187,500
shares of its common stock, subject to the satisfaction of conditions
related to the achievement of specified performance standards by the
Stynawske field project. In December 2000, CanArgo announced that a
preliminary development plan had been reached with the joint venture
partner.
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(11) Segment Information
For the six month period ended June 30, 2000, CanArgo operated through
one business segment, oil and gas exploration and production. In the
fourth quarter of 2000, CanArgo expanded its oil and gas exploration
and production activities to include the refining and marketing of
crude oil and crude oil products. Intersegment revenue
eliminations reflect transfers from exploration and production
operations to refining operations. Intersegment sales prices
approximate market prices.
Operating revenues for the six month periods ended June 30, 2001 and
2000 by geographical area were as follows:
JUNE 30, June 30,
2001 2000
----------- ----------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 3,524,451 $3,596,071
REFINING AND MARKETING
Eastern Europe 3,943,533 --
INTERSEGMENT ELIMINATIONS (906,545) --
----------- ----------
TOTAL $ 6,561,439 $3,596,071
=========== ==========
Operating income (loss) for the six month periods ended June 30, 2001
and 2000 by geographical area was as follows:
JUNE 30, June 30,
2001 2000
----------- ---------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 673,245 $ 701,334
REFINING AND MARKETING
Eastern Europe 15,322 --
CORPORATE AND OTHER EXPENSES (2,403,030) (766,019)
INTERSEGMENT ELIMINATIONS (385,187) --
----------- ---------
TOTAL OPERATING INCOME (LOSS) $(2,099,650) $ (64,685)
=========== =========
Net income (loss) before minority interest for the six month periods
ended June 30, 2001 and 2000 by geographic area was as follows:
JUNE 30, June 30,
2001 2000
----------- ---------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe $ 664,746 $ 673,834
REFINING AND MARKETING
Eastern Europe (46,659) --
CORPORATE AND OTHER EXPENSES (1,783,806) (718,936)
INTERSEGMENT ELIMINATIONS (385,187) --
----------- ---------
NET INCOME (LOSS) BEFORE MINORITY INTEREST $(1,550,906) $ (45,102)
=========== =========
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Identifiable assets as of June 30, 2001 and December 31, 2000 by
business segment and geographical area were as follows:
JUNE 30, December 31,
2001 2000
----------- -----------
CORPORATE
Eastern Europe $ 1,557,067 $ 695,909
Western Europe 13,713,819 30,894,569
----------- -----------
TOTAL 15,270,886 31,590,478
----------- -----------
OIL AND GAS EXPLORATION, DEVELOPMENT AND PRODUCTION
Eastern Europe 56,259,843 47,045,102
China 700,940 --
----------- -----------
TOTAL 56,960,873 47,045,102
REFINING AND MARKETING
Eastern Europe 7,089,702 4,128,616
----------- -----------
IDENTIFIABLE ASSETS - TOTAL $79,321,371 $82,764,196
=========== ===========
(12) Subsequent Events
In July 2001, CanArgo completed the acquisition of the remaining
outstanding common shares and Lateral Vector Resources Inc. became a
wholly owned subsidiary of CanArgo. In April 2001, CanArgo had acquired
approximately 82% (77% on a fully diluted basis) of the outstanding
common shares of Lateral Vector Resources Inc. pursuant to an
unsolicited offer to purchase all of its outstanding common shares.
According to publicly available information at the time CanArgo made
its offer in March 2001, Lateral Vector Resources Inc. negotiated and
concluded with Ukrnafta, the Ukrainian State Oil Company, a Joint
Investment Production Activity agreement in 1998 to develop the
Bugruvativske Field in Eastern Ukraine.
In July 2001, CanArgo closed a private placement of 16,057,765 new
shares at NOK 4.25 per share (approximately US$0.45 per share) to
certain institutions and qualified purchasers identified in this
prospectus. Gross proceeds from the placement were some NOK 68 million
(approximately US$7.2 million). After completion of the private
placement, CanArgo had 92,008,446 common and Exchangeable shares issued
and issuable. From the net proceeds, CanArgo is required to pay
subscribers to the private placement a cash fee of 3.33% of the
purchase price of their shares for each full 30 day period after
closing until a registration statement registering such shares is
declared effective by the Securities and Exchange Commission. The
maximum cash fee is 10% of the subscription price with the obligation
to file a registration statement and the commencement of the first full
30 day period contingent upon receipt by CanArgo of all such
information required to file a registration statement.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUALIFYING STATEMENT WITH RESPECT TO FORWARD-LOOKING INFORMATION
THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS. SEE
"FORWARD-LOOKING STATEMENTS" BELOW AND ELSEWHERE IN THIS REPORT.
LIQUIDITY, CAPITAL RESOURCES AND CHANGES IN FINANCIAL CONDITION
CanArgo's management believes that cash and cash equivalents at June 30, 2001
should be sufficient to cover CanArgo's near term funding requirements with
respect to its activities in the Republic of Georgia. Existing cash and cash
equivalents at June 30, 2001, however, are not sufficient to adequately finance
the acquisition and subsequent development of the Bugruvativske field in Eastern
Ukraine. While the July 2001 private placement of 16,057,765 new shares at NOK
4.25 per share (approximately US$0.45 per share) to certain institutions and
qualified purchasers will provide CanArgo with the funds necessary to begin
rapid development of the Bugruvativske field, both the Bugruvativske field and
the Stynwaske field in Western Ukraine are in the early stage of evaluation and
development and are themselves relatively new to CanArgo. Additional financing
will likely be required in order to fully develop and exploit these fields. In
addition, CanArgo is in the process of establishing its own administrative and
finance infrastructure in the Ukraine. Establishment of this infrastructure may
result in a diversion, temporary or otherwise, of time and other resources from
other operating activities.
To date CanArgo has directed substantially all of its efforts and most of its
available funds to the development of the Ninotsminda oil field in the Republic
of Georgia and some ancillary activities closely related to the Ninotsminda
field project. Current development plans for the Ninotsminda field in the
Republic of Georgia includes the drilling of exploration wells N100 and M11,
several rehabilitations of existing wells and quantification of the reserve and
production potential of the recently announced discoveries in the Saramatian and
Upper Eocene sequences. These plans are scheduled to be implemented in 2001 and
the first half of 2002, but that timing is dependent upon key supplies and other
equipment for the development being available promptly as well as adequate
financing.
In Ukraine, an assessment of both the Bugruvativske and Stynawske fields and
preparation of a development program with Ukrnafta is currently underway. Based
on its efforts to date, CanArgo plans to significantly increase production from
these fields by investing in both remedial workover activity and potential
infill drilling, horizontal drilling and pressure maintenance utilising
appropriate technologies.
While a considerable amount of infrastructure for the Ninotsminda, Bugruvativske
and Stynawske fields has already been put in place, CanArgo cannot provide
assurance that:
- for the Bugruvativske and Stynawske fields, an adequate
investment agreement and development plan can be put in place;
- funding of field development plans will be timely;
- that development plans will be successfully completed or will
increase production; or
- that field operating revenues after completion of the
development plan will exceed operating costs.
To pursue all of its existing projects and new opportunities, CanArgo will
require additional capital. Potential sources of funds include additional
equity, project financing, debt financing and the participation of other oil and
gas entities in CanArgo's projects. Based on CanArgo's past history of raising
capital and continuing discussions including those with major stockholders,
investment bankers and other companies, CanArgo believes that such required
funds may be available. However, there is no assurance that such funds will be
available, and if available, will be offered on attractive or acceptable terms.
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Development of the oil and gas properties and ventures in which CanArgo has
interests involves multi-year efforts and substantial cash expenditures. Full
development of CanArgo's oil and gas properties and ventures will require the
availability of substantial additional financing from external sources. CanArgo
also may, where opportunities exist, seek to transfer portions of its interests
in oil and gas properties and ventures to entities in exchange for such
financing. CanArgo generally has the principal responsibility for arranging
financing for the oil and gas properties and ventures in which it has an
interest. There can be no assurance, however, that CanArgo or the entities that
are developing the oil and gas properties and ventures will be able to arrange
the financing necessary to develop the projects being undertaken or to support
the corporate and other activities of CanArgo. There can also be no assurance
that such financing as is available will be on terms that are attractive or
acceptable to or are deemed to be in the best interest of CanArgo, such entities
and their respective stockholders or participants.
Ultimate realization of the carrying value of CanArgo's oil and gas properties
and ventures will require production of oil and gas in sufficient quantities and
marketing such oil and gas at sufficient prices to provide positive cash flow to
CanArgo. Establishment of successful oil and gas operations is dependent upon,
among other factors, the following:
- - mobilization of equipment and personnel to implement effectively
drilling, completion and production activities;
- - achieving significant production at costs that provide acceptable
margins;
- - reasonable levels of taxation, or economic arrangements in lieu of
taxation in host countries; and
- - the ability to market the oil and gas produced at or near world prices.
CanArgo has plans to mobilize resources and achieve levels of production and
profits sufficient to recover the carrying value of its oil and gas properties
and ventures. However, if one or more of the above factors, or other factors,
are different than anticipated, these plans may not be realized, and CanArgo may
not recover the carrying value of its oil and gas properties and ventures.
CanArgo will be entitled to distributions from the various properties and
ventures in which it participates in accordance with the arrangements governing
the respective properties and ventures.
CHANGES IN FINANCIAL POSITION
As of June 30, 2001, CanArgo had working capital of $10,207,000, compared to
working capital of $22,687,000 as of December 31, 2000. The $12,480,000 decrease
in working capital from December 31, 2000 to June 30, 2001 is principally due to
a reduction in cash as a result of the acquisition of Lateral Vector Resources
Inc. ("LVR"), capital and operating expenditures.
Cash and cash equivalents decreased from $28,627,000 at December 31, 2000 to
$10,902,000 at June 30, 2001. The decrease was primarily due to the cost of a
three-well exploration program currently underway at the Ninotsminda field,
continued investment in refining and marketing activities and the acquisition of
approximately 82% (77% on a fully diluted basis) of the outstanding common
shares of LVR.
Cash and cash equivalents at June 30, 2001 included $178,000 held by Ninotsminda
Oil Company with respect to initial advances, less capital expenditures, from
AES Gardabani related to AES Gardabani's participation in a three well
exploration program in the Republic of Georgia.
Accounts receivable increased from $787,000 at December 31, 2000 to $1,320,000
at June 30, 2001. The increase is primarily as a result of accounts receivable
generated from oil, natural gas and refined product sales in 2001.
Advances to operator increased from $1,147,000 at December 31, 2000 to
$1,295,000 at June 30, 2001 as a result of advances to the operator of the
Ninotsminda field for future expenditures on behalf and at the direction of
CanArgo.
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Inventory increased from $696,000 at December 31, 2000 to $1,172,000 at June 30,
2001 primarily as result of the sale of oil by Ninotsminda Oil Company to
Georgian American Oil Refinery. Crude oil and refined product inventory
increased to provide the refinery feedstock to commence operations and
reestablish its position in the domestic and regional market. In addition to
crude oil and refined product inventory at Georgian American Oil Refinery,
approximately 31,900 barrels of oil were held in storage by Ninotsminda Oil
Company at June 30, 2001 for sale either to Georgian American Oil Refinery or
the Georgian domestic, region or international market.
Capital assets, net increased from $50,477,000 at December 31, 2000 to
$63,294,000 at June 30, 2001, primarily as a result of investment of $8,876,000
in capital assets including oil and gas properties and equipment, principally
related to the Ninotsminda field. Capital assets also increased as a result of
the acquisition of LVR and CanArgo Power in April 2001. Included in oil and gas
related equipment acquired as part of the acquisition of LVR is $701,000 with
respect to oil and gas equipment located in China.
Investments in and advances to oil and gas and other ventures, net increased
from $696,000 at December 31, 2000 to $756,000 at June 30, 2001. The increase is
primarily due to advances to Boryslaw Oil Company of $550,000 relating to a
three well workover program currently underway on the Stynawske field, partially
offset by the sale in April 2001 of CanArgo's investment in Uentech and the
purchase of a 50% interest in CanArgo Power resulting in CanArgo Power becoming
a wholly owned subsidiary of CanArgo.
CanArgo has contingent obligations and may incur additional obligations,
absolute or contingent, with respect to the acquisition and development of oil
and gas properties and ventures in which it has interests that require or may
require CanArgo to expend funds and to issue shares of its Common Stock. At June
30, 2001, CanArgo had a contingent obligation to issue 187,500 shares of common
stock to a third party upon satisfaction of conditions relating to the
achievement of specified Stynawske field project performance standards. As
CanArgo develops current projects and undertakes other projects, it could incur
significant additional obligations.
Accounts payable increased to $4,350,000 at June 30, 2001 from $2,691,000 at
December 31, 2000 primarily as a result of the acquisition of LVR,
including $701,000 with respect to liabilities related to a previous LVR project
in China. Accrued liabilities also increased to $536,000 at June 30, 2001 from
$324,000 at December 31, 2000 primarily as a result of the acquisition of LVR.
Advances from joint venture partner decreased to $178,000 at June 30, 2001
compared to $5,889,000 at December 31, 2000 as capital expenditures were
incurred as part of a three well exploration program in the Republic of Georgia.
Minority interest in subsidiaries increased to $3,304,400 at June 30, 2001
compared to $1,394,000 at December 31, 2000 following the expansion of CanArgo
Standard Oil Products in Tbilisi, Georgia and related investment by CanArgo's
partners in the venture. CanArgo consolidates its 50% interest in CanArgo
Standard Oil Products as it has the ability to control the strategic operating
and financial activities of the joint venture.
RESULTS OF OPERATIONS
Six Month Period Ended June 30, 2001 Compared to Six Month Period Ended June 30,
2000
In November 2000, CanArgo acquired a 51% interest in Georgian American Oil
Refinery and Georgian American Oil Refinery became a subsidiary of CanArgo.
Under purchase accounting, Georgian American Oil Refinery's results have been
included in CanArgo's consolidated financial statements since the date of
acquisition. In December 2000, the first of several petrol stations planned by
CanArgo Standard Oil Products also opened in Tbilisi, Georgia.
CanArgo recorded operating revenue of $6,561,000 during the six month period
ended June 30, 2001 compared with $3,596,000 for the six month period ended June
30, 2000. The increase is primarily due to refining and marketing revenue from
Georgian American Oil Refinery and CanArgo Standard Oil Products.
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Ninotsminda Oil Company generated $2,618,000 of revenue in the six month period
ended June 30, 2001. Its net share of the 232,186 barrels (1,283 barrels per
day) of gross oil production for sale from the Ninotsminda field in the period
amounted to 140,140 barrels. An additional 16,900 barrels of oil were removed
from storage and sold in the period. For the six month period ended June 30,
2000, Ninotsminda Oil Company's net share of the 244,787 barrels (1,352 barrels
per day) of gross production was 126,590 barrels.
Ninotsminda Oil Company's entire share of production was sold into the Georgian
local and regional market. Because lower transportation costs are involved,
CanArgo believes that sales of Ninotsminda oil to customers in the Georgian
local and regional market generally yield relatively higher net sales prices to
Ninotsminda Oil Company than sales to other customers. Net sale prices for
Ninotsminda oil sold during the first half of 2001 averaged $19.15 per barrel as
compared with an average of $19.06 per barrel in the first half of 2000. Its net
share of the 692,700 mcf of gas delivered was 450,250 mcf at an average net sale
price of $1.15 per mcf of gas. For the six month period ended June 30, 2000,
Ninotsminda Oil Company's net share of the 791,000 mcf of gas delivered was
514,000 mcf at an average net sales price of $1.23 per mcf of gas.
Refining and marketing revenue for the six month period ended June 30, 2001
relate to operating activities of Georgian American Oil Refinery and CanArgo
Standard Oil Products. In the first half of 2001, sales from the refinery
continued to be nominal following the imposition of restrictions and subsequent
excise tax on feedstock and refined product. In April 2001, new legislation
addressing indigenous refining activities was passed by the Republic of Georgia
that removed or reduced excise taxes on feedstock and refined product. Refining
operations did not recommence until June 2001.
CanArgo had no revenue from equipment rentals in the first half of 2001 compared
to other revenue from equipment rentals of $196,000 for the six month period
ended June 30, 2000.
The operating loss for the six month period ended June 30, 2001 amounted to
$2,100,000 compared with an operating loss of $65,000 for the corresponding
period in 2000. The increase in operating loss is attributable primarily to
lower oil and gas revenue as a result of lower production, the sale of oil
production to Georgian American Oil Refinery, an increase in Georgian American
Oil Refinery's inventory levels following the recommencement of operations in
June 2001 and significant increases in operating and corporate activity.
Lease operating expenses increased to $1,113,000 for the six month period ended
June 30, 2001 as compared to $632,000 for the six month period ended June 30,
2000. The increase is primarily a result of increased activity at the
Ninotsminda field.
Purchases of crude oil and products and refinery operating expenses of
$2,629,000 and $197,000 respectively for the six month period ended June 30,
2001 relate to operating activities of Georgian American Oil Refinery and
CanArgo Standard Oil Products.
Direct project costs increased to $571,000 for the six month period ended June
30, 2001, from $384,000 for the six month period ended June 30, 2000, reflecting
increased activity within Georgia and reestablishment of activity with respect
to the licence Boryslaw Oil Company holds in the Stynawske field, Ukraine.
Direct project costs are expected to further increase following the acquisition
of Lateral Vector Resources Inc. LVR negotiated and concluded a Joint Investment
Production Activity (JIPA) agreement in 1998 to develop the Bugruvativske field
in eastern Ukraine together with Ukrnafta. CanArgo believes that under the terms
of this JIPA, LVR has certain rights to incremental production from the field.
Ukrnafta and LVR are required under the terms of the JIPA to make a total
initial contribution of $2 million prior to December 31, 2000. LVR's portion of
the initial contribution was $960,000, which it failed to make. Furthermore,
until such time as an investment agreement and valuation of the assets to be
contributed by Ukrnafta is completed and accepted by LVR, LVR is not entitled to
any of this production and any sharing of future production is to be determined
after consideration of base oil. Under the terms of the JIPA and associated work
programs, CanArgo expects to bring LVR current with respect to its outstanding
investment obligations and to significantly increase production from the field
by investment in both remedial workover activity and potential infill drilling,
horizontal drilling and pressure maintenance utilizing appropriate technologies.
CanArgo is presently evaluating LVR's interest and obligations under the JIPA
and information
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regarding the field, and is in discussions with Ukrnafta to resolve these and
other open issues under the JIPA. There is no assurance as to whether such
discussions will be successfully completed or, if completed, on what terms.
General and administrative costs increased to $2,048,000 for the six month
period ended June 30, 2001, from $766,000 for the six month period ended June
30, 2000. The increase is primarily attributable to significant increased
operating and corporate activity, higher costs attributed to the London office
following the move of administrative and finance functions from Calgary to
London in 2000 and general and administrative costs of $375,000 related to
refining and marketing activities.
The increase in depreciation, depletion and amortization expense to $2,102,000
from $1,879,000 for the six month period ended June 30, 2000 is attributable
principally to depletion related to Ninotsminda field oil production and
depreciation of drilling equipment.
The equity income from investments increased to $29,000 for the six month period
ended June 30, 2001, from a loss of $82,000 for the six month period ended June
30, 2000 as a result of equity income from production and sales of crude oil by
Boryslaw Oil Company and the sale of Uentech International Corporation. Equity
income from Boryslaw Oil Company was partially offset by expenses related to
operation of the gas pipeline from Ninotsminda to the Gardabani power station
and Rustavi industrial complex.
CanArgo recorded net other income of $549,000 for the six months ended June 30,
2001, as compared to other loss of $20,000 during the six months ended June 30,
2000. The principal reason for the increase is interest income on cash balances
and equity income from investments.
The net loss of $1,530,000 or $0.02 per share for the six month period ended
June 30, 2001 compares to a net loss of $179,000, or $nil per share for the six
month period ended June 30, 2000. The weighted average number of common shares
outstanding was substantially higher during the six month period ended June 30,
2001 than during the six month period ended June 30, 2000, due in large part to
private placements in April, June and August 2000.
Three Month Period Ended June 30, 2001 Compared to Three Month Period Ended June
30, 2000
In November 2000, CanArgo acquired a 51% interest in Georgian American Oil
Refinery and Georgian American Oil Refinery became a subsidiary of CanArgo.
Under purchase accounting, Georgian American Oil Refinery's results have been
included in CanArgo's consolidated financial statements since the date of
acquisition. In December 2000, the first of several petrol stations planned by
CanArgo Standard Oil Products also opened in Tbilisi, Georgia.
CanArgo recorded operating revenue of $2,964,000 during the three month period
ended June 30, 2001 compared with $1,515,000 for the three month period ended
June 30, 2000. The increase is due to refining and marketing revenue from
Georgian American Oil Refinery and CanArgo Standard Oil Products. In 2001, oil
and gas sales revenue decreased as production was sold from Ninotsminda Oil
Company to its affiliate, Georgian American Oil Refinery.
Ninotsminda Oil Company generated $870,000 of revenue in the three month period
ended June 30, 2001. Its net share of the 101,230 barrels (1,112 barrels per
day) of gross oil production for sale from the Ninotsminda field in the period
amounted to 60,380 barrels. An additional 10,200 barrels of oil were removed
from storage and sold in the period. For the three month period ended June 30,
2000, Ninotsminda Oil Company's net share of the 117,655 barrels (1,293 barrels
per day) of gross production was 60,200 barrels.
Ninotsminda Oil Company's entire share of production was sold into the Georgian
local and regional market. Because lower transportation costs are involved,
CanArgo believes that sales of Ninotsminda oil to customers in the Georgian
local and regional market generally yield relatively higher net sales prices to
Ninotsminda Oil Company than sales to other customers. Net sale prices for
Ninotsminda oil sold during the second quarter of 2001 averaged $19.49 per
barrel as compared with an average of $19.42 per barrel in the second quarter of
2000. Its net share of the 246,0000 mcf of gas delivered was 159,915 mcf at an
average net sale price of $1.13 per mcf of gas. For the
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three month period ended June 30, 2000, Ninotsminda Oil Company's net share of
the 238,000 mcf of gas delivered was 154,700 mcf at an average net sales price
of $1.18 per mcf of gas.
Refining and marketing revenues for the three month period ended June 30, 2001
relate to operating activities of Georgian American Oil Refinery and CanArgo
Standard Oil Products. In the second quarter of 2001, sales from the refinery
continued to be nominal following the imposition of restrictions and subsequent
excise tax on feedstock and refined product. In April 2001, new legislation
addressing indigenous refining activities was passed by the Republic of Georgia
which removed or reduced excise taxes on feedstock and refined product. Refining
operations did not recommence until June 2001.
CanArgo had no revenue from equipment rentals in the second quarter of 2001
compared to other revenue from equipment rentals of $169,000 for the three month
period ended June 30, 2000.
The operating loss for the three month period ended June 30, 2001 amounted to
$1,454,000 compared with an operating loss of $187,000 for the corresponding
period in 2000. The increase in operating loss is attributable primarily to
lower oil and gas revenue as a result of lower production, the sale of oil
production to Georgian American Oil Refinery, an increase in Georgian American
Oil Refinery's inventory levels following the recommencement of operations in
June 2001 and significant increases in operating and corporate activity.
Lease operating expenses increased to $611,000 for the three month period ended
June 30, 2001 as compared to $260,000 for the three month period ended June 30,
2000. The increase is primarily a result of increased activity at the
Ninotsminda field.
Purchases of crude oil and products and refinery operating expenses of
$1,472,000 and $77,000 respectively for the three month period ended June 30,
2001 relate to operating activities of Georgian American Oil Refinery and
CanArgo Standard Oil Products.
Direct project costs increased to $322,000 for the three month period ended June
30, 2001, from $247,000 for the three month period ended June 30, 2000,
reflecting increased activity within Georgia and reestablishment of activity
with respect to the licence Boryslaw Oil Company holds in the Stynawske field,
Ukraine. Direct project costs are expected to further increase following the
acquisition of Lateral Vector Resources Inc. See the discussion regarding the
acquisition of LVR and projected activities on the Bugruvativske field under the
six-month comparison of operating results set forth above.
General and administrative costs increased to $1,020,000 for the three month
period ended June 30, 2001, from $392,000 for the three month period ended June
30, 2000. The increase is primarily attributable to significant increased
operating and corporate activity, higher costs attributed to the London office
following the move of administrative and finance functions from Calgary to
London in 2000 and general and administrative costs of $184,600 related to
refining and marketing activities.
The increase in depreciation, depletion and amortization expense to $917,000
from $804,000 for the three month period ended June 30, 2000 is attributable
principally to depletion related to Ninotsminda field oil production and
depreciation of drilling equipment.
The equity income from investments increased to $66,000 for the three month
period ended June 30, 2001, from a loss of $69,000 for the three month period
ended June 30, 2000 as a result of equity income from production and sales of
crude oil by Boryslaw Oil Company and the sale of Uentech International
Corporation. Equity income from Boryslaw Oil Company was partially offset by
expenses related to operation of the gas pipeline from Ninotsminda to the
Gardabani power station.
CanArgo recorded net other income of $199,000 for the three months ended June
30, 2001, as compared to other income of $5,000 during the three months ended
June 30, 2000. The principal reason for the increase is interest income on cash
balances and equity income from investments.
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The net loss of $1,203,000 or $0.02 per share for the three month period ended
June 30, 2001 compares to a net loss of $280,000, or $0.01 per share for the
three month period ended June 30, 2000. The weighted average number of common
shares outstanding was substantially higher during the three month period ended
June 30, 2001 than during the three month period ended June 30, 2000, due in
large part to private placements in April, June and August 2000.
NEW ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria, which must be met, for intangible assets acquired in a purchase method
business combination to be recognized and reported apart from goodwill.
Statement 142 will require that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement 142 will
also require that intangible assets with definite useful lives be amortized over
their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
CanArgo is required to adopt the provisions of Statement 141 immediately and
Statement 142 effective January 1, 2002. Furthermore, any goodwill and any
intangible asset determined to have an indefinite useful life that are acquired
in a purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-Statement 142 accounting literature. Based on present
circumstances SFAS No. 141 and No. 142 would not have any material effect on
CanArgo's financial statements.
FORWARD LOOKING STATEMENTS
The forward looking statements contained in this Item 2 and elsewhere in this
Form 10-Q are subject to various risks, uncertainties and other factors that
could cause actual results to differ materially from the results anticipated in
such forward looking statements. Included among the important risks,
uncertainties and other factors are those hereinafter discussed.
Operating entities in various foreign jurisdictions must be registered by
governmental agencies, and production licenses for development of oil and gas
fields in various foreign jurisdictions must be granted by governmental
agencies. These governmental agencies generally have broad discretion in
determining whether to take or approve various actions and matters. In addition,
the policies and practices of governmental agencies may be affected or altered
by political, economic and other events occurring either within their own
countries or in a broader international context.
CanArgo does not have a majority of the equity in the entity that is the
licensed developer of some projects that CanArgo may pursue in Eastern Europe
such as the Bugruvativske and Stynawske field projects, even though CanArgo may
be the designated operator of the oil or gas field. In such circumstances, the
concurrence of co-venturers may be required for various actions. Other parties
influencing the timing of events may have priorities that differ from those of
CanArgo, even if they generally share CanArgo's objectives. As a result of all
of the foregoing, among other matters, the forward looking statements regarding
the occurrence and timing of future events may well anticipate results that will
not be realized.
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The availability of equity or debt financing to CanArgo or to the entities that
are developing projects in which CanArgo has interests is affected by many
factors including:
- - world economic conditions;
- - international relations;
- - the stability and policies of various governments;
- - fluctuations in the price of oil and gas and the outlook for the oil
and gas industry;
- - competition for funds; and
- - an evaluation of CanArgo and specific projects in which CanArgo has an
interest.
Rising interest rates might affect the feasibility of debt financing that is
offered. Potential investors and lenders will be influenced by their evaluations
of CanArgo and its projects and comparisons with alternative investment
opportunities. CanArgo's ability to finance all of its present oil and gas
projects and other ventures according to present plans is dependent upon
obtaining additional funding. An inability to obtain financing could require
CanArgo to scale back its project development, capital expenditure, production
and other plans.
The development of oil and gas properties is subject to substantial risks.
Expectations regarding production, even if estimated by independent petroleum
engineers, may prove to be unrealized. There are many uncertainties inherent in
estimating production quantities and in projecting future production rates and
the timing and amount of future development expenditures. Estimates of
properties in full production are more reliable than production estimates for
new discoveries and other properties that are not fully productive. Accordingly,
estimates related to CanArgo's properties are subject to change as additional
information becomes available.
Most of CanArgo's interests in oil and gas properties and ventures are located
in Eastern European countries. Operations in those countries are subject to
certain additional risks including the following:
- - enforceability of contracts;
- - currency convertibility and transferability;
- - unexpected changes in tax rates;
- - sudden or unexpected changes in demand for crude oil and or natural
gas;
- - availability of trained personnel; and
- - availability of equipment and services and other factors that could
significantly change the economics of production.
Production estimates are subject to revision as prices and costs change.
Production, even if present, may not be recoverable in the amount and at the
rate anticipated and may not be recoverable in commercial quantities or on an
economically feasible basis. World and local prices for oil and gas can
fluctuate significantly, and a reduction in the revenue realizable from the sale
of production can affect the economic feasibility of an oil and gas project.
World and local political, economic and other conditions could affect CanArgo's
ability to proceed with or to effectively operate projects in various foreign
countries.
Demands by or expectations of governments, co-venturers, customers and others
may affect CanArgo's strategy regarding the various projects. Failure to meet
such demands or expectations could adversely affect CanArgo's participation in
such projects or its ability to obtain or maintain necessary licenses and other
approvals.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CanArgo principal exposure to market risk is due to changes in oil and gas
prices and currency fluctuations. As indicated elsewhere in this Report, as a
producer of oil and gas CanArgo is exposed to changes in oil and gas prices as
well as changes in supply and demand which could affect its revenues. CanArgo
does not engage in any commodity hedging activities. Due to the ready market for
its production in the Republic of Georgia, CanArgo does not believe that any
current exposures from this risk will materially affect CanArgo's financial
position at this time, but there can be no assurance that changes in such market
will not affect CanArgo adversely in the future. Also as indicated elsewhere in
this Report, because all of CanArgo's operations are being conducted in Eastern
Europe, CanArgo is potentially exposed to the market risk of fluctuations in the
relative values of the currencies in areas in which it operates. At present
CanArgo does not engage in any currency hedging operations since, to the extent
it receives payments in local currencies, it is utilizing such currencies to pay
for its local operations. In addition, it currently has contracts to sell its
production from the Ninotsminda field in the Republic of Georgia which provide
for payment in dollars. Accordingly, at present CanArgo does not believe that
any exposure to the risk of fluctuations in currency values will materially
affect CanArgo's financial position. There can be no assurance, however, that
this continues into the future. CanArgo had no material interest in investments
subject to market risk during the period covered by this report.
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PART II - OTHER INFORMATION
CANARGO ENERGY CORPORATION AND SUBSIDIARIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 7, 2001, the Annual Meeting of Stockholders was held at the Felix
Konferansesenter, Bryggetorget 3, Aker Brygge, Oslo, Norway for the following
purposes; to elect four directors to serve until the next Annual Meeting of
Stockholders or until their successors are duly elected and qualified, and to
approve a proposal to amend the 1995 Long-Term Incentive Plan to increase the
number of shares that may be issued thereunder from 4,000,000 to 7,500,000
shares, subject to a limit on the number of outstanding stock options and stock
appreciation rights under the Plan to an amount that would not exceed 10% of the
number of then outstanding shares of Common Stock. The matters were voted upon
at the meeting, and the number of votes cast for, against or withheld, as to
each matter, where applicable, are set forth below.
PROPOSAL VOTES FOR VOTES AGAINST VOTES WITHHELD
- -------- --------- ------------- --------------
To elect Messrs. Roger Brittain, David
Robson, Russell Hammond and Nils
Trulsvik to the Board of Directors 64,297,344 - 1,957,711
To ratify amendments to the Long Term
Stock Incentive Plan 15,734,221 2,821,626 1,876,798
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Management Contracts, Compensation Plans and
Arrangements are identified by an asterisk (*)
Documents filed herewith are identified by a cross
(+).
1(1) Escrow Agreement with Signature Stock Transfer, Inc.
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(2) Selling Agent Agreement with each of Credifinance
Securities Limited, David Williamson Associates
Limited, and Orkla Finans (Fondsmegling) ASA
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(3) Escrow Agreement with Orkla Finans (Fondsmegling)
ASA (Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(4) Selling Agent Agreement with National Securities
Corporation (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
1(5) Escrow Agreement with Continental Stock Transfer &
Trust Company (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
2(1) Agreement Relating to the Sale and Purchase of All
the Issued Share Capital of Gastron International
Limited dated August 10, 1995 by and among Ribalta
Holdings, Inc. as Vendor and Fountain Oil
Incorporated as Purchaser, and John Richard Tate as
Warrantor (Incorporated herein by reference from
October 19, 1995 Form 8-K).
Supplemental Agreement Relating to the Sale and
Purchase of All the Issued Share Capital
22
23
2(2) of Gastron International Limited dated November 3,
1995 by and among Ribalta Holdings, Inc. as Vendor
and Fountain Oil Incorporated as Purchaser, and John
Richard Tate as Warrantor (Incorporated herein by
reference from October 19, 1995 Form 8-K).
2(3) Supplemental Deed Relating to the Sale and Purchase
of All the Issued Share Capital of Gastron
International Limited dated May 29, 1996 by and
among Ribalta Holdings, Inc. as Vendor and Fountain
Oil Incorporated as Purchaser, and John Richard Tate
as Warrantor (Incorporated herein by reference from
September 30, 1997 Form 10-Q).
2(4) Memorandum of Agreement between Fielden Management
Services Pty, Ltd., A.C.N. 005 506 123 and Fountain
Oil Incorporated dated May 16, 1995 (Incorporated
herein by reference from December 31, 1997 Form
10-K/A).
2(5) Amended and Restated Combination Agreement between
Fountain Oil Incorporated and CanArgo Energy Inc.
dated as of February 2, 1998 (Incorporated herein by
reference from Form S-3 Registration Statement, File
No. 333-48287 filed on September 9, 1998).
2(6) Voting, Support and Exchange Trust Agreement
(Incorporated herein by reference as Annex G from
Form S-3 Registration Statement, File No. 333-48287
filed on September 9, 1998).
2(7) Offer Circular relating to a proposed purchase all
of the outstanding common shares of Lateral Vector
Resources, Inc. dated March 20, 2001 (Incorporated
herein by reference from Form 14D-1F dated March 21,
2001).
2(8) Notice of Extension and Variation amending
Registrant's offer to purchase all of the
outstanding common shares of Lateral Vector
Resources, Inc. dated April 9, 2001 (Incorporated
herein by reference from Amendment No. 1 to Form
14D-1F dated April 11, 2001).
3(1) Registrant's Certificate of Incorporation and
amendments thereto (Incorporated herein by reference
from July 15, 1998 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by
reference from Post-Effective Amendment No. 1 to
Form S-1 Registration Statement, File No. 333-72295
filed on July 29, 1999).
4(1) Registration Rights Agreement between Registrant and
JKX Nederland B.V. dated September 28, 2000,
relating to purchase of 21.2% interest in
Ninotsminda Oil Company (Incorporated herein by
reference from July 20, 2000 Form 8-K).
*10(1) Form of Option Agreement for options granted to
certain persons, including Directors (Incorporated
herein by reference from August 31, 1994 Form
10-KSB, filed by Electromagnetic Oil Recovery, Inc.,
the Company's predecessor).
*10(2) Amended and Restated 1995 Long-Term Incentive Plan
(Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
*10(3) Amended and Restated CanArgo Energy Inc. Stock
Option Plan (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(4) Workorder between CanArgo Energy Inc. and Nils N.
Trulsvik as Consultant (Incorporated herein by
reference from September 30, 1998 Form 10-Q).
*10(5) Employment Contract between CanArgo Energy Inc. and
Anthony J. Potter (Incorporated
23
24
herein by reference from September 30, 1998 Form
10-Q).
10(6) Put Option Agreement between CanArgo Energy
Corporation, JKX Oil & Gas PLC. and IFC dated
December 17, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(7) Guarantee Agreement between CanArgo Energy
Corporation and IFC dated December 17, 1998
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
February 12, 1999).
10(8) Agreement between Georgian American Oil Refinery
Company and CanArgo Petroleum Products Ltd. dated
September 26, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(9) Terrenex Acquisition Corporation Option regarding
CanArgo (Nazvrevi) Limited (Incorporated herein by
reference from Form S-1 Registration Statement, File
No. 333-72295 filed on February 12, 1999).
10(10) Production Sharing Contract between (1) Georgia and
(2) Georgian Oil and JKX Navtobi Ltd. dated February
12, 1996 (Incorporated herein by reference from Form
S-1 Registration Statement, File No. 333-72295 filed
on September 7, 1999).
10(11) Agreement and Promissory Note dated July 19, 1999,
with Terrenex Acquisition Corporation (Incorporated
herein by reference from Post-Effective Amendment
No. 1 to Form S-1 Registration Statement, File No.
333-72295 filed on July 29, 1999).
10(12) Agreement between CanArgo Energy Corporation,
Ninotsminda Oil Company and IFC dated October 19,
1999 (Incorporated herein by reference from
September 30, 1999 Form 10-Q).
10(13) Agreement on Financial Advisory Services between
CanArgo Energy Corporation, Orkla Finans
(Fondsmegling) A.S and Sundal Collier & Co. ASA
dated December 8, 1999 (Incorporated herein by
reference from December 28, 1999 Form 8-K).
10(14) Form of Subscription Agreement (Incorporated herein
by reference from December 28, 1999 Form 8-K).
10(15) Agreement between CanArgo Energy Corporation and JKX
Nederland BV dated January 19, 2000 (Incorporated
herein by reference from December 31, 1999 Form
10-K).
*10(16) Employment Agreement between CanArgo Energy
Corporation and Paddy Chesterman dated February 24,
2000 (Incorporated herein by reference from December
31, 1999 Form 10-K).
10(17) Agreement between Ninotsminda Oil Company and AES
Gardabani dated March 10, 2000 (Incorporated herein
by reference from December 31, 1999 Form 10-K).
10(18) Term Sheet dated September 27, 2000 relating to sale
of 15,660,916 shares of Registrant's common stock
(Incorporated herein by reference from July 20, 2000
Form 8-K).
10(19) Form of Subscription Agreement relating to sale of
15,660,916 shares of the Registrant's common stock
(Incorporated herein by reference from July 20, 2000
Form 8-K).
10(20) Subscription Agreement between Registrant and JKX
Nederland B.V. dated September 15,
24
25
2000 relating to purchase of 21.2% interest in
Ninotsminda Oil Company (Incorporated herein by
reference from July 20, 2000 Form 8-K).
*10(21) Employment Agreement between CanArgo Energy
Corporation and Dr. David Robson dated June 29, 2000
(Incorporated herein by reference from September 30,
2000 Form 10-Q).
10(22) Tenancy Agreement between CanArgo Energy Corporation
and Grosvenor West End Properties dated September 8,
2000 (Incorporated herein by reference from
September 30, 2000 Form 10-Q).
10(23) Agreement between CanArgo Energy Corporation and
Roger Brittain dated August 18, 2000 (Incorporated
herein by reference from December 31, 2000 Form
10-K).
*10(24) Employment Agreements between CanArgo Energy
Corporation and Murray Chancellor dated September
22, 2000 (Incorporated herein by reference from
December 31, 2000 Form 10-K).
*10(25) Employment Agreements between CanArgo Energy
Corporation and Anthony Potter dated October 1, 2000
(Incorporated herein by reference from December 31,
2000 Form 10-K).
10(26) Production Sharing Contract between (1) Georgia and
(2) Georgian Oil and CanArgo Norio Limited dated
December 12, 2000 (Incorporated herein by reference
from December 31, 2000 Form 10-K) (Incorporated
herein by reference from December 31, 2000 Form
10-K).
10(27) Agreement between CanArgo Energy Corporation and
Georgian British Oil Services Company dated November
10, 2000 relating to the purchase of 9.35% interest
in Georgian American Oil Refinery (Incorporated
herein by reference from December 31, 2000 Form
10-K).
10(28) Share Exchange Agreement between CanArgo Energy
Corporation and Argonaut Oil and Gas Limited dated
November 10, 2000, related to the purchase of 28.7%
interest in Georgian American Oil Refinery
(Incorporated herein by reference from December 31,
2000 Form 10-K).
10(29) Agreement Number 1 dated March 20, 1998 on Joint
Investment Production Activity for further
development and further exploration of Bugruvativsk
Field. +
21 List of Subsidiaries +
25
26
(b) Reports on Form 8-K:
On July 5, 2001 CanArgo completed the acquisition of the remaining
outstanding common shares of Lateral Vector Resources Inc. ("LVR") and
LVR became a wholly owned subsidiary of CanArgo. LVR is an oil and gas
company with activities principally in east Ukraine. According to
publicly available information, LVR negotiated and concluded a Joint
Investment Production Activity (JIPA) agreement in 1998 to develop the
Bugruvativske Field (the "Field") in eastern Ukraine together with
Ukrnafta. Under the terms of this JIPA, LVR have certain rights to
incremental production from the Field, which CanArgo understands is
currently producing oil, and is one of the larger oil fields in that
area.
On July 4, 2001, CanArgo announced that it closed a private placement
of approximately 16 million shares of its common stock for net proceeds
of approximately $6.8 million. Such proceeds will be used to replenish
cash resources used to acquire LVR, to initiate development of its
Ukrainian properties and for working capital purposes. Sundal Collier &
Co ASA and Den norske Bank ASA, DnB Markets acted as placement agents
for this transaction and received a success fee of 5.75% of the gross
proceeds of NOK 68,245,500 (approximately US$ 7,280,000). The shares to
be issued in connection with this placement were issued under
Regulation S of the Securities Act of the United States and have not
been registered under the Securities Act of 1933, as amended, and may
not be offered or sold in the United States or to U.S. persons (as
defined in such Regulation) absent registration or an applicable
exemption from registration.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CANARGO ENERGY CORPORATION
Date: August 14, 2001 By: /s/ Anthony J. Potter
--------------------------
Anthony J. Potter
Chief Financial Officer
26
27
INDEX TO EXHIBITS
Exhibit
No. Description
------- -----------
Management Contracts, Compensation Plans and
Arrangements are identified by an asterisk (*)
Documents filed herewith are identified by a cross
(+).
1(1) Escrow Agreement with Signature Stock Transfer, Inc.
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(2) Selling Agent Agreement with each of Credifinance
Securities Limited, David Williamson Associates
Limited, and Orkla Finans (Fondsmegling) ASA
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(3) Escrow Agreement with Orkla Finans (Fondsmegling)
ASA (Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
September 9, 1999).
1(4) Selling Agent Agreement with National Securities
Corporation (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
1(5) Escrow Agreement with Continental Stock Transfer &
Trust Company (Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
2(1) Agreement Relating to the Sale and Purchase of All
the Issued Share Capital of Gastron International
Limited dated August 10, 1995 by and among Ribalta
Holdings, Inc. as Vendor and Fountain Oil
Incorporated as Purchaser, and John Richard Tate as
Warrantor (Incorporated herein by reference from
October 19, 1995 Form 8-K).
Supplemental Agreement Relating to the Sale and
Purchase of All the Issued Share Capital
28
2(2) of Gastron International Limited dated November 3,
1995 by and among Ribalta Holdings, Inc. as Vendor
and Fountain Oil Incorporated as Purchaser, and John
Richard Tate as Warrantor (Incorporated herein by
reference from October 19, 1995 Form 8-K).
2(3) Supplemental Deed Relating to the Sale and Purchase
of All the Issued Share Capital of Gastron
International Limited dated May 29, 1996 by and
among Ribalta Holdings, Inc. as Vendor and Fountain
Oil Incorporated as Purchaser, and John Richard Tate
as Warrantor (Incorporated herein by reference from
September 30, 1997 Form 10-Q).
2(4) Memorandum of Agreement between Fielden Management
Services Pty, Ltd., A.C.N. 005 506 123 and Fountain
Oil Incorporated dated May 16, 1995 (Incorporated
herein by reference from December 31, 1997 Form
10-K/A).
2(5) Amended and Restated Combination Agreement between
Fountain Oil Incorporated and CanArgo Energy Inc.
dated as of February 2, 1998 (Incorporated herein by
reference from Form S-3 Registration Statement, File
No. 333-48287 filed on September 9, 1998).
2(6) Voting, Support and Exchange Trust Agreement
(Incorporated herein by reference as Annex G from
Form S-3 Registration Statement, File No. 333-48287
filed on September 9, 1998).
2(7) Offer Circular relating to a proposed purchase all
of the outstanding common shares of Lateral Vector
Resources, Inc. dated March 20, 2001 (Incorporated
herein by reference from Form 14D-1F dated March 21,
2001).
2(8) Notice of Extension and Variation amending
Registrant's offer to purchase all of the
outstanding common shares of Lateral Vector
Resources, Inc. dated April 9, 2001 (Incorporated
herein by reference from Amendment No. 1 to Form
14D-1F dated April 11, 2001).
3(1) Registrant's Certificate of Incorporation and
amendments thereto (Incorporated herein by reference
from July 15, 1998 Form 8-K).
3(2) Registrant's Bylaws (Incorporated herein by
reference from Post-Effective Amendment No. 1 to
Form S-1 Registration Statement, File No. 333-72295
filed on July 29, 1999).
4(1) Registration Rights Agreement between Registrant and
JKX Nederland B.V. dated September 28, 2000,
relating to purchase of 21.2% interest in
Ninotsminda Oil Company (Incorporated herein by
reference from July 20, 2000 Form 8-K).
*10(1) Form of Option Agreement for options granted to
certain persons, including Directors (Incorporated
herein by reference from August 31, 1994 Form
10-KSB, filed by Electromagnetic Oil Recovery, Inc.,
the Company's predecessor).
*10(2) Amended and Restated 1995 Long-Term Incentive Plan
(Incorporated herein by reference from
Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 333-72295 filed on
July 29, 1999).
*10(3) Amended and Restated CanArgo Energy Inc. Stock
Option Plan (Incorporated herein by reference from
September 30, 1998 Form 10-Q).
*10(4) Workorder between CanArgo Energy Inc. and Nils N.
Trulsvik as Consultant (Incorporated herein by
reference from September 30, 1998 Form 10-Q).
*10(5) Employment Contract between CanArgo Energy Inc. and
Anthony J. Potter (Incorporated
29
herein by reference from September 30, 1998 Form
10-Q).
10(6) Put Option Agreement between CanArgo Energy
Corporation, JKX Oil & Gas PLC. and IFC dated
December 17, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(7) Guarantee Agreement between CanArgo Energy
Corporation and IFC dated December 17, 1998
(Incorporated herein by reference from Form S-1
Registration Statement, File No. 333-72295 filed on
February 12, 1999).
10(8) Agreement between Georgian American Oil Refinery
Company and CanArgo Petroleum Products Ltd. dated
September 26, 1998 (Incorporated herein by reference
from Form S-1 Registration Statement, File No.
333-72295 filed on February 12, 1999).
10(9) Terrenex Acquisition Corporation Option regarding
CanArgo (Nazvrevi) Limited (Incorporated herein by
reference from Form S-1 Registration Statement, File
No. 333-72295 filed on February 12, 1999).
10(10) Production Sharing Contract between (1) Georgia and
(2) Georgian Oil and JKX Navtobi Ltd. dated February
12, 1996 (Incorporated herein by reference from Form
S-1 Registration Statement, File No. 333-72295 filed
on September 7, 1999).
10(11) Agreement and Promissory Note dated July 19, 1999,
with Terrenex Acquisition Corporation (Incorporated
herein by reference from Post-Effective Amendment
No. 1 to Form S-1 Registration Statement, File No.
333-72295 filed on July 29, 1999).
10(12) Agreement between CanArgo Energy Corporation,
Ninotsminda Oil Company and IFC dated October 19,
1999 (Incorporated herein by reference from
September 30, 1999 Form 10-Q).
10(13) Agreement on Financial Advisory Services between
CanArgo Energy Corporation, Orkla Finans
(Fondsmegling) A.S and Sundal Collier & Co. ASA
dated December 8, 1999 (Incorporated herein by
reference from December 28, 1999 Form 8-K).
10(14) Form of Subscription Agreement (Incorporated herein
by reference from December 28, 1999 Form 8-K).
10(15) Agreement between CanArgo Energy Corporation and JKX
Nederland BV dated January 19, 2000 (Incorporated
herein by reference from December 31, 1999 Form
10-K).
*10(16) Employment Agreement between CanArgo Energy
Corporation and Paddy Chesterman dated February 24,
2000 (Incorporated herein by reference from December
31, 1999 Form 10-K).
10(17) Agreement between Ninotsminda Oil Company and AES
Gardabani dated March 10, 2000 (Incorporated herein
by reference from December 31, 1999 Form 10-K).
10(18) Term Sheet dated September 27, 2000 relating to sale
of 15,660,916 shares of Registrant's common stock
(Incorporated herein by reference from July 20, 2000
Form 8-K).
10(19) Form of Subscription Agreement relating to sale of
15,660,916 shares of the Registrant's common stock
(Incorporated herein by reference from July 20, 2000
Form 8-K).
10(20) Subscription Agreement between Registrant and JKX
Nederland B.V. dated September 15,
30
2000 relating to purchase of 21.2% interest in
Ninotsminda Oil Company (Incorporated herein by
reference from July 20, 2000 Form 8-K).
*10(21) Employment Agreement between CanArgo Energy
Corporation and Dr. David Robson dated June 29, 2000
(Incorporated herein by reference from September 30,
2000 Form 10-Q).
10(22) Tenancy Agreement between CanArgo Energy Corporation
and Grosvenor West End Properties dated September 8,
2000 (Incorporated herein by reference from
September 30, 2000 Form 10-Q).
10(23) Agreement between CanArgo Energy Corporation and
Roger Brittain dated August 18, 2000 (Incorporated
herein by reference from December 31, 2000 Form
10-K).
*10(24) Employment Agreements between CanArgo Energy
Corporation and Murray Chancellor dated September
22, 2000 (Incorporated herein by reference from
December 31, 2000 Form 10-K).
*10(25) Employment Agreements between CanArgo Energy
Corporation and Anthony Potter dated October 1, 2000
(Incorporated herein by reference from December 31,
2000 Form 10-K).
10(26) Production Sharing Contract between (1) Georgia and
(2) Georgian Oil and CanArgo Norio Limited dated
December 12, 2000 (Incorporated herein by reference
from December 31, 2000 Form 10-K) (Incorporated
herein by reference from December 31, 2000 Form
10-K).
10(27) Agreement between CanArgo Energy Corporation and
Georgian British Oil Services Company dated November
10, 2000 relating to the purchase of 9.35% interest
in Georgian American Oil Refinery (Incorporated
herein by reference from December 31, 2000 Form
10-K).
10(28) Share Exchange Agreement between CanArgo Energy
Corporation and Argonaut Oil and Gas Limited dated
November 10, 2000, related to the purchase of 28.7%
interest in Georgian American Oil Refinery
(Incorporated herein by reference from December 31,
2000 Form 10-K).
10(29) Agreement Number 1 dated March 20, 1998 on Joint
Investment Production Activity for further
development and further exploration of Bugruvativsk
Field. +
21 List of Subsidiaries +