Exhibit 99.1
[CanArgo Energy Corporation LOGO]
FOR IMMEDIATE RELEASE IN EUROPE & NORTH AMERICA
February 28th, 2003
CANARGO ANNOUNCES PRELIMINARY 2002 YEAR END RESULTS
Oslo, Norway - CanArgo Energy Corporation (OSE: CNR, OTCBB: GUSH) is pleased to
report preliminary results for the year ended December 31, 2002. CanArgo's
preliminary net loss for the year ended December 31, 2002 was $5.3 million
($0.06 per share) down from $13.2 million ($0.16 per share) for 2001.
Preliminary operating revenues (excluding refining revenues) improved by 22% for
the year ended 31 December, 2002, reflecting improved oil and gas sales and
additional other income from provision of drilling services in Georgia. There
was no refining revenue during the year following suspension of activity in
2001.
Excluding write-down of oil and gas properties and other assets, CanArgo's
preliminary net Operating Loss from Continuing Operations for the year ended
December 31, 2002 was $3.4 million down from a net Operating loss from
Continuing Operations of $4.9 million for the year ended December 31, 2001. A
further improvement would be expected in 2003 as the effects of a cost reduction
programme implemented in the last quarter of 2002 become apparent.
Based on preliminary reserve estimates for the Ninotsminda Field, CanArgo has
recorded a write-down of oil and gas properties of $1.6 million. In 2002,
CanArgo increased its interest in the Norio and North Kumisi Production Sharing
Agreement ("Norio") from 50% to 64.2% through a farm-in to the MK72 exploration
well and capitalisation of debt. As a result of the finalisation of respective
equity interest, CanArgo's interest was adjusted to reflect its share of the
carrying net asset value of Norio, and in accordance with US accounting rule SAB
51, CanArgo has recorded a "non-operating" loss of $0.4 million in other
expenses.
During the year, CanArgo approved plans to sell its 50% interest in its retail
operation, CanArgo Standard Oil Products (CSOP), and to dispose of its mobile 3
megawatt duel fuel power plant (generator). The proceeds from these sales will
provide finance for Georgian and Ukrainian development projects. The assets and
liabilities of CSOP and the generator have been classified as "Assets held for
sale" and "Liabilities held for sale" for all periods presented. The results of
operations of CSOP have been classified as discontinued, net of taxes and
minority interest for all periods presented.
Review of Operations
The Company's main production asset is the Ninotsminda field in Georgia. Net
annual oil production after local taxes from Ninotsminda to CanArgo for 2002 was
189,987 barrels with
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field production currently being stable. Drilling has now commenced on a new
horizontal well N4H. The well is being drilled into the central area of the
Middle Eocene reservoir, which is more highly fractured, and where production
rates in the past have been higher. It is being deviated between the N4 and N49
wells that have been two of the field's better producers in the past. The
Ninotsminda Field is a fractured reservoir, which is best exploited through
horizontal drilling, as demonstrated by the previous horizontal well, N98H. The
N4H well is currently horizontal and it is planned to drill the horizontal
section for a total distance of some 740 metres.
In 2002, following the withdrawal of the US power company AES from CanArgo's
exploration programme, it was decided to suspend the two exploration wells, MK72
and M11, focusing the Company's resources on increasing oil production through
horizontal drilling on Ninotsminda, and finding new partners for the exploration
programme. Initial interest has been positive and the company is optimistic that
suitable partners will be found.
The Norio oil exploration well (MK72), was cased at a depth of 2,932 metres in
the Lower Sarmatian. The well is targeting a large structure in the Middle
Eocene, which is potentially an analogue of the nearby Samgori oilfield, from
which some 180 million barrels of oil have been recovered at production rates up
to 70,000 barrels per day. A velocity survey was performed at the current depth
to allow a review and calibration of seismic data in the drilled section, with
the current interpretation predicting the target zone at approximately 4,200
metres. CanArgo successfully increased its equity interest in CanArgo Norio Ltd,
the subsidiary which owns the license to the Norio Block, from 50% to 64.2%
through its funding of well MK72 to date. Also, CanArgo Norio Limited has
successfully won the tender for the oil and gas exploration and production
rights to Block XIG (Tbilisi) and Block XIH (Rustavi) in Eastern Georgia. The
Production Sharing Agreement is currently being negotiated. The Manavi gas
exploration well (M11) was cased at a depth of 4,182 metres at the top of the
Middle Eocene. The well is targeting a large structure in the Cretaceous with
the potential for over 1 trillion cubic feet of gas condensate.
The initial testing programme on the N100 exploration oil discovery was
completed. Although oil was recovered, production rates were deemed to be
non-commercial at this stage. The Company is still considering several options
to enhance productivity, including fracture stimulation of the well in light of
the positive results of injectivity testing and data obtained whilst drilling.
Additionally, the well could provide a potential site for a future horizontal
sidetrack following the results of well N4H, the new horizontal well. N100 has
now been suspended pending further technical review. The well was drilled to
4,927 metres reaching total depth in the Lower Eocene / Paleocene section.
In October 2002 CanArgo announced that it has agreed binding terms for the sale
of its interest in its Georgian gasoline station business, CanArgo Standard Oil
Products ("CSOP"), for a cash consideration of US$ 4 million. A US investment
company has agreed to purchase CanArgo's entire holding in CSOP, with legal
ownership being transferred once all funds are received. Under the terms of the
agreement a non-refundable deposit of $1 million has been paid with the balance
of $3 million due in August, 2003. The sale of CSOP provides a significant
investment return on the disposal of this non-core asset, which represents only
a small part of CanArgo's asset base. CanArgo's investment to date in CSOP has
been US$ 1.94 million, made since April 2000, with the majority of funds being
invested during 2001.
In Ukraine in September 2002 CanArgo announced that it has agreed terms with
Ukrnafta, the Ukrainian State Oil Company, on revisions to the existing Joint
Investment Production Activity ("JIPA") Agreement for the incremental
development of the Bugruvativske Field, and has also reached agreement with a
local Ukrainian oil company on the terms of a farm-in to the JIPA.
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Under the terms of the farm-in agreement, CanArgo's Ukrainian partner will
invest approximately $3 million in the Bugruvativske field over the course of
the next 7 months in order to drill two new horizontal wells and they will bear
the financial risk under the JIPA during this period. The first investment was
made in December 2002. CanArgo can match up to the $3 million invested by its
partner, prior to 31 December 2003, and if it does so in full would own a 34.5%
interest in the JIPA.
In west Ukraine oil production remains steady at approximately 470 barrels per
day (plus associated gas) from the Stynawske oilfield following the initial
workover programme carried out by the joint venture Boryslaw Oil Company (BOC).
CanArgo has now been fully repaid the loan it guaranteed to fund this programme.
BOC is currently in negotiations with the Ukrainian licensing authorities
concerning a forward work programme for the field, and an extension to the
licence agreement.
CanArgo has also recently announced that, following its participation in the
first International Bid Round in Syria, it has won exclusive rights to negotiate
a Production Sharing Contract (PSC) for Block XIX in southern Syria. These
negotiations have now commenced, and award of the PSC is subject to satisfactory
conclusion of these negotiations and ratification of the PSC by the Syrian
Parliament. The block comprises 6,000 km(2) of under-explored acreage in the
Sirhan Basin in the south of the country, bordering Jordan. There are two oil
and gas plays in the block, one Paleozoic and one Mesozoic; these plays have
been successfully exploited in both western Iraq and more recently in
neighbouring north-eastern Jordan. On the successful signing of the PSC it is
planned to acquire seismic data during an initial period in order to identify
leads prior to committing to an exploration drilling programme. CanArgo is
seeking suitable partners to work with on this PSC.
Dr David Robson, Chairman and Chief Executive Officer of CanArgo Energy Corp
said, "2002 has been a challenging year but we are pleased at the value we have
realised by selling our holding of CSOP, increasing our equity in Norio,
progressing our Ukrainian production projects and moving ahead with further
development activity on Ninotsminda. The funds from the sale of CSOP will make a
significant cash boost to the company, allowing us to invest further in our core
business of oil and gas production. Current production from Ninotsminda is
steady, and we look forward to increasing this production through our horizontal
programme. In the latter part of 2002 we began implementing a cost reduction
programme in the UK and in Georgia, and further reductions will be implemented
shortly. We expect to see the effects of this cost-cutting in the second quarter
of 2003 with a significant reduction in G&A costs, direct project costs and
field operating expenses. The agreements on the Ukrainian Bugruvativske project
allow this project to be progressed with outside investment, and with our
partner bearing the initial financial risk. We will continue to seek farm-in
partners for our two high potential exploration wells that we have suspended.
These remain very good prospects. Additionally the Syria project offers us the
chance to diversify our asset base and expand into a prolific
hydrocarbon-producing area."
CanArgo Energy Corporation is an independent oil and gas exploration and
production company. CanArgo's principal oil and gas operations are located in
the republic of Georgia and Ukraine.
The matters discussed in this press release include forward looking statements,
which 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. Such risks, uncertainties and other factors include
the uncertainties inherent in oil and gas development and production activities,
the effect of actions by third parties including government officials,
fluctuations in
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world oil prices and other risks detailed in the Company's reports on Forms 10-K
and 10-Q filed with the Securities and Exchange Commission. The forward-looking
statements are intended to help shareholders and others assess the Company's
business prospects and should be considered together with all information
available. They are made in reliance upon the safe harbor provisions of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company cannot give assurance that the
results anticipated herein will be attained.
For further information, contact:
Julian Hammond
Investor Relations
CanArgo Energy Corporation
Tel: +44 (0) 20 7808 4700
Fax: +44 (0) 20 7808 4747
E-mail: info@canargo.com
web: www.canargo.com
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CANARGO ENERGY CORPORATION
PRELIMINARY RESULTS FOR THE YEAR AND THREE MONTH PERIOD
ENDED DECEMBER 31 DECEMBER, 2002
CONSOLIDATED STATEMENT OF OPERATIONS
EXPRESSED IN UNITED STATES DOLLARS
UNAUDITED UNAUDITED
---------------------------- ----------------------------
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating Revenues from Continuing Operations:
Oil and gas sales $ 1,003,351 $ 147,393 $ 4,163,201 $ 3,967,078
Refining -- 614,117 -- 2,595,763
Other 14,588 608,032 1,412,741 608,032
------------ ------------ ------------ ------------
1,017,939 1,369,542 5,575,942 7,170,873
------------ ------------ ------------ ------------
Operating Expenses:
Field operating expenses 396,614 1,974 1,537,917 1,568,011
Purchases of crude oil and products -- 1,123,547 -- 1,451,083
Refinery operating expenses -- (55,794) -- 791,139
Direct project costs 270,380 363,593 1,428,638 1,300,423
Selling, general and administrative 948,310 1,052,880 3,652,262 3,741,826
Depreciation, depletion and amortization 715,594 725,505 2,316,921 3,249,962
Impairment of oil and gas properties 1,600,000 7,300,000 1,600,000 7,300,000
Impairment of other assets -- 3,859,795 -- 3,859,795
Loss on disposition of assets 10,725 16,130 10,725 16,130
------------ ------------ ------------ ------------
3,941,623 14,387,630 10,546,463 23,278,369
------------ ------------ ------------ ------------
OPERATING LOSS FROM CONTINUING OPERATIONS (2,923,684) (13,018,088) (4,970,521) (16,107,496)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest, net 703 (4,614) 32,413 642,216
Other 69,538 (113,527) (654,850) (74,796)
Equity income from investments (50,425) (234,292) 86,059 (160,000)
------------ ------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSE) 19,816 (352,433) (536,378) 407,420
------------ ------------ ------------ ------------
NET LOSS BEFORE MINORITY INTEREST (2,903,868) (13,370,521) (5,506,899) (15,700,076)
Minority interest in income (loss) of consolidated
subsidiaries 10,286 1,954,500 7,986 2,138,163
------------ ------------ ------------ ------------
NET LOSS FROM CONTINUING OPERATIONS $ (2,893,582) $(11,416,021) $ (5,498,913) $(13,561,912)
============ ============ ============ ============
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF TAXES AND MINORITY INTEREST (2,178) 214,559 171,212 343,566
------------ ------------ ------------ ------------
NET LOSS (2,895,760) (11,201,462) (5,327,701) (13,218,346)
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME:
Foreign currency translation (93,270) -- 4,668 --
------------ ------------ ------------ ------------
COMPREHENSIVE LOSS $ (2,989,030) $(11,201,462) $ (5,323,033) $(13,218,346)
============ ============ ============ ============
Weighted average number of
common shares outstanding 97,356,206 92,008,446 96,643,744 83,869,579
------------ ------------ ------------ ------------
NET LOSS PER COMMON SHARE - BASIC AND DILUTED
- from continuing operations $ (0.03) $ (0.12) $ (0.06) $ (0.16)
- from discontinued operations $ (0.00) 0.00 $ 0.00 0.00
------------ ------------ ------------ ------------
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.03) $ (0.12) $ (0.06) $ (0.16)
------------ ------------ ------------ ------------
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CONSOLIDATED BALANCE SHEET UNAUDITED
EXPRESSED IN UNITED STATES DOLLARS -------------------------
AS OF
DECEMBER 31, DECEMBER 31,
2002 2001
----------- -----------
Cash and cash equivalents $ 1,598,304 $ 5,891,038
Assets held for sale 8,095,947 $ 6,355,036
Other current assets 879,834 $ 4,811,115
Capital assets 59,702,525 $52,535,420
Investments in and advances to oil and gas and other ventures - net 459,308 $ 719,308
----------- -----------
Total Assets $70,735,918 $70,311,917
=========== ===========
Liabilities held for sale 2,351,965 $ 1,177,174
Other current liabilities 2,637,041 $ 1,289,682
Provision for future site restoration 122,290 $ 64,290
Minority interest in subsidiaries 3,519,342 $ 1,981,191
Stockholders' equity 62,105,280 $65,799,580
----------- -----------
Total liabilities and stockholders' equity $70,735,918 $70,311,917
=========== ===========
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