Canoro Reports Prospective Resource Estimates for Amguri and AA-ON/7

Canoro Resources announces prospective resource estimates for its Amguri oil and gas field, and five independent prospects on its AA-ON/7 exploration block. The Amguri best estimates of in place resources are 143 mmbbls of oil, 9 mmbbls of condensate, and 294 bcf of gas. Combined, the best estimate for Amguri recoverable resource is 78 mmboe. The AA-ON/7 best estimates of in place resource for oil is 313 mmbbls oil and 1.0 tcf of gas. Combined, the best estimate for AA-ON/7 recoverable resource is 172 mmboe.

The prospective resource estimates were prepared by Canoro's independent evaluator, Sproule International Ltd., with an effective date of May 24, 2006. The resource estimates presented are based on prospective resources as defined in the Canadian Oil and Gas Evaluation Handbook as those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. They are assumed to be technically viable and economic to recover. A probability-weighted approach was employed in the calculation of these quantities, including statistical distributions of reservoir parameters and areal extent.

Prospective resources offer less certainty than a reserves report. As such, Sproule has also been commissioned to prepare a reserves report for Amguri, which is anticipated to evaluate only a limited drainage radius for the producing zones in Amguri wells 5, 6 and 8A. It is expected that the reserves report will be available with the announcement of Canoro's year-end financial results at the end of July.

Amguri Development Field (60% Operated Interest)

Canoro's Amguri development block, in the prolific Assam/Arakan basin of northeast India, is 52.75 km2 gross (31.65 km2 net) in area. The block contains the previously discovered Amguri oil and gas field. Nine wells were drilled on the block with one well producing minor amounts of gas when Canoro became operator in November 2004. Canoro re-entered four wells and successfully re-established production from the Barail in two wells, uncovered an additional productive Barail gas zone in the third, and converted the fourth into a water injection well.

Amguri is currently producing from the Tipam Sandstone (Miocene age) and the Barail Sandstone (Oligocene age), with additional hydrocarbons previously tested in the Basal Sandstone (Paleocene age). These three formations, plus a fractured basement structural high, which is productive in a nearby field, provide the basis of the prospective resources estimate. Additional prospective formations that are producing in nearby fields were not included at this time.

Amguri Probabilistic Estimate of Prospective Resources(1)


------------------------------------------------------------------------
                                             Low         Low       Best
                                        Estimate    Estimate   Estimate
                                Zone    In Place Recoverable   In Place
------------------------------------------------------------------------
Oil (mmbbls)                  Barail
                          Basal Sand
                            Basement          66          20        143
------------------------------------------------------------------------
Condensate (mmbbls)           Barail           5           2          9
------------------------------------------------------------------------
Natural Gas (bcf)              Tipam
                              Barail         197         107        294
------------------------------------------------------------------------
Barrels Oil Equivalent
 (mmboe)                         All         104          40        201
------------------------------------------------------------------------



------------------------------------------------------------------------
                                            Best      High         High
                                        Estimate  Estimate     Estimate
                                     Recoverable  In Place  Recoverable
------------------------------------------------------------------------
Oil (mmbbls)                                  46       239           80
------------------------------------------------------------------------
Condensate (mmbbls)                            4        14            6
------------------------------------------------------------------------
Natural Gas (bcf)                            167       407          237
------------------------------------------------------------------------
Barrels Oil Equivalent
 (mmboe)                                      78       321          126
------------------------------------------------------------------------
(1)Unrisked


 

These estimates are based on current well results and interpretation of 2D seismic data, and could be revised after the interpretation of a recently completed 3D survey. As these prospective resources are within the Amguri field boundary, Canoro expects a reasonably high chance of success in developing this resource to its full potential.

AA-ON/7 Exploration Block (50% Operated Interest)

Canoro's AA-ON/7 exploration block, also in the Assam/Arakan basin of northeast India, is 1,445 km2 gross (722.5 km2 net) in area. The block contains the 1973 Dergaon gas discovery. In February 2005, Canoro re-entered the Dergaon well and confirmed that there are producible hydrocarbons in the Cretaceous formation. This set the stage for a 340 km 2D seismic acquisition program on the western half of the block around the discovery. Interpretation of the seismic led to five different prospects in this portion of the block. The interpretation results, the results of the Dergaon re-entry and other data from the block were utilized for the prospective resource estimates of the five independent prospects on the AA-ON/7 block presented below.



AA ON/7 Probabilistic Estimate of Prospective Resources(1)


------------------------------------------------------------------------
                                             Low         Low       Best
                                        Estimate    Estimate   Estimate
                            Prospect    In Place Recoverable   In Place
------------------------------------------------------------------------
Natural Gas (bcf)      #1 Cretaceous          40          21        560
------------------------------------------------------------------------
Natural Gas (bcf)           #2 Tipam          63          39        439
------------------------------------------------------------------------
Oil (mmbbls)       #3 Barail Subcrop          48          12        195
------------------------------------------------------------------------
Oil (mmbbls)       #4 Barail Channel          26           6         84
------------------------------------------------------------------------
Oil (mmbbls)            #5 Fractured
                            Basement           9           2         34
------------------------------------------------------------------------
Total Barrels
 Oil Equivalent
 (mmboe)                         All         100          30        480
------------------------------------------------------------------------



------------------------------------------------------------------------
                                            Best      High         High
                                        Estimate  Estimate     Estimate
                                     Recoverable  In Place  Recoverable
------------------------------------------------------------------------
Natural Gas (bcf)                            299       725          384
------------------------------------------------------------------------
Natural Gas (bcf)                            272       638          393
------------------------------------------------------------------------
Oil (mmbbls)                                  48       232           57
------------------------------------------------------------------------
Oil (mmbbls)                                  21       106           26
------------------------------------------------------------------------
Oil (mmbbls)                                   8        42           10
------------------------------------------------------------------------
Total Barrels
 Oil Equivalent
 (mmboe)                                     172       607          223
------------------------------------------------------------------------
(1)Unrisked


 

The five prospects identified above, illustrate the significant hydrocarbon potential of this exploration block. This estimate does not include any potential on the block in the eastern sub-thrust areas, which has yet to be evaluated by Canoro.

The Directorate General of Hydrocarbons (the regulatory body overseeing the upstream oil and gas sector in the Republic of India) has not reviewed the prospective resource estimates, but will be briefed on the results shortly.

Additional Information as Required under NI 51-101

The production sharing contract (PSC) for Amguri expires on November 26, 2028, while the PSC for AA-ON/7 expires March 26, 2008. If a commercial discovery is made on AA-ON/7, the PSC will continue its primary term until March 26, 2026. Both PSCs contain extension provisions beyond their primary term.




------------------------------------------------------------------------
                                Cretaceous       Tipam           Barail
                                                         Erosional Edge
------------------------------------------------------------------------
Geologic Age                    Cretaceous     Miocene        Oligocene
------------------------------------------------------------------------
Lithology                        sandstone   sandstone        sandstone
------------------------------------------------------------------------
Nearest Production          East Lakhibari      Amguri           Amguri
                                    (60 km)     (45 km)          (45 km)
------------------------------------------------------------------------
Depth of Zone Top                  1,700 m     1,000 m          1,200 m
------------------------------------------------------------------------



------------------------------------------------------------------------
                            Barail Channel           Fractured Basement
------------------------------------------------------------------------
Geologic Age                     Oligocene                  Precambrian
------------------------------------------------------------------------
Lithology                        sandstone            fractured granite
------------------------------------------------------------------------
Nearest Production           Amguri (45 km)    Borholla/Champang (20 km)
------------------------------------------------------------------------
Depth of Zone Top                  1,300 m                       1,500m
------------------------------------------------------------------------

Based on Canoro's evaluation of offsetting wells and currently available seismic, it is estimated that the Barail and fractured basement prospects have a chance of success of approximately 1 in 4, which is inline with basin statistics. In addition, Canoro expects a greater chance of success for the Cretaceous and the Tipam prospects, based on Dergaon 1 results and seismic indications.

The gross well cost for all exploration wells is estimated to be US$3.5 million, as the wells are planned to be drilled to basement to test secondary targets not included in the table, even though the primary targets vary in depth. The gross well cost for the Amguri wells is estimated to be US$5 million.

Under the terms of both PSCs, Canoro is entitled to receive world prices for any oil production. Oil production from Amguri is being trucked, but a main oil line with spare capacity is located approximately 11 km away. Canoro is currently negotiating a gas sales contract with an anticipated price of approximately US$2.07/mcf for sales from Amguri. Under the PSC, Canoro is entitled to sell gas at market prices. The gas is being tied-in to a main gas line located on the Amguri block with the first sales of Amguri from the newly worked over wells anticipated in June. Both the main oil and gas lines also run near the AA-ON/7 block.

Canoro is a Canadian-based international oil and gas company operating in the prolific Assam/Arakan basin of northeast India. The Company has restored production from the suspended Amguri oil and gas field. Canoro is the operator of Amguri and has a 60% working interest. Canoro is the operator with a post-farmin 50% working interest in the 1,445 km2 AA-ON/7 exploration block, and has a post-farmin 15% non-operated working interest in the 295 km2 AA-ONN 2003/02 exploration block. On AA-ON/7, ONGC can elect to back-in for a 30% interest in any commercial discovery, reducing Canoro's interest to 35%. Common shares of Canoro trade on the TSX Venture Exchange under the symbol 'CNS'.

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