The Kumisi #1 well, which commenced drilling on February 7, is currently drilling ahead at a depth of 7,034 feet (2,144 meters) in the Lower Eocene. Some gas shows were observed whilst drilling through the Middle Eocene section, which is the primary reservoir in the nearby Samgori and Ninotsminda Fields. The Cretaceous sequence, the top of which is prognosed to be at a depth of approximately 9,845 feet (approximately 3,000 meters), is the primary target in the well which is being drilled to appraise a potentially large gas condensate discovery made in Soviet times but not tested. It is planned to set a 7" (178 mm) casing above the Cretaceous prior to drilling ahead to the target depth of 12,140 feet (3,700 meters) which is expect to be reach in June.
At the Manavi M12 location, preparations are progressing for the planned acid stimulation of the reservoir and the resumption of the testing program. The chemicals for the acidization have arrived from Germany and are currently being delivered to the site. Due to the depth of the reservoir interval being tested, it was necessary to add an extension to the coil tubing available in-country for the job, however, a failure of the western supplied coil connector during function testing, has forced a delay to the operation while a replacement coil and unit are delivered by Schlumberger to Georgia. The replacement coil, which is of sufficient length, is also of larger diameter and this will enable the chemicals to be pumped at a higher velocity and rate that will enhance the treatment process. It will also allow greater pressure to be applied during the acid squeeze and together this will ensure the stimulation program is performed in an optimum manner and given the greatest chance of success. The coil tubing unit is currently being mobilized from Turkey and the coil is due to be shipped shortly from Italy and will take about two - three weeks to be delivered to Georgia. On this basis, the testing program is expected to recommence in approximately one month.
At the Ninotsminda Field, after a further review of possible workover candidates in the eastern part of the Field, CanArgo Rig #1 has been mobilized to the N52 well. CanArgo believes that the eastern part of the Ninotsminda Field has the greatest potential for additional production and is relatively un-drained. The N52 well was drilled in 1987 but never produced due to the loss of several hundred meters of tubing in the hole, which is believed to be in a number of parts. It is located to the south east of the N98H well, which has produced at a stable rate and with low water cut in excess of 445,000 barrels of oil to date. The planned operations on N52 are to recover the fish, perforate the Middle Eocene reservoir interval and put the well on production. The main risk concerns the magnitude of the fishing operation while the well itself is suitably placed to exploit unswept oil in this relatively under developed part of the field.
In accordance with Section 601(b) of the American Stock Exchange Company Guide, we understand that the Company is required to disclose that in respect of the Company's 2006 audited financial statements, the audit opinion issued in the auditors independent report contained additional explanatory language to the standard audit report in respect of the Company's ability to continue as a going concern. The independent audit report has previously been publicly disclosed in our financial statements contained in the Company's 2006 Annual Report on Form 10-K and is available at www.sec.gov.
CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in Georgia and in the Republic of Kazakhstan.
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