CanArgo Reports an Increase in Reserves at the Ninotsminda F

CanArgo Energy reports that gross total proved oil reserves at its Ninotsminda Field in the Republic of Georgia at January 1, 2004 have increased by 63% to 6.76 million barrels.

The reserves appraisal report effective January 1, 2004 was prepared by Oilfield Production Consultants (OPC), independent petroleum consultants, in accordance with SEC classifications and guidelines. Gross total proven oil reserves for the Ninotsminda Field increased from 4.15 million barrels (mmbbls) at the end of December 2002 to 6.762 mmbbls at January 1, 2004. Over the same period, natural gas reserves, on an energy equivalent basis, decreased from 1.34 million barrels of oil equivalent (mmboe) to 0.51 mmboe.

The significant increase in recoverable oil reserves results primarily from the completion of a dynamic reservoir model during the year and the implementation of a successful development programme based on horizontal drilling. However, recovery of these reserves is dependent on application of optimal production levels for the Ninotsminda wells and further application of horizontal drilling techniques. Independent petroleum engineering specialists recommend that the optimal long-term production rate for these horizontal wells be of the order of 500 bopd. In order to maximise productivity and recoverability from the field, wells are being choked back to the approximate recommended levels while it is planned that future horizontal wells should be drilled under-balanced (i.e. producing whilst drilling) using coiled tubing once this is available in the country.