CanArgo Energy Outlines Georgian Drilling Program

CanArgo Energy revealed its planned Georgian drilling program for the remainder of 2004.

This program is focused on further horizontal development wells on the Ninotsminda Field, commencement of the horizontal development program on the Samgori Field and appraisal of the Manavi oil discovery.

The program will be based around the utilization of Under Balanced Coiled Tubing Drilling (UBCTD) to optimally drill the development wells. This technique, which is used internationally but has so far not been applied in Georgia, involves drilling the wells using coiled tubing, rather than conventional drillstring, and producing the wells whilst drilling. This technique will minimize formation damage, increase the potential length of the horizontal section, and reduce the risk of fracturing the reservoir down to the water zone when drilling the wells. As a result production levels for the horizontal wells should be optimized. Negotiations are underway with an internationally renowned oilfield service company which specializes in such work. Coiled tubing is also planned to be used on the Manavi M11 well which almost certainly will require a sidetrack due to collapse of the production tubing during the initial testing of the Cretaceous oil discovery. The UBCTD unit will need to be mobilized to Georgia. However the coil and spool will first need to be specially manufactured for this program. As such, it is unlikely that the unit will be ready to commence the program before August, but once work begins each well should take no longer than three weeks to complete. In the interim period CanArgo will start preparation work using its conventional rigs on the target wells for the UBCTD. This will involve milling a suitable window to drill the horizontal section, and in some instances sidetracking the well to the top of the Middle Eocene reservoir. It is also planned to used conventional drilling techniques on the Manavi M11 well to sidetrack the well to the top of the Middle Eocene.

In order to minimize mobilization and other costs per well, a program of up to 15 well bores is planned for the UBCTD unit. Five of these are planned on the Ninotsminda Field, and the remainder on the Samgori Field. The Ninotsminda wells include well N22, the eastern multilateral from well N100, and the eastern step out well N99. Certain conditions need to be satisfied before CanArgo takes over its planned 50% interest in the Samgori Field and Block XIB Production Sharing Contract, but it is hoped that these conditions will be satisfied in the near future. However technical discussions are already underway with respect to identifying the candidate wells for horizontal sidetracks on the Samgori Field, as is the extension of the Ninotsminda Field dynamic reservoir model over the Samgori area and it is expected that this will integrate with and direct the planned UBCTD program.

In addition to the planned Manavi M11 sidetrack, at least one appraisal well (M12) is planned on the Manavi oil discovery this year. A location has been chosen and negotiations are underway with an international drilling contractor to supply a high technology drilling rig equipped with a 'Top Drive' drilling system to drill this well. Utilizing this equipment for what is planned to be a 5,000 meter well should result in faster drilling times than utilizing CanArgo's existing equipment which will be focused on preparation work for the UBCTD program. The M12 well is expected to spud in June/July.

Regarding the recent news from Georgia concerning the semi-autonomous region of Adjara in southwestern Georgia. CanArgo points out that this dispute is localized in that area and that it has no affect on its operations which continue to progress as normal. Dr David Robson, Chief Executive Officer commented; "We have an exciting and aggressive program in Georgia for the remainder of this year, focused both on development of our producing fields and on appraisal of our Manavi discovery. I believe that the use of high technology equipment will ensure that we can achieve the optimum production rates from our development program, and minimize drilling times in our appraisal activities. We have a considerable amount of preparation work to do for the UBCTD program and we will be commencing this work imminently, but this does mean that we will not be bringing on-stream any new production wells before the UBCTD unit arrives. We have extremely attractive opportunities in Georgia right now and I believe we should move forward quickly to develop these opportunities. To progress this program we require our shareholders to support the expansion of the Company's authorized share capital at the Special Shareholders' Meeting planned for 23rd March. I urge any of our shareholders who have not yet returned their proxy form to do so as the last day to return this in Norway is Wednesday 17th March and Monday 22nd March in the United States. I look forward to implementing this exciting program in 2004."