CanArgo Awards Underbalanced Drilling Contract to Weatherfor

CanArgo Energy has signed a contract with WEUS Holding Inc., a subsidiary of Weatherford International, for Weatherford to supply Under Balanced Coiled Tubing Drilling ("UBCTD") services to CanArgo's projects in the Republic of Georgia.

Under the terms of the contract Weatherford will supply and operate a UBCTD unit to be used on a program of up to 14 horizontal wellbores on CanArgo's Ninotsminda and Samgori Fields in Georgia. In addition the unit will be used to deepen and test CanArgo's recent Manavi M11 Cretaceous oil discovery.

A special coil and spool is required for the project, and following construction of this in the United States, the unit will be mobilized to Georgia. It is expected that the unit will be in Georgia by September ready to commence work on Manavi 11, the first well of the program. Meanwhile CanArgo will be preparing the wells for the arrival of the unit. This preparatory work includes the sidetracking of Manavi M11, which has just commenced, and the drilling of a new vertical well (S302) on the central part of the Samgori Field, which is expected to commence within the next month.

This program will develop further the experience gained by CanArgo in its recent conventional horizontal drilling program on the Ninotsminda Field. The use of under balanced drilling techniques has been shown to result in significantly less formation damage, resulting in higher sustained production rates and ultimate recovery. Utilization of coiled tubing drilling gives greater flexibility in the drilling process and in the control of the horizontal section. Although UBCTD is now used commonly in North America, with significant success, these techniques have not yet been applied in the Former Soviet Union, and it is anticipated that the use of this state of the art technology will significantly increase oil production in the Ninotsminda and Samgori Fields.

Dr. David Robson, President and CEO of CanArgo, said, "We are extremely pleased to have concluded this contract with Weatherford to bring UBCTD to Georgia. Weatherford are the world leader in this field, and I am confident that with their help we can find the best way to develop and produce our fields in Georgia, as well as appraise our Manavi oil discovery. I look forward to the work commencing."

"We are very pleased to be working with CanArgo on a project of this magnitude," said Darrell Johnson, Vice President, Weatherford Underbalanced Systems. "This is the largest Underbalanced Coiled Tubing Drilling ("UBCTD") services contract we've been awarded to date, and the contract is a sign of the growing adoption of underbalanced technology in applications outside North America. We are looking forward to working with CanArgo on the successful introduction and application of UBCTD in this market."