Westmount Energy to Participate in CDS' Paraguay Project

CDS Oil & Gas Group has agreed a £500,000 Convertible Loan from Westmount Energy Limited, the Jersey, Channel Islands, based independent energy investment company quoted on AIM, to assist the funding of its exploration program in the Chaco Basin in northwest Paraguay.

The Loan is repayable on December 29, 2006, but in lieu of repayment, Westmount has the option, at any time prior to December 29, 2006 to elect to subscribe for, and apply the amount of the Loan by subscribing for and paying up five million new ordinary shares of 1p each in CDS at a subscription price of 10p per share. Westmount will waive any interest and CDS will simultaneously procure the issue to Westmount of Warrants to subscribe for a further five million new ordinary shares of 1p each in CDS at 10p per share for a period of one year.

In the event Westmount has not exercised its rights as outlined above by December 29, 2006 it has agreed to apply the Loan (including accrued interest thereon) in paying up and automatically subscribing for on December 29, 2006, such number of new ordinary shares of 1p each in CDS as shall be found by dividing the aggregate amount of the Loan and accrued interest by the "Average Price" (namely the average mid-market price per share of an Ordinary Share of 1p in CDS as traded on AIM for the previous 14 trading days prior to the December 29, 2006) less 5% thereof.

CDS is a UK company which, through its Paraguayan subsidiary, CDS Energy S.A., is pursuing the exploration and development potential of three blocks covering a large area (7.22 million acres or 29,210 km²) of North West Paraguay in South America.

CDS has a 100% working interest in all three blocks, which include the 400 square kilometers Gabino Mendoza Block, the 4,911 square kilometers PG&E Block and the 23,899 square kilometers Boqueron Block. These blocks include substantial exploration opportunities in a large prospective area in the eastward extension of the Chaco Basin within Paraguay. CDS recently announced that it has reached the planned depth of 1,635 meters on its first well which has now been cased and suspended for further evaluation.

The well, which was spudded on November 25, 2005, is located 200m southeast of the Independencia 1 well drilled in 1993 on the Gabino Mendoza block, which was in turn a re-entry of the Mendoza 1-R well drilled by Pure Oil in 1959. The primary objective of the new well was a potential oil-bearing zone between 705 meters and 1,600 meters, identified by CDS through its interpretation of seismic data and the well logs of previous drilling operations.

Commenting on the investment from Westmount, John Bentley, Chairman of CDS, said:
"We are very pleased to have the support of Westmount Energy, which has a successful track record of investing in small oil and gas companies with early stage exploration opportunities. It is a great vote of confidence in the potential of our acreage in Paraguay and of CDS's opportunities for growth."

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