Transeuro Signs LOI for Exploratory Drilling in Armenia

Transeuro Energy Corp.

Vancouver-based Transeuro Energy Corp. said that it has signed a letter of intent (LOI) with High Arctic Energy Services (HAES) for the provision of a drilling rig plus associated equipment to drill three exploration wells in Armenia.

Transeuro has completed the initial study phase of the exploration operations in Armenia and has collated and interpreted all the historical data. The company has contracted AESP, the local seismic acquisition company to provide an additional 131 km of 2D seismic in the Oktemberian region in the west of the country, where 2 gas prospects have been identified. The survey is expected to start later this month. The old seismic data in the area have been reprocessed and will be integrated with the new data to update the structural interpretation over the prospects and to finalize the drilling locations for the first two wells in the program.

Under the provisions of the LOI, HAES has committed to providing the drilling rig in country, ready to commence drilling on the first location by 1st February 2007. The first well is located on the Kamir prospect and is planned to drill down to around 2,500m to test the Lower Sand Clay (LSC) and Lower Multi-colored Suite (LMS) where previous wells have produced gas to surface and have shown hydrocarbon saturations on wireline logs. Underbalance drilling techniques will be used to minimize drilling damage and to maximize production rates.

The second well will test the Southwest Oktemberian prospect located updip of the known gas in the Karmir structure. The structure is delineated by seven shallow wells drilled over an area of 8 square kilometers during the 1960s and 1970s. An independent petrophysical review of the well logs suggests numerous possible gas reservoirs in the LSC from 320-860m, with over 40m of net pay that were never tested, and additional untested reservoirs in the LMS. The well will be drilled down to 2,500m to test these and deeper sands that are identified as potentially hydrocarbon bearing in offset wells.

Following success in the initial seismic programme with AESP, Transeuro intends to survey the Shorakhpur area where previous wells are reported to have recovered oil and indicated hydrocarbon saturations on wireline logs. A third well is planned, either on the oil prospect or in the Oktemberian region.

Program expenditures will be finalized under the formal drilling contract to be entered into between the parties. Transeuro Energy Corp. is involved in the acquisition of petroleum and natural gas rights, the exploration for, and development and production of crude oil, condensate and natural gas. The company's properties are located in Canada, Armenia, Papua New Guinea, and Ukraine.