CDS Completes Resource Audit in Paraguay

CDS Oil & Gas Group plc said that it has received revised Prospective Resource valuation studies for two of its prospects in northwest Paraguay: the Emilia Well Area on the Boqueron Block and the Gabino Mendoza Block.

The company commissioned studies of the Emilia oil prospect and the Independencia deep gas prospect from CAS International LLC (Collarini) of Houston, Texas, to evaluate the extent of each target and its potential productivity. The expected resource potential in the area of the Emilia well is estimated at 729 MBbl/well (mean average). Although several other potential Emilia look-alike Prospective Resources are possible within the Boqueron block only the Emilia was studied by Collarini who have concluded that the reservoir is potentially more productive than originally thought. However, due to lack of data at this stage they can only map a restricted area and, accordingly, the Prospective Resources at Emilia are estimated (Best Estimate) at 27.2 MMBbl OOIIP and 6.4 MMBbl recoverable. Collarini's Best Estimate of the Emilia Well Potential is focused on a prospective area of 143 hectares.

The Scott Pickford report based its analysis at the Emilia well from two seismic lines and the data from a Pennzoil well drilled in 1972. Collarini have used an industry standard approach, using the same basic data as Scott Pickford to derive a P50 risked resource over a smaller but more productive acreage.

For example, at Emilia, the Scott Pickford report indicated 12,000 Bbl per acre of mean recoverable reserves, while the Collarini report indicates 18,000 Bbl per acre of mean recoverable for the same reservoir, greatly improving the possible recoverable oil in place.

In the case of the Gabino Mendoza Block, the Collarini Best Estimate Prospective Resource potential is 142 BCFG (6.56 BCFG/well mean average) in a 1,401 hectare area around the CDS-GM-05-5001 well which was drilled in December 2005. The Gabino Mendoza Block covers an area of 40,000 hectares. Scott Pickford did not estimate any recoverable resources on this block in the Competent Persons report.

John Bentley, Chairman of CDS stated: "We are pleased with the results of the study as it enhances and confirms our confidence in the potential for the Paraguayan properties."

The Collarini report, with its methodology, gives validity to the productive qualities of the reservoir, both at Emilia for oil and for the deep gas case at Independencia. But, it also indicates that more work needs to be done by CDS to be able to analyse more fully the underlying stratigraphy and to resolve the lateral stratigraphic extent or structural trap for each case.

All estimates are probabilistic estimations using generally accepted industry "Monte Carlo" simulation method. The estimation should be viewed within context of the reports "Prospective Hydrocarbon Resource Evaluation in and related to Boqueron Block" and "Prospective Hydrocarbon Resource Evaluation in and related to Gabino Mendoza Block", both dated 1 September 2006. A copy of the complete report can be viewed on the CDS website www.cdsogg.com. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering data, and all conclusions represent only informed professional judgments.

The definition of Prospective Resources is as follows: The potential volume of hydrocarbon that could be commercially produced from an as yet undiscovered field.

The summary set out above of the results of the Collarini Associates study has been reviewed for CDS by Steven L. Veal,. Mr Veal is a petroleum geologist with more than 26 years experience in the petroleum and natural gas industries and is a member, and former Vice President and Treasurer, of the American Association of Petroleum Geologists and a Fellow of the Royal Geological Society, London.