Centurion Energy International Inc.
TSX : CUX
AIM : CUX.L

Centurion Energy International Inc.

May 15, 2006 08:30 ET

Centurion Announces Q1 2006 Results

CALGARY, ALBERTA--(CCNMatthews - May 15, 2006) - Centurion Energy International Inc. (TSX:CUX) (AIM:CUX.L):

Not for distribution to United States newswire services or for dissemination in the United States.

Centurion Energy International Inc., an independent oil and gas exploration and production company, operating principally in the Egyptian Nile Delta, today announces its 2006 first quarter report. Centurion is listed on the Toronto (symbol: CUX) and London AIM (symbol: CUX.L) stock exchanges. The unaudited interim consolidated financial statements and management's discussion and analysis included in this report have been prepared by management and approved by Centurion's Audit Committee on behalf of the Board of Directors.

Highlights

- Cash flow from Centurion's continuing operations (Egypt) totaled $22.8 million ($0.25 per share diluted) during Q1, 2006 compared to $12.2 million ($0.13 per share diluted for Q1, 2005.

- Earnings for Centurion's continuing operations (Egypt) totaled $11.5 million ($0.12 per share diluted) during Q1, 2006 compared to $4.3 million ($0.05 per share diluted) in Q1, 2005.

- Production for the first quarter 2006 increased approximately 25% to 32,455 boe per day compared to the fourth quarter 2005 of 25,885 boe per day.

- Acquired an additional 25% working interest in the West El Manzala and West El Qantara Exploration Concessions, then entered into a farm-in and LNG cooperation agreement with two subsidiaries of Royal Dutch Shell PLC to sell 50% working interest in the Concessions for US$15 million plus their share of exploration and development costs, with an additional US$245 million in conditional payments.

- Signed the Production Sharing Contract and Joint Operating Agreement for the Nigeria/Sao Tome Joint Development Zone (7.5 percent net working interest).

- A conditional purchase and sale agreement with a private U.S. corporation was terminated in April 2006, which resulted in the refund to Centurion of its US$11.3 million deposit and payment to Centurion of a break-fee payment of US$7.4 million (before tax).

This report contains certain forward looking statements that are subject to risks and uncertainties, and actual performance or results may vary from potential performance or results that are stated in this report. These risks and uncertainties include the risk that planned drilling programs may not be successful and may not result in an increase in reserves to the extent set out herein. Additional risks associated with the Company's operations are set out in its Annual Information Form.

All financial information is reported in Canadian dollars and is in accordance with Canadian generally accepted accounting principles (GAAP) unless otherwise noted. The financial measures of cash flow from operations and cash flow per share referred to in this report and Management's Discussion and Analysis (MD&A) are not recognized measures under GAAP.

Natural gas has been converted into barrels of oil equivalent (boe) at 6:1. The abbreviation boe, boe per day and mboe disclosed in this report and MD&A may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf: 1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.



Financial Summary
(In thousands of Canadian dollars, except per share amounts)

------------------------------------------------------------------------
Three months ended Three months ended
March 31, 2006 March 31, 2005
------------------------------------------------------------------------
Cashflow

Continuing operations 22,782 12,199
Discontinued operations(1) - 6,219
Corporate total 22,782 18,418
Basic per share - continuing operations $0.26 $0.14
Diluted per share - continuing operations $0.25 $0.13
Basic per share - corporate $0.26 $0.22
Diluted per share - corporate $0.25 $0.20

Earnings

Continuing operations 11,543 4,327
Discontinued operations(1) - 2,947
Corporate total 11,543 7,274
Basic per share - continuing operations $0.13 $0.05
Diluted per share - continuing operations $0.12 $0.05
Basic per share - corporate $0.13 $0.08
Diluted per share - corporate $0.12 $0.08
------------------------------------------------------------------------
(1) Discontinued Operations pertain to assets in Tunisia sold effective
April, 2005


Production Summary for the Three Months Ended March 31, 2006

------------------------------------------------------------------------

Natural Total Average
Gas Condensate LPG's Oil Q1 BOE Q1 BOE/D
Field (mmscf) (bbls) (bbls) (bbls) (6:1) (6:1)
------------------------------------------------------------------------
El Wastani 12,577 336,292 81,939 - 2,514,448 27,938
South Manzala 2,021 - - - 336,851 3,743
Hana and
West Gharib - - - 69,626 69,626 774
Corporate Total 14,598 336,292 81,939 69,626 2,920,925 32,455
------------------------------------------------------------------------


OPERATING HIGHLIGHTS

Egypt

El Manzala Concession

El Wastani and El Wastani East Development Lease (Centurion 100% WI)

Construction of a major Company-operated gas processing facility was the focus of operations in El Wastani during the first quarter along with the drilling of two wells.

The Company has made significant progress towards processing all of its own gas in the development lease, a process which began in 2005 with the construction of a Joule-Thompson (JT) plant to produce sales gas and condensates from the majority of its field output. The remaining produced gas continues to be processed at the third party-operated Abu Madi gas plant, approximately 20 kilometers west of the El Wastani lease.

In 2006 work has progressed on the second phase of the project aiming at the commissioning of a Mechanical Refrigeration Unit (MRU) capable of processing all of Centurion's gas and recovered condensates. The foundations for the MRU have been completed and 75% of the equipment is installed; commissioning of the plant is expected to commence near the end of July.

The final phase of the facility's work will entail the commissioning of a Turbo-Expander Unit in late 2006, which will enhance the recovery and added sales of LPG's. Upon completion, the Company expects to realize increased LPG revenues and reduce processing fees paid to third parties.

Activity also continued in developing the field's multiple reservoirs. The well EW-10 which had reached total depth at the end of 2005 was completed in the Lower Abu Madi formation and brought on-stream at a rate of 6 mmscf per day plus 150 barrels of condensate per day.

The well EW-12 was spud in early January 2006 in the interior of the development lease. The well reached a total depth of 3109 meters in the Qawasim formation, and three separate Qawasim intervals were tested, two yielding commercial gas production from a new, separate accumulation from existing Qawasim producers. The upper interval was placed on production after testing 16 mmscf per day gas and 96 barrels of condensate per day.

EWW-1 was spud in January 2006, targeting new Abu Madi and Qawasim sands separated from the main field by a fault. After coring the Qawasim the well encountered unexpected overpressures from a deeper interval. Well control problems resulted in two sidetracks being drilled, with the second sidetrack attempting to re-access the cored Qawasim interval at the end of the first quarter. The well has since reached a total depth of 3200 meters and although oil was recovered during drilling and the core interval was oil-stained, it appears that the final side track reached total depth in a different fault block and no oil bearing intervals were encountered. Data is being reviewed to determine if a future location can target the zone in the original fault block that had the significant shows in the first well bore.

Production from the El Wastani field averaged 140 mmscf per day during the quarter, approximately 10 percent below current combined facility capacity. This was related to lengthy start-up difficulties with our new JT plant and interaction with gas and liquid streams through both Centurion and the third-party Abu Madi plant pipelines and facilities. Related liquids production averaged 3,737 barrels of condensate per day and 910 barrels of LPG per day, for a combined total average daily rate of 27,938 boe per day.

South El Manzala Development Lease (Centurion 100% W.I.)

During the first quarter the exploration well Abu Monkar-3 completed its testing and was abandoned as it tested water and non-commercial quantities of gas, as previously reported. Well data is being reviewed and integrated into the regional interpretation to refine future Sidi Salim drilling prospects, a horizon which has yielded significant quantities of rich gas and light oil in other wells in the Nile Delta.

With the deployment of drilling and service rig equipment to El Wastani and the new exploration acreage, first quarter activities were limited to rigless well interventions aimed at shutting off water production in wells which have recently experienced a dramatic influx as previously reported and stabilizing production levels. Work plans for the development lease during the rest of 2006 will include further workovers as well as up to two new wells targeting the shallow El Wastani and Kafr El Sheikh formations.

Production during the quarter averaged 22 mmscf per day (3,743 boe per day), similar to the exit rate for 2005.

West El Manzala and West El Qantara Exploration Concessions (Centurion 75% W.I.)

The first quarter was marked by two deals of great advantage to the Company and the commencement of exploration drilling on the West El Manzala acreage.

Centurion first acquired the remaining 25% working interest bringing its ownership in both exploration Concessions to 100%, with the details of consideration paid outlined in the Company's press release of March 15, 2006. On April 30, 2006, the Egyptian Government granted formal approval of the acquisition.

The Company subsequently signed a farm-in and LNG cooperation agreement with two subsidiaries of Royal Dutch Shell PLC ("Shell"), through which Shell acquired a 50% W.I. in the two exploration Concessions with Centurion continuing to act as operator. Subsequent to quarter end Shell has made an initial payment to Centurion of US$15 million. Under the terms of the agreement, Shell will pay 50% of all exploration and development costs for as long as they continue to be a partner in the Concessions. If Shell continues as a Concession owner after the drilling of an initial five-well exploration program, a subsequent payment of US$20 million will be made to Centurion, followed by up to a total of US$225 million if and when specific discovery volumes and development objectives are met. If Shell elects not to continue after the initial five well program, their interest will revert back to Centurion. The deal marks an important step in the Company's strategy of diversifying its product sales in the longer term while at the same time sharing exploration risk with a technically strong partner. The farm-out to Shell is subject to certain conditions, including obtaining the government approvals for a transfer that is required under the Concessions agreements.

The acquisition and processing of 1400 square kilometers of 3-D seismic data on the West El Manzala acreage has been completed and interpretation is underway. The first two wells in the multi-well 2006 drilling program; Al Hamra-1 and El Deeb-1 (50% W.I.) were both spud in February targeting Abu Madi and Qawasim targets. The upper Qawasim reservoirs in both wells had hydrocarbon shows but did not produce commercial quantities. The lower Qawasim and Sid Salim formations were originally targets for these two wells. High pressure and mechanical limitations did not allow the wells to be drilled to fully penetrate and evaluate these formations, where significant reserves have been found in nearby onshore and offshore fields.

3-D seismic acquisition of approximately 560 square kilometers in the West El Qantara Concession commenced on May 5, 2006, and up to 10 wells are expected to be drilled on the two Concessions during the year.

West Gharib Concession (Centurion 30% W.I.)

Hana-10 was drilled as a development well in the Hana field. The well tested oil from the Kareem reservoir. Additional perforations are planned before placing the well on production.

Exploration drilling continued aggressively on the West Gharib Concession in advance of the permit expiry during the second quarter of 2006. During the quarter, Darb-1 and West Rahmi-3 were abandoned, at quarter-end, two wells were drilling and a third was preparing to spud, all targeting new oil accumulations.

Production from the combined development leases within the West Gharib Concession averaged 2,580 barrels per day of 21.7 degree API oil (774 barrels per day Centurion share). Production from the West Hoshia field is temporarily shut in awaiting regulatory approval of the Plan of Development.

Kom Ombo Concession (Centurion 100% W.I.)

Centurion has high-graded the play to the southern part of the Concession where it has acquired an additional 516 kilometers of 2-D seismic. Processing of the newly acquired seismic is in its final stages, interpretation will follow to finalize the interpretation and firm up the leads and prospects.

NIGERIA-SAO TOME JOINT DEVELOPMENT ZONE (JDZ)

The Production Sharing Contract (PSC) and the Joint Operating Agreement (JOA) were signed March 14, 2006. The Centurion Hercules Petroleum consortium was awarded a 10% interest in Block 4. Centurion has an option to increase working interest from 7.5% to 10%. Subject to rig availability the operator Addax Petroleum plans to drill the first well in the first half of 2007, on one of the several large prospects interpreted and mapped on the 3-D seismic.

Block 4 is an extension of the prolific Nigeria deep water play where a number of significant oil discoveries have been made.

MANAGEMENT'S DISCUSSION AND ANALYSIS

May 15, 2006

This Management's Discussion and Analysis (MD&A) is a review of operations, current financial position and outlook for Centurion Energy International Inc. (Centurion or the Company) and should be read in conjunction with the unaudited consolidated financial statements and related notes of Centurion for the periods ended March 31, 2006 and 2005. The unaudited consolidated financial statements included in this MD&A have been prepared by management and approved by Centurion's Audit Committee on behalf of the Board of Directors. These statements are based on certain estimates and assumptions and involve risks and uncertainties. Actual results may differ materially. Refer to the Business Risk Assessment section of this MD&A for additional information related to identified risks, estimates and uncertainties.

Non GAAP Measurements

Throughout this quarterly report, Centurion discloses certain financial information (cash flow, cash flow per share and cash flow from operations) that do not have any standardized meaning as prescribed by Canadian GAAP and are therefore considered non GAAP measures. These measures may not be comparable to similar measures presented by other public issuers.

Quarterly Trends

Foreign Exchange Fluctuations

Centurion operates in a U.S. dollar based environment. All revenues and the majority of our costs (both capital and operating) are paid in U.S. dollars. However, being a Canadian Company trading primarily on a Canadian exchange, Centurion reports its financial results in Canadian funds. Accordingly, all U.S. dollar amounts presented in Centurion's statements of operations and cashflows are converted to Canadian funds for reporting purposes based on the average Canadian to U.S. dollar exchange rates prevailing during the reporting period.

During the three months ended March 31, 2006, the average Canadian to U.S. dollar exchange rate was $0.87 compared to $0.82 for the comparable period in 2005. The strengthening Canadian dollar in 2006 had the effect of reducing all U.S. dollar translated amounts on the statements of operations and cashflows by approximately 6 percent compared to 2005. The effect of this reduction on earnings and cashflow was approximately $0.01 and $0.02 per share, respectively.

Commodity Prices

For the three months ended March 31, 2006, the average price realized, before royalty, by Centurion was US$2.90 per mscf of natural gas (US$2.70 per mscf in 2005), US$ 59.65 per barrel of condensate (US$46.13 per barrel in 2005) and US$40.83 per barrel of oil (US$25.98 per barrel in 2005). The corporate average price, before royalties, received for a barrel of oil equivalent was US$27.60 compared to US$24.01 in 2005 due to overall increases in world oil and condensate prices. The increase in realized sales gas prices is due to the use of the Company's JT facility, which has a lower liquid yield than the Abu Madi plant resulting in higher heat content sales gas.

Financial Review

Calculation of per Barrel Amounts

Production and sales volumes for the three months ended March 31, 2006 are not the same figure due to the inventorying of approximately 14,485 barrels of condensate in Egypt at December 31, 2005. This volume was subsequently sold in early January 2006 and for financial reporting purposes it has been treated as sales in 2006. Accordingly, all per boe amounts referenced in this MD&A are based on the sales volumes achieved in the three months ended March, 31 2006 which totaled 2,935,410 boe.

Continuing Operations

On April 26, 2005, Centurion completed the sale of its Tunisian assets to Candax Energy Inc. As a result of this transaction, Centurion has presented all of the 2005 revenues and expenses associated with the operations included in the sale as discontinued operations for financial reporting purposes, with no amounts reported in 2006 due to the sale. The carrying amount of assets and liabilities associated with the discontinued operations sold are no longer included in the balance sheet and were netted against proceeds received on the sale.

The MD&A has been segregated between continuing operations (primarily Centurion's Egyptian operations) and discontinued operations (Tunisia), as a result of the sale of the Tunisian producing assets. Any prior year comparative figures have been restated to give a meaningful comparison for the current year's activities.



Revenue
($000s except per boe amounts) 2006 2005
------------------------------------------------------------------------

Oil and gas sales (net of royalties) 42,874 21,162
Average gross price realized before royalty ($ per boe) 27.60 24.01
------------------------------------------------------------------------


Sales, net of royalties, for the three months ended March 31, 2006 were $42.9 million compared to $21.2 million for the comparable period in 2005, an increase of 103 percent. The increase was mainly due to a 215 percent increase in sales volumes achieved in the El Wastani field associated with both the installation of further field processing equipment and further development and step-out drilling in 2006 and 2005. Offsetting the increases in El Wastani production was the effects of foreign currency fluctuations and a reduction in Centurion's share of Egyptian production from approximately 40.0 percent in 2005 to an average of 37.9 percent in 2006, related to the factors of Cost Recovery allowed under the terms of the Production Sharing Contract (PSC).

The production volumes taken under the PSC by the Egyptian Government are in lieu of any further taxes and royalties and the 37.9 percent allocation Centurion received has no further financial encumbrances upon it.

Centurion accounts for the Egyptian Government's share of production volumes as royalty and tax expense. For the three months ended March 31, 2006, the royalty expense approximated $38.1 million (47 percent of gross sales) compared to $19.1 million (47 percent of gross sales) for the comparable period in 2005. For more details on the Company's PSC refer to the 2005 annual report.



Operating Expense
($000s except per boe amounts) 2006 2005
------------------------------------------------------------------------

Operating expense 6,191 3,008
Field cost per boe ($) 1.34 0.96
Processing cost per boe ($) 0.77 0.83
------------------------------------------------------------------------
Per boe ($) 2.11 1.79
------------------------------------------------------------------------


Total operating expense for the three months ended March 31, 2006 amounted to $6.2 million ($2.11 per boe) compared to $3.0 million ($1.79 per boe) for the comparable period in 2005. The increase in per boe operating expenses is mainly attributable to increased costs associated with routine maintenance and workover costs on existing wells which were used to maintain productivity and well performance.



Netback
($ per boe) 2006 2005
------------------------------------------------------------------------

Revenue (net of royalty) 14.61 12.61
Operating expense (2.11) (1.79)
------------------------------------------------------------------------
Netback 12.50 10.82
------------------------------------------------------------------------


The netback on the Company's production for the three months ended March 31, 2006 (revenues net of royalties less operating costs) was $36.7 million ($12.50 per boe) compared to $18.2 million ($10.82 per boe) for the comparable period in 2005. The increase in netbacks per boe can be largely explained by an increase in gross realized sales prices offset by a decrease in cost recovery allocation (37.9 percent in 2006 from 40.0 percent in 2005) to Centurion under the terms of the Production Sharing Contract coupled with increased operating costs. Each of these factors has been described in more detail in the relevant discussions above.



General and Administrative Expenses
($000s except per boe amounts) 2006 2005
------------------------------------------------------------------------

Total 1,995 1,579
Capitalized - continuing operations 1,233 719
Capitalized - discontinued operations - 129
Expensed 762 731
Expensed per boe ($) 0.26 0.44
------------------------------------------------------------------------


General and administrative expenses for the three months ended March 31, 2006 were $0.8 million ($0.26 per boe) compared to $0.7 million ($0.44 per boe) for the comparable period in 2005.



Depletion, Depreciation and Amortization
($000s except per boe amounts) 2006 2005
------------------------------------------------------------------------

Oil and gas depletion, depreciation and amortization 9,922 6,534
Per boe ($) 3.40 3.89
Other depreciation 86 204
------------------------------------------------------------------------


The depletion provision for the three months ended March 31, 2006 amounted to $9.9 million ($3.40 per boe) compared to $6.5 million ($3.89 per boe) for 2005. The remaining depletion of $0.1 million relates to depreciation of non-oil and gas assets.

Interest and Finance Costs

Interest and finance costs for the three months ended March 31, 2006 totaled $1.3 million compared to $0.3 million in for the comparable period in 2005. The increase of $1.0 million was caused by the increase in outstanding debt balance and fees related to performance bonds issued by the Company. As at March 31, 2006, the Company had drawn US$69.4 million on its credit facility as compared to US$10 million at March 31, 2005.

Foreign Prospect Review Costs

Foreign prospect review costs for the three months ended March 31, 2006 totaled $0.2 million compared to $0.3 million for the comparable period in 2005. In 2006 and 2005, Centurion has focused on bid rounds and other efforts to establish a foot hold in Libya. Costs associated with these efforts are expensed until a concession or exploration license has been acquired.

Stock Based Compensation

Stock based compensation expense for the three months ended March 31, 2006 and 2005 amounted to $1.0 million. The Company expenses stock options based on the Black-Sholes valuation method over the vesting life of the granted options.

Liquidity, Capital Resources and Capital Expenditures

Capital asset and materials and supplies expenditures for the three months ended March 31, 2006 totaled $74.7 million including $74.6 million spent in Egypt and $0.1 million spent in Nigeria. The expenditures in Egypt consisted of the 2006 drilling program costs, facility installation costs, the initial payment to acquire the additional 25% working interest in the West El Manzala and West El Qantara Concessions (refer to Significant Transaction below), pre-purchase of drilling inventory and supplies, 3-D seismic acquisition and general geological and geophysical programs.

Cash on hand at March 31, 2006, was $3.7 million compared to $27.1 million at December 31, 2005. Centurion had working capital of $44.3 million at March 31, 2006, compared to working capital of $28.9 million at December 31, 2005.

During the fourth quarter of 2005, Centurion revised its credit facility with the Standard Bank plc. This new facility has a credit limit of US$150 million, with US$100 million available immediately and an option of an additional US$50 million subject to certain bank restrictions. This new facility has replaced the prior US$40 million facility. This revised facility in addition to forecast 2006 cashflow from operations is expected to meet the anticipated 2006 capital program requirements and allow for continued exploration and development growth in focus areas.



Summary of Contractual Obligations

Obligations Payments Due by Period ($000s)
------------------------------------------------------------------------
Less
than 1 - 3 4 - 5 After 5
Total 1 year years years years
------------------------------------------------------------------------
Standard Bank Financing 80,715 - - 80,715 -
Capital lease obligations(1) 1,931 566 1,365 - -
Nigeria/Sao Tome JDZ(2) 4,641 - - 4,641 -
West El Manzala and West El
Qantara obligations(3) 4,373 4,373 - - -
------------------------------------------------------------------------
Total contractual obligations 91,660 4,939 1,365 85,356 -
------------------------------------------------------------------------

(1) A capital lease agreement with Northstar Trade Finance Ltd. for a
sales leaseback arrangement of compression equipment previously
purchased and installed at the Company's gas fields in Egypt was
entered into in May 2004. The lease requires equal monthly payments
of US$51,000 for five years. The lease arrangement results in an
interest rate of approximately 8 percent.
(2) Under the terms of the Nigeria/Sao Tome JDZ Production Sharing
Contract, the Company will be obligated to pay for its share of the
minimum work program of US$53 million.
(3) In May 2004, Centurion was awarded the West El Manzala and West El
Qantara blocks, in the Nile Delta of Egypt. Centurion and its
partner (Centurion - 75 percent working interest) have committed to
spend US$18 million on the blocks (US$13 million in West El Manzala
and US$5 million in West El Qantara) during the first phase of
exploration. A 2,000 square kilometer 3-D seismic program has been
commenced on these lands at an estimated program cost of US$20
million, which will satisfy the commitment during the first phase of
exploration. In December 2005, the Standard Bank, backed by Export
Development Canada, replaced a cash deposit with a performance
guarantee for these commitments.


Discontinued Operations

Sale of Tunisian Producing Assets

On April 26, 2005, Centurion completed the sale of its Tunisian assets to Candax Energy Inc. The transaction resulted in final proceeds of approximately $43.7 million inclusive of working capital adjustments.

Although the sale of the Tunisian properties was effective January 1, 2005, GAAP requires that the vendor continue recording financial activity of the discontinued operations until the transaction actually closes. Accordingly, production volumes, revenues, operating costs and tax expense associated with the discontinued operations have been reported for the period of January 1, 2005 to the closing date of April 26, 2005 by Centurion.

Net income from discontinued operations of approximately was $2.9 million being recorded in the three months ended March 31, 2005 (no operations related to 2006). Sales, net of royalties for the three months ended March 31, 2005 were $8.6 million with associated operating costs and income taxes totaling $3.1 million and $2.6 million respectively.

Accounting Policies and Estimates

Changes in Accounting Principles

No changes in accounting principles were adopted in 2006.

Significant Transactions

Termination of the Conditional Purchase of a Private Company with Operations in Egypt and Texas

In February, 2006, the Company entered into a conditional purchase and sales agreement to acquire a private U.S. corporation. The acquisition was to include operated properties in Egypt's Nile Delta region and in Texas, U.S. The purchase agreement was terminated by the Private Company in April 2006, which resulted in the return of the US$11.3 million deposit paid by the Company in addition to a US$7.4 million before tax break fee. As the termination occurred subsequent to the end of the first quarter, the Company has not reported the results of this termination in the unaudited consolidated financial statements.

CTIP Oil and Gas Limited Acquisition

On March 15, 2006, the Company entered into an agreement with CTIP Oil and Gas Limited to acquire a 25 percent participating interest in the West El Manzala and West El Qantara Concessions. On April 30, 2006, the Egyptian Government granted formal approval of the acquisition giving the Company a 100 percent participating interest in each of these Concessions.

Under the terms of the acquisition agreement, the Company has paid US$20 million for the Concession interest. In addition, the Company will issue 1,000,000 common shares at a price of Cdn$12.10 per share. The Company has agreed to pay additional payments that could total up to a further US$25 million as and when specific discovery volumes and development objectives are met. Centurion has also granted a three percent net profits interest to CTIP on future production from the Concessions.

Nigeria/Sao Tome - Joint Development Zone (JDZ)

On March 14, 2006, the Company signed a Production Sharing Contract (PSC) and received formal granting by the JDZ of its 10 percent (gross) equity interest, 7.5 percent (net) in Block 4. In accordance with the PSC the Company paid US$ 6.75 million, being its share of the total signature bonus. The Company will also be obligated to pay its share of the minimum work program of two exploration wells and one appraisal well, or its share of the total minimum expenditure of US$ 53 million for the block.

West El Manzala and West El Qantara Farm-out

On March 20, 2006, the Company signed an agreement with Shell Egypt West Manzala GmbH and Shell Egypt West Qantara GmbH ("Shell"). The agreement provides for a Farm-in and LNG Cooperation Agreement, through which Shell will acquire a 50 percent interest in the West El Manzala and West El Qantara Concessions. The farm-out to Shell is subject to certain conditions, including obtaining the government approvals for a transfer that is required under the Concessions agreements.

Under the Shell agreement, Shell made an initial payment to the Company of US$15 million in April, 2006 and will pay 50 percent of all exploration and development costs for as long as they remain a Concession owner. If Shell continues as a Concession owner after the drilling of an initial five well exploration program, an additional payment of US $20 million is payable by Shell to the Company. If Shell elects not to continue, the interest of Shell will revert back to Centurion.

Shell has agreed to pay additional premiums that could total up to a further US $225 million if and when specific discovery volumes and development objectives are met.



Summary of Quarterly Results

($ millions, except per share amounts) 2006-Q1 2005-Q4 2005-Q3 2005-Q2
------------------------------------------------------------------------
Sales (net of royalties)
Continuing operations 42.9 34.3 28.8 22.9
Discontinued operations - - - 0.3
Corporate total 42.9 34.3 28.8 23.2
Cash flow
Continuing operations 22.8 18.2 15.6 13.2
Discontinued operations - - - 0.2
Corporate total 22.8 18.2 15.6 13.4
Basic per share - continuing operations 0.26 0.20 0.18 0.15
Diluted per share - continuing operations 0.25 0.19 0.17 0.15
Basic per share - corporate total 0.26 0.20 0.18 0.15
Diluted per share - corporate total 0.25 0.19 0.17 0.15
Earnings
Continuing operations 11.5 (9.6) 7.6 4.4
Discontinued operations - - - (0.5)
Corporate total 11.5 (9.6) 7.6 3.9
Basic per share - continuing operations 0.13 (0.11) 0.09 0.05
Diluted per share - continuing operations 0.12 (0.11) 0.08 0.05
Basic per share - corporate total 0.13 (0.12) 0.09 0.04
Diluted per share - corporate total 0.12 (0.12) 0.08 0.04

($ millions, except per share amounts) 2005-Q1 2004-Q4 2004-Q3 2004-Q2
------------------------------------------------------------------------
Sales (net of royalties)
Continuing operations 21.2 16.6 15.0 11.6
Discontinued operations 8.6 3.4 6.9 4.2
Corporate total 29.8 20.0 21.9 15.8
Cash flow
Continuing operations 12.2 10.2 7.5 6.7
Discontinued operations 6.2 1.3 5.4 2.8
Corporate total 18.4 11.5 12.9 9.5
Basic per share - continuing operations 0.14 0.13 0.09 0.09
Diluted per share - continuing operations 0.13 0.12 0.09 0.09
Basic per share - corporate total 0.22 0.14 0.16 0.13
Diluted per share - corporate total 0.20 0.13 0.15 0.12
Earnings
Continuing operations 4.3 4.1 1.9 2.3
Discontinued operations 3.0 (0.4) 2.0 1.5
Corporate total 7.3 3.7 3.9 3.8
Basic per share - continuing operations 0.05 0.05 0.02 0.03
Diluted per share - continuing operations 0.05 0.05 0.02 0.03
Basic per share - corporate total 0.08 0.04 0.05 0.05
Diluted per share - corporate total 0.08 0.04 0.05 0.04


Financial Instruments

Balance Sheet Financial Instruments

Centurion's financial instruments presented in the Consolidated Balance Sheet consist of cash and equivalents, accounts receivable, accounts payable and long-term debt. The estimated fair values of recognized financial instruments have been determined based on the Company's assessment of available market information and appropriate valuation methodologies; however, these estimates may not necessarily be indicative of the amounts that could be realized or settled in current market transactions. Based on these assessments, the carrying value of identified financial instruments approximates fair value.

Concentration of Credit Risk

Currently, all production of the Company is sold to one customer, the Egyptian Government. The Company is exposed to credit risk in the event that the Egyptian Government is unable to meet its financial obligations.

Critical Estimates

In reporting financial and reserve information, the Company is required to use certain estimates. These estimates relate primarily to the future development costs associated with proved undeveloped reserves, reserve volumes, future production and revenues, and future costs associated with site restoration liabilities. The Company has all of its oil and gas reserves, future development costs and future cash flows from those reserves evaluated and reported on by independent petroleum reserve engineering consultants. The estimation of these amounts is a subjective process, based on engineering data, forecasted prices and production levels and the timing of expenditures. All of these estimates are subject to numerous uncertainties and various interpretations, and consequently will change over time to reflect updated information as it is received.

Business Risk Assessment

There are a number of inherent risks associated with oil and gas operations and development. Many of these risks are beyond the control of management. The following outlines some of the principal risks and their potential impact to the Company.

Foreign Investments

All of the Company's oil and gas operations and related assets are located outside Canada. These operations are subject to the risks associated with foreign investment including tax increases, royalty increases, renegotiations of contracts, currency exchange fluctuations and political uncertainty. The jurisdiction, in which the Company primarily operates, Egypt, has a well established fiscal regime and there are some improved fiscal terms to encourage investment. The U.S. dollar is the functional currency in the primary operating area. Centurion is paid in U.S. dollars for the sale of its production.

As operations are primarily carried out in U.S. dollars, the main exposure to currency exchange fluctuations is the conversion to equivalent Canadian funds for reporting purposes. Based upon the 2006 cash flow estimate and a Canadian dollar exchange rate between US$0.85 and US$0.90, the effect for each $0.01 change in exchange rate is less than $0.01 per share, fully diluted.

Commodity Prices

Centurion's oil and gas prices are affected by factors such as supply and demand, oil quality and transportation adjustments. During 2006, the Company expects to have oil, gas and natural gas liquids sales from its Egyptian operations. Centurion's gas production from its Egyptian reserves has a sales contract with a selling price of US$2.65 per mmbtu when the Brent oil reference price is US$22 or greater. The contract also has a floor of US$1.50 per mmbtu when the Brent oil price is US$10 or lower with a sliding scale gas price for Brent oil reference prices between US$10 and US$22. Changes in the price for Brent crude oil over US$22 have no impact on cash flow for Egyptian gas production.

Competition

The oil and gas industry is highly competitive. The Company believes that it is well positioned in Egypt; both in terms of Company-owned infrastructure, an excellent land base and significant level of reserves and activity, and can compete strongly with other companies operating there.

Environment

The Company has an ongoing program to abandon and reclaim wells and facilities in accordance with government regulations. Centurion maintains adequate insurance for environmental risks.

Cautionary Statement regarding Forward-Looking Information

Certain statements contained in this MD&A including statements which contain words such as "anticipate", "could", "should", "expect", "seek", "may", "intend", "likely", "will", "believe" and similar expressions, statements relating to matters that are not historical facts, and statements of our beliefs, intentions and expectations about development, results and events which will or may occur in the future, constitute "forward-looking information" within the meaning of applicable Canadian securities legislation and are based on certain assumptions and analysis made by us derived from our experience and perceptions. Forward-looking information in this MD&A includes, but is not limited to: statements relating to "reserves" and "resources" as they involve the implied assessment, based on certain estimates and assumptions that the resources and reserves described can be profitably produced in the future; expected cash provided by continuing operations; future capital expenditures, including the amount and nature thereof; oil and natural gas prices and demand; expansion and other development trends of the oil and natural gas industry; business strategy and outlook; expansion and growth of our business and operations; the maintenance of existing government, supplier and partner relationships; supply channels; accounting policies; balance sheet financial instruments; credit risks; and other such matters.

All such forward-looking information is based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors we believe are appropriate in the circumstances. The risks, uncertainties, and assumptions are difficult to predict and may affect operations, including, without limitation: the risks associated with foreign operations; foreign exchange fluctuations; commodity prices; equipment and labour shortages and inflationary costs; general economic conditions; industry conditions; changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced; the ability of oil and natural gas companies to raise capital; the effect of weather conditions on operations and facilities; the existence of operating risks; volatility of oil and natural gas prices; oil and natural gas product supply and demand; risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations; increased competition; stock market volatility; opportunities available to or pursued by us and other factors, many of which are beyond our control. The foregoing factors are not exhaustive and are further discussed herein under the heading "Risk Factors" and in the Annual Information Form of Centurion Energy International Inc. filed on SEDAR at www.sedar.com.

Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits will be derived therefrom. Except as required by law, Centurion Energy International Inc. disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Company Information

Centurion Energy International Inc. is a Calgary-based oil and gas exploration and development Company engaged in the exploration, development and production of oil, natural gas and natural gas liquids with a focus in Egypt.

Additional information related to the Company, including the Company's Annual Information Form and Management Information Circular, are available at www.sedar.com.



Centurion Energy International Inc
Consolidated Balance Sheets

($000's Canadian dollars)

As at As at
March 31 December 31
2006 2005
(unaudited) (unaudited)

Assets
Current Assets
Cash 3,718 27,111
Accounts receivable 65,311 46,779
Deposits and prepaids (note 2) 14,685 873
Condensate inventory - 85
----------- -----------
83,714 74,848

Capital assets 220,727 162,531
Materials and supplies 21,935 14,198
Deferred financing costs 2,054 2,176
----------- -----------
328,430 253,753
----------- -----------
----------- -----------

Liabilities
Current liabilities
Accounts payable 38,870 45,362
Short-term portion of capital lease obligation
(note 4) 566 560
----------- -----------
39,436 45,922


Capital lease obligation (note 4) 1,365 1,504
Long-term debt (note 3) 80,715 13,618
Asset retirement obligation (note 5) 4,541 3,743
----------- -----------
126,057 64,787

Shareholders' Equity
Capital stock (note 6) 144,318 143,770
Contributed surplus (note 7) 11,622 10,739
Foreign currency translation adjustment (19,526) (19,968)
Retained earnings 65,959 54,425
----------- -----------
202,373 188,966

----------- -----------
328,430 253,753
----------- -----------
----------- -----------



Centurion Energy International Inc.
Consolidated Statement of Operations and Retained Earnings

($000's Canadian dollars)

For the three months ended March 31 (Unaudited)

2006 2005

Revenue
Sales - net of royalties 42,874 21,162
Other income 172 333
----------- -----------
43,046 21,495

Expenses
Operating 6,191 3,008
Depletion, depreciation and amortization 10,008 6,738
General and administrative 762 731
Foreign prospect review 235 275
Stock based compensation (note 8) 1,013 980
Interest and finance costs 1,274 275
Amortization of deferred financing costs 140 89
Foreign exchange loss 1 125
Accretion 87 65
----------- -----------
19,711 12,286

Income before income taxes 23,335 9,209

Current income taxes 11,801 4,882

----------- -----------
Income for the period from continuing operations 11,534 4,327
----------- -----------

Income for the period from discontinued operations - 2,947

----------- -----------
Income for the period 11,534 7,274
----------- -----------

Retained earnings - Beginning of period 54,425 45,298
----------- -----------
Retained earnings - End of period 65,959 52,572
----------- -----------
----------- -----------

Basic earnings per share from continuing operations 0.13 0.05
Diluted earnings per share from continuing operations 0.12 0.05

Basic earnings per share 0.13 0.08
Diluted earnings per share 0.12 0.08



Centurion Energy International Inc.
Consolidated Statement of Cash Flows

($000's Canadian dollars)

For the three months ended March 31 (Unaudited)

2006 2005

Cash provided by (used in) operating activities
Income for the period from continuing operations 11,534 4,327
Items not affecting cash
Depletion, depreciation and amortization 10,008 6,738
Amortization of deferred financing costs 140 89
Stock based compensation 1,013 980
Accretion 87 65

----------- -----------
Funds from continuing operations 22,782 12,199
Funds from discontinued operations - 6,219
----------- -----------
22,782 18,418
----------- -----------

Changes in continuing non cash working capital
items (16,938) (6,863)
Changes in discontinued working capital items - (963)
----------- -----------
5,844 10,592
----------- -----------

Investing activities
Capital asset and materials and supplies
expenditures (74,735) (30,844)
Changes in continuing non-cash working capital
items (21,898) 10,209
Discontinued operations - (4,192)
----------- -----------
(96,633) (24,827)
----------- -----------

Financing activities
Issue/(repayment) of long term debt (net) 67,236 (178)
Issuance of capital stock 418 37,897
Discontinued operations - (648)
----------- -----------
67,654 37,071
----------- -----------

Foreign currency translation (258) (332)
----------- -----------
(Decrease) / increase in cash (23,393) 22,504
----------- -----------
Cash - Beginning of period 27,111 37,416
----------- -----------
Cash - End of period 3,718 59,920
----------- -----------
----------- -----------


These unaudited interim consolidated financial statements for the periods ended March 31, 2006 and 2005 have been prepared in accordance with Canadian Generally Accepted Accounting Principles and should be read in conjunction with the annual financial statements prepared for the year ending December 31, 2005.

1 Accounting Policies

These interim consolidated financial statements have been prepared using the same accounting policies as used in the financial statements for the year ended December 31, 2005. Please refer to Note 1 "Summary of Accounting Policies" in the 2005 Consolidated Financial Statements for a detailed description of these policies.

2 Deposits and Prepaids

Deposits and prepaids includes a $13.2 million (US$11.3 million) deposit made in conjunction with the terminated purchase of a private U.S. corporation further described in note 15. Other deposits and prepaids amounting to $1.5 million represents amounts prepaid in the normal course of operations.

3 Long-Term Debt

Long-term debt consists of drawings of approximately US$69.4 million on a credit facility with Standard Bank plc. This debt bears interest at LIBOR plus a margin based on outstanding borrowings ranging between 2.00% and 3.45% and is payable quarterly. No principal repayments are required until the end of the 48 month agreement and accordingly have been classified as a long-term obligation. This debt facility is secured by an assignment of all shares of the operating legal entities. The current allowable borrowing base is US$100 million.

4 Capital Lease Obligation

The capital lease obligation of $1,365 (2005 - $1,504) represents a capital lease for compression facilities related to the Company's gas fields in Egypt. This obligation is being repaid over a five-year term commencing May 2004 with a blended interest and principal payment of US$51 thousand per month. An amount of $566 (2005 - $560) has been included as the short-term portion of capital lease obligation.



5 Asset Retirement Obligation
($000s)
------------------------------------------------------------------------

Asset retirement obligation at December 31, 2005 3,743

Additions during 2006 698
Foreign exchange effects 13
Accretion expense 87
------------------------------------------------------------------------
Asset retirement obligation at March 31, 2006 4,541


The total undiscounted amount of estimated cash flows required to settle the obligations is $8,704 (2005 - $7,692). Future obligations have been discounted at the Company's credit adjusted risk-free rate of 9 percent (2005 - 9 percent) and an inflation rate of 2 percent (2005 - 2 percent). These obligations are expected to be paid in 2010 through 2021.

To date, Centurion has not retired any wells or facilities from its continuing operations, nor has it segregated or restricted any funds to fulfill these future liabilities and obligations. Such future obligations will be funded from future cash flows, including future salvage value on existing capital equipment.



6 Capital Stock

Authorized

Unlimited number of common shares
Unlimited number of preferred shares (none outstanding)

Number of shares ($000s)
------------------------------------------------------------------------

Balance at December 31, 2005 88,577,185 143,770

Issued on exercise of options
(including allocation of contributed surplus) 308,800 548


------------------------------------------------------------------------
Balance at March 31, 2006 88,885,985 144,318
------------------------------------------------------------------------
------------------------------------------------------------------------


7 Contributed Surplus

($000s)
------------------------------------------------------------------------

Balance - December 31, 2004 3,168
Stock based compensation 7,899
Stock based compensation associated with exercised options (328)

------------------------------------------------------------------------
Balance - December 31, 2005 10,739

Stock based compensation 1,013
Stock based compensation associated with exercised options (130)

------------------------------------------------------------------------
Balance - March 31, 2006 11,622
------------------------------------------------------------------------
------------------------------------------------------------------------


8 Stock Options
Weighted
Average
Exercise
Share Options Price ($)
------------------------------------------------------------------------

Balance - December 31, 2005 7,052,533 5.87

Options exercised in 2006 308,800 1.35
Options granted in 2005 30,000 13.85
------------------------------------------------------------------------

Balance - March 31, 2006 6,773,733 6.12


For the three month period ended March 31, 2006 an expense of $1,013 (2005- $980) has been recorded in respect of employee stock options. This expense has been calculated using a Black-Scholes model assuming an average risk free ranging from 3.40% to 4.05%; an average 3 year expected option life; an average share price volatility ranging from 38% - 56%; and no dividend yield.



Weighted Average Stock Option Exercise Prices and Remaining Option Lives

------------------------------------------------------------------------
Weighted - Average
Exercise Price Options Remaining Contractual
Range ($) Outstanding Life in Years Options Exercisable
------------------------------------------------------------------------
0.46 - 1.63 2,588,766 1.6 2,588,766
3.05 - 3.40 1,495,467 3.4 1,277,133
9.47 - 11.25 165,000 4.2 50,000
11.95 - 12.25 1,499,500 4.6 800,000
13.70 - 13.85 875,000 3.9 -
14.13 - 17.8 150,000 3.9 -
------------------------------------------------------------------------
6,773,733 4,715,899
------------------------------------------------------------------------
------------------------------------------------------------------------


9 Segmented Information

The Company has defined its continuing operations as oil and gas operations. The majority of the Company's oil and gas operations are located in Egypt. Certain exploration activities continue in other locations in Africa. Operations that have been discontinued are disclosed in note 12.



Geographic Segments
($000s)

Nigeria -
Three months ended Sao Tome Canada
March 31, 2006 Egypt Tunisia (JDZ) and Other Total
------------------------------------------------------------------------
Revenue 42,874 - - - 42,874
Other Income 44 - - 128 172
Depletion Depreciation
and Amortization 9,922 - - 86 10,008
Income Tax Expense 11,801 - - - 11,801
Net Income (Loss) 14,916 - (12) (3,370) 11,534
Capital Assets 219,077 - 1,030 620 220,727
Materials and
Supplies Inventory 21,935 - - - 21,935
Capital Asset and
Material and Supplies
Expenditures 74,608 - 98 29 74,735
------------------------------------------------------------------------

Nigeria -
Three months ended Sao Tome Canada
March 31, 2005 Egypt Tunisia (JDZ) and Other Total
------------------------------------------------------------------------
Revenue 21,162 - - - 21,162
Other Income 15 - - 318 333
Depletion Depreciation
and Amortization 6,660 - - 78 6,738
Income Tax Expense 4,882 - - - 4,882
Net Income (Loss) 7,643 - - (3,316) 4,327
Capital Asset and
Material and Supplies
Expenditures 30,750 - - 94 30,844
------------------------------------------------------------------------

Nigeria -
Year-ended December Sao Tome Canada
31, 2005 Egypt Tunisia (JDZ) and Other Total
------------------------------------------------------------------------
Capital Assets 160,913 - 941 677 162,531
Materials and Supplies
Inventory 14,198 - - - 14,198
------------------------------------------------------------------------


10 Earnings per Share

Per share basic amounts are calculated using the weighted average common shares outstanding during the period. Diluted per share amounts are calculated assuming all in the money securities are exercised with the resultant proceeds realized on the exercise of these securities being used to repurchase the Company's common shares at the average share price during the period. For the three months ended March 31, 2006, the weighted average basic common shares outstanding were 88,824,018 securities and 3,655,081 dilutive securities existed (2005 - 86,880,346 basic and 4,512,693 dilutive).



11 Supplemental Cash Flow Information

Cash taxes and interest
For the three months ended

March 31, 2006 March 31, 2005
------------------------------------------------------------------------
Cash taxes paid 11,801 4,882
Cash interest paid 584 275
------------------------------------------------------------------------


12 Discontinued Operations

In late 2004, the Company evaluated its ongoing operations in Tunisia and decided to pursue the sale of its operating assets in the country. The Company signed a purchase and sales agreement on February 25, 2005 for the sale of all the Company's Tunisian assets including SEEB, but excluding its interest in the Mellita Permit and a reduced interest in the Ezzaouia and El Biban Triassic prospects. On April 26, 2005, the sales transaction closed for final proceeds of $43.7 million.

Selected financial information for the operations included in discontinued operations for the three months ended March 31, 2005 is reported below (there were no results for 2006):



March 31,
($000s) 2005
------------------------------------------------------------------------

Revenues 8,613
Income from discontinued operations before taxes 5,564
Income taxes 2,617
Income from discontinued operations 2,947
------------------------------------------------------------------------


13 Contingencies, Commitments

On June 30, 2005, Centurion awarded Presson-Enerflex a contract for the supply, delivery and project management of the El Wastani phase III stand alone gas plant in Egypt. This contract represents a US$32.3 million commitment which will be due and payable at project milestones throughout 2006 and is included in Centurion's 2005/2006 capital budget. All amounts under the terms of the contract will be incurred in fiscal 2006. As at March 31, 2006, approximately US$6.2 million has been paid under this contract with an additional US$10 million recorded in Accounts Payable.

Centurion has contracted four drilling rigs in connection with the 2006 budgeted drilling program in Egypt. In the event that Centurion does not proceed with planned drilling for these rigs, the Company would be obligated to pay the rig operators a variable rate based on days not utilized under the contracts. The maximum commitment at March 31, 2006 related to these contracts is approximately $7.3 million, which could be reduced for farm-outs to other operators.

In May 2004, Centurion was awarded the West El Manzala and West El Qantara blocks, in the Nile Delta of Egypt. Centurion (75 percent working interest) and its partner have committed to spend US$18 million on the blocks during the first phase of exploration. As at March 31, 2006, Centurion has spent US$9.8 million of their committed US$13.5 million obligation. The remainder will be spent during the 2006 drilling and seismic programs.

On March 15, 2006, the Company entered into an agreement with CTIP Oil and Gas Limited (CTIP) to acquire a 25 percent working interest in the West El Manzala and West El Qantara concessions. Following the closing of this acquisition, the Company will hold a 100 percent participating interest in each of these concessions.

Under the terms of the acquisition agreement, the Company has paid US$20 million and will issue 1,000,000 common shares at a price of CAD$12.10 per share for the concession interests. The Company has agreed to pay additional payments that could total up to a further US$25 million as and when specific discovery volumes and development objectives are met. Centurion has also granted a three percent net profits interest to CTIP on future production from the Concessions. The Egyptian Government granted formal approval of the acquisition on April 30, 2006. A deposit of US$20 million has been paid prior to March 31, 2006 and has been classified with capital assets in the consolidated balance sheet.

On March 20, 2006, the Company signed an agreement with Shell Egypt West Manzala GmbH and Shell Egypt West Qantara GmbH (together "Shell"). The agreement provides for a Farm-in and LNG Cooperation Agreement, through which Shell will acquire a 50 percent interest in the West El Manzala and West El Qantara concessions. The farm-out to Shell is subject to certain conditions, including obtaining the government approvals for a transfer that is required under the Concessions agreement. Subsequent to quarter end Shell has made an initial payment to the Company of US$15 million. Under the terms of the agreement, Shell will pay 50 percent of all exploration and development costs for as long as they remain a partner in the concessions. If Shell continues as a concession owner after the drilling of an initial five well exploration program, an additional payment of US$20 million is payable by Shell to the Company. If Shell elects not to continue, the interest of Shell will revert back to Centurion. Shell has agreed to pay additional premiums that could total up to a further US$225 million if and when specific discovery volumes and development objectives are met. In April 2006, the Company has received the initial US$15 million payment and its share of exploration and development costs associated with the concessions. These amounts have not been reflected in the March 31, 2006 consolidated financial statements.

On March 14, 2006, the Company signed a Production Sharing Contract (PSC) and formal granting by the Joint Development Zone of its 10 percent (gross) equity interest, 7.5 percent (net) in Block 4 of the Nigeria/Sao Tome.
Under the PSC the Company is obligated to pay US$6.75 million, being its share of the total signature bonus. The Company will also be obligated for its share in the minimum expenditure of US$53 million for the block.

14 Financial Instruments

Balance sheet financial instruments

Centurion's financial instruments presented on the Consolidated Balance Sheet consist of cash, accounts receivable, accounts payable and long-term debt. The estimated fair values of recognized financial instruments have been determined based on the Company's assessment of available market information and appropriate valuation methodologies; however, these estimates may not necessarily be indicative of the amounts that could be realized or settled in current market transactions. Based on these assessments, the carrying value of identified financial instruments approximates fair value.

Concentration of credit risk and economic dependence

Currently, all production of the Company is sold to one customer, the Egyptian Government. The Company is exposed to credit risk in the event that the Egyptian Government is unable to meet its financial obligations.

15 Subsequent Events

On February 22, 2006, the Company entered into a conditional purchase and sales agreement to acquire a private U.S. corporation. On April 13, 2006, the private U.S. Corporation terminated the Company's agreement and under the terms of the contract, the US$11.3 million deposit paid by the Company was returned to the Company in addition to a US$7.4 million agreement break fee. As at March 31, 2006, the US$11.3 million deposit paid has been classified as Deposits and prepaids. No amounts have been recorded in respect of the US$7.4 million (before tax) break fee for the three months ended March 31, 2006.

Certain statements in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Contact Information

  • Centurion Energy International
    Said S. Arrata
    President and CEO
    (403) 263-6002
    or
    Centurion Energy International
    Barry W. Swan
    Senior Vice President and CFO
    (403) 263-6002
    or
    Centurion Energy International
    Scott Koyich
    Investor Relations
    (403) 215-5979
    or
    Citigate Dewe Rogerson, London
    Martin Jackson
    +44 207 638 9571
    or
    Citigate Dewe Rogerson, London
    Kate Delahunty
    +44 207 638 9571