Centurion Energy International Inc.
TSX : CUX
AIM : CUX

Centurion Energy International Inc.

May 12, 2005 09:30 ET

Centurion Energy International Inc.: Interim Financial Statements- Three months ended March 31, 2005

CALGARY, ALBERTA--(CCNMatthews - May 12, 2005) -

REPORT TO SHAREHOLDERS

Centurion Energy International Inc. (TSX:CUX)(AIM:CUX) the Toronto (symbol: CUX) and London AIM (symbol: CUX.L) listed independent oil and gas exploration and production company, operating principally in the Egyptian Nile Delta, today announces its 2005 first quarter report. The unaudited interim financial statements and management discussion and analysis included in this report have been prepared by management and approved by Centurion's Board of Directors.

Highlights

- Corporate cash flow totaled $18.4 million ($0.20 per share diluted) during Q1, 2005 compared to $8.2 million ($0.11 per share diluted) in Q1, 2004.

- Corporate earnings totaled $7.3 million ($0.08 per share diluted) during Q1, 2005 compared to $2.0 million ($0.03 per share diluted) in Q1, 2004.

- Completed the sale of the Tunisian producing properties to Candax Energy Inc. for proceeds of $43.7 million on April 26, 2005. Centurion's cash position is now in excess of $100 million.

- Drilled two El Wastani development wells in the quarter, EW-4 and EW-9, which have been tested for a combined rate of 50.3 mmscf/d of natural gas and 1,059 bpd of associated liquids. These two wells will significantly increase production from this field by the end of Q2 2005.

- Spudded El Wastani 6, a development well targeting the Abu Madi, Qawasim and Sidi Salim formations in the El Wastani Development lease. The well has already encountered gas pay in the Abu Madi and Qawasim formations and is drilling ahead to the Sidi Salim.

- Acquired the first 400 square kilometers of a 3D seismic program totaling 2,250 square kilometers on the West Manzala and West Qantara concessions. The first phase of processing has commenced and drilling is expected to commence before the end of 2005.

- Subsequent to quarter end, PetroCanada, operator of the Mellita Permit in Tunisia, spudded the onshore Medoun - 1 exploration well. Centurion is being carried by PetroCanada for its share of the cost of this well.

- Completed a share offering in January 2005 for net proceeds of approximately $37 million.

Forward Looking Statements

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.

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.



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

---------------------------------------------------------------------
Three months ended Three months ended
March 31, 2005 March 31, 2004
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---------------------------------------------------------------------
Cashflow
---------------------------------------------------------------------

---------------------------------------------------------------------
Continuing operations 12,199 6,624
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Discontinued operations 6,219 1,558
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Corporate total 18,418 8,182
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Basic per share - continuing
operations $0.14 $0.09
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Basic per share - corporate $0.21 $0.11
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Diluted per share - continuing
operations $0.13 $0.09
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Diluted per share - corporate $0.20 $0.11
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---------------------------------------------------------------------
Earnings
---------------------------------------------------------------------

Continuing operations 4,327 2,299
---------------------------------------------------------------------
Discontinued operations 2,947 (276)
---------------------------------------------------------------------
Corporate total 7,274 2,023
---------------------------------------------------------------------
Basic per share - continuing
operations $0.05 $0.03
---------------------------------------------------------------------
Basic per share - corporate $0.08 $0.03
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Diluted per share - continuing
operations $0.05 $0.03
---------------------------------------------------------------------
Diluted per share - corporate $0.08 $0.03
---------------------------------------------------------------------


Production Summary for the Three Months Ended March 31, 2005

---------------------------------------------------------------------
Natural Q1 Exit
Gas Condensate LPG's Oil BOE's BOEPD Rates
Field (mmscf) (bbls) (bbls) (bbls) (6:1) (6:1) (BOEPD)
---------------------------------------------------------------------

El
Wastani 3,720 117,345 61,846 - 799,132 8,879 9,447
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South
Manzala 4,980 - - - 830,044 9,223 10,106
---------------------------------------------------------------------
Hana - - - 48,578 48,578 540 531
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Egypt
Total 8,700 117,345 61,846 48,578 1,677,754 18,642 20,084
---------------------------------------------------------------------

---------------------------------------------------------------------
El
Biban(b) 390 - - 53,429 118,527 1,317 1,332
---------------------------------------------------------------------
Ezzaouia(b) 57 - - 49,127 58,587 651 546
---------------------------------------------------------------------
Robanna(b) - - - 3,617 3,617 40 41
---------------------------------------------------------------------

Tunisia
Total 447 - - 106,173 180,731 2,008 1,919
---------------------------------------------------------------------
---------------------------------------------------------------------

Corporate
Total 9,147 117,345 61,846 154,751 1,858,485 20,650 22,003
---------------------------------------------------------------------


Note (a) : Natural gas has been converted into barrels of oil equivalent at 6:1. Boe's disclosed in this table may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf: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.

Note (b) : These properties are classified as discontinued operations and were sold on April 26, 2005. Refer to notes 10&11 of the financial statements for further details.

OPERATING HIGHLIGHTS

EGYPT

El-Manzala Concession

El Wastani Development Lease

The El Wastani-4 development well was drilled to a final total measured depth of 3,000 meters after penetrating the targeted Abu Madi Sands, to the north of EW-1. A 7" liner was run to total depth and the well tested at a rate of 15 mmscf/d of natural gas plus 411 bpd of associated liquids. EW-4 has been tied into the existing facilities located at the EW-1 wellsite.

The El Wastani-9 well was drilled to appraise the southern extension of the lower Abu Madi pay zone penetrated in EW-1, EW-3 and EW-4. The well was drilled to a final total measured depth of 2,936 meters after penetrating the targeted Abu Madi Sands and the secondary Qawasim target.

The Qawasim formation yielded 9.0 mmscf/d of natural gas plus 190 bpd of associated liquids from a 10 meter perforated interval. 14 meters out of a total net pay of 39 meters were perforated in the Lower Abu Madi sands and tested at a combined rate of 26.3 mmscf/d of natural gas and 458 bpd of associated liquids. EW-9 is currently being tied-in to the existing facilities.

The El Wastani-6 Development well was spudded at the end of March, targeting Abu Madi, Qawasim and Sidi Salim formations. At the time of writing, intermediate casing has been set in the Qawasim after logging significant pay in both the Qawasim and Lower Abu Madi, and drilling has resumed towards the Sidi Salim formation.

The El Wastani field produced an average of 41.3 mmscf/d of sales gas and 1,991 bpd of condensate and LPG's during Q1 2005 compared to 10.2 mmscf/d and 636 bpd of condensate and LPG's during Q1 2004. Ongoing modifications to the facilities in the El Wastani field are expected to increase field capacity from the current 45 mmscf/d to approximately 70 mmscf/d by mid-year. Further additions will increase the field capacity before year-end to achieve the targeted rate of 150 mmscf/d with a commensurate increase in liquids sales.

South Manzala Development Lease

As a result of installing compression and dehydration facilities at the South Manzala plant site the production capacity has increased to 60 mmscf/d. Production from the existing wells in the South Manzala field is currently filling this capacity with an average flow rate of 55.3 mmscf/day during Q1 2005 compared to 34.5 mmscf/day in Q1, 2004. Further modifications to facilities as well as the installation of a new 12" sales gas pipeline twinning the existing 33 km 8" line to El Hourany will result in an increase in capacity to 120 mmscf/d by the end of Q3, 2005.

The Abu Monkar-2 well was drilled to a total depth of 2,510m, 15m into the targeted Sidi Salim formation, following difficulties in drilling operations. Upon entering the Sidi Salim formation, mud logs indicated gas and a significant gas kick was experienced. Due to the drilling difficulties, the hole could not be safely deepened to the planned total depth. Securing and testing the interval proved also to be problematic because of continuous shale collapses and other mechanical difficulties. The decision was ultimately made to move the drilling rig off the hole due to wellbore instability. The rig has now moved and is drilling the first of four wells in the existing Gelgel field.

Despite the drilling problems encountered, management is strongly encouraged by this prospect, particularly by the gas shows and kick observed while drilling. Plans are being made to re-drill the target in late Q2, 2005.

West Gharib Concession

Hana Field

Production from the Hana field averaged 540 bopd during Q1 2005 compared to 515 bopd during Q1 2004.

Drilling and testing operations have continued with the operator recently reporting on three wells. Fadl-1 has been suspended following a cement squeeze to isolate a water zone below a potentially productive heavy oil interval, Hoshia-1 has tested approximately 500 bopd of 16.5 degree API oil from the Rudeis sandstone and the exploration well West Hoshia-1 has been drilled to a total depth of 2,028 feet and is awaiting testing equipment.

West Manzala and West Qantara

Exploration Blocks in Egypt

Centurion commenced the acquisition of a 3-D seismic program covering most of the area of the two adjoining exploration blocks. Approximately 400 square km's of seismic have been acquired and the processing of this data commenced during the quarter. Acquisition is expected to be complete in Q4 2005, with processing and interpretation taking place concurrently allowing the company to identify targets and plan drilling locations before the end of 2005.

Kom Ombo Concession

Reprocessing of 1,500 km's of 2D seismic is ongoing and a contract has been awarded for surface geology studies in the Kom Ombo concession. A minimum of 500 km of new 2D seismic, a Basin Modeling study of the area and an Environmental Impact study are also planned to be completed during 2005.

TUNISIA

Mellita Permit

The onshore well on the Mellita permit, Medoun-1, spudded on May 5, 2005 and is currently drilling ahead. It is estimated that drilling and testing operations will take approximately 45 days to complete. Centurion is being carried by its partner, PetroCanada, for the first $US 13.5 million of costs related to drilling of an onshore and offshore well in the Mellita Permit.

MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the unaudited financial statements of Centurion for the periods ended March 31, 2005 and 2004. The unaudited interim financial statements included in this report have been prepared by management and approved by Centurion's Audit Committee on behalf of the Board of Directors. This Management Discussion and Analysis is dated
May 11, 2005.

Trends Observed During the Quarter

Commodity Prices

Late 2004 and early 2005 saw world oil prices reach all time record highs. Brent oil prices averaged $US 47.50 per bbl in Q1 2005 bringing condensate and NGL prices along for the ride. Prices realized by Centurion per commodity in Q1 2005 were $US 2.70 per mscf of gas, $US 46.13 per bbl of condensate and natural gas liquids and $US 25.98 per bbl of oil.

Foreign Exchange Fluctuations

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

During Q1, 2005, the average Canadian to US dollar exchange rate was $0.82 compared to $0.76 in Q1, 2004. The strengthening Canadian dollar in Q1, 2005 had the effect of reducing all US dollar translated amounts by 8% compared to Q1 2004 and reduced earnings and cashflow by less than one cent per share each.

Dilution Impacts

Centurion, not unlike many of its peers, requires capital funding to complete its upcoming drilling and development programs. These programs may require large cash infusions to the point where current cashflow from operations and available bank financing are not sufficient to meet these capital demands. As a result, public companies commonly rely on share offerings to raise the capital to complete its drilling and development programs. A short term impact of such share offerings is dilution of period results until the cashflow and earnings from the new investments start to be reflected.

Since Q1, 2004, Centurion has participated in two share offerings, August 2004 and January 2005. Dilution associated with these stock issues decreased cashflow and earnings for the three months ended March 31, 2005 by $0.05 and $0.02 per share respectively.

Sale of Tunisian Producing Assets

As part of Centurion's focus on higher impact exploration and development, Centurion signed a purchase and sales agreement with Candax Energy Inc. on February 25, 2005, to sell all of Centurion's Tunisian producing assets for approximately $41.2 million plus working capital adjustments. The effective date of the sale is January 1, 2005.

As a result of this transaction, Centurion has presented all of the assets, liabilities, revenues and expenses associated with the operations included in the sale as discontinued operations for financial reporting purposes. Accordingly, the management discussion and analysis is segregated between continuing operations (primarily Centurion's Egyptian operations) and discontinued operations (Tunisia). Any prior year comparative figures have been restated to give a meaningful comparison for the current year's activities.

Subsequent to quarter end, on April 26, 2005, the transaction was completed for total gross proceeds of approximately $43.7 million inclusive of all working capital adjustments. The financial effect of the sale will be accounted for in the second quarter of 2005.

Continuing Operations

Revenue

Sales, net of royalties for Q1 2005 were $21.2 million compared to $11.2 million for Q1 2004, an increase of 90%. This increase in sales is a combination of a 121% increase in production from El Wastani and South Manzala offset by foreign currency effects and a 7.5% reduction in Centurion's share of Egyptian production from 47.5% in 2004 to approximately 40% in 2005.

Under the terms of Centurion's Production Sharing Contract ("PSC"), Centurion receives both a cost recovery portion and profit portion of any hydrocarbons produced. The "cost recovery portion" is limited to the lesser of 30% of gross sales or 20% of non-recovered capital costs plus 100% of current operating costs. The remaining production is deemed the "profit portion" and Centurion and the Egyptian Government share that profit portion at a 25% and 75% share respectively.

Prior to 2004, Centurion's production was such that it received the full 30% of the cost recovery portion of production plus its share of the profit portion. This resulted in 47.5% of total production being allocated to Centurion. In 2005 and onwards, Centurion's substantial growth in production and sales will result in cost recovery being limited to 20% of capital and 100% of operating costs. Accordingly, the percentage of gross production Centurion receives in 2005 has decreased to approximately 40% from the previous 47.5% level. The production volumes taken by the Egyptian Government are in lieu of any further taxes and royalties and the 40% allocation Centurion received has no further financial encumbrances upon it.

The Egyptian Government share of production volumes are accounted for by Centurion as royalty and tax expense. In Q1, 2005, the royalty expense approximated $19.1 million (47% of gross sales) compared to $7.1 million (39% of gross sales) in Q1, 2004. The 7.5% increase in royalty rate is commensurate with the increased production allocation to the Egyptian Government discussed above.

Operating Expense

Operating expense for Q1, 2005 amounted to $3.0 million ($1.79 per boe) compared to $1.3 million ($1.72 per boe) for Q1, 2004. The increase in per boe operating expenses is attributable to the increased value of the LPG's produced from El Wastani that the Abu Madi plant operator keeps in lieu of payment for third party gas processing. These costs amounted to $1.4 million ($0.83 per boe) in Q1 2005 compared to $0.3 million ($0.39 per boe) in Q1 2004. The value of the LPG's produced is recorded as sales with a corresponding amount charged to operating expense.

Field operating costs decreased to $0.96 per boe in Q1 2005 compared to $1.33 per boe in Q1 2004. The decrease in field costs is a result of having minimal variable costs associated with incremental gas production, while the larger portion of fixed operating costs gets allocated over increased production volumes achieved in 2005 compared to 2004.

General and Administrative Expense

General and administrative expenses for both Q1, 2005 and Q1, 2004 were $0.7 million. Centurion's cost per boe produced is $0.39 for Q1 2005 compared to $0.75 for Q1 2004.

Interest and Finance Costs

Interest for Q1, 2005 amounted to $0.3 million compared to $0.2 million for Q1, 2004. This represents interest on both the bank indebtedness and the capital lease related to compression facilities installed in Egypt. The capital lease commenced in Q2, 2004 and represents the majority of the increased cost over Q1, 2004.

Depreciation, Depletion and Amortization

The depletion provision for Q1, 2005 amounted to $6.5 million ($3.89 per boe) compared to $4.1 million ($5.30 per boe) for Q1, 2004. Decreases in the per boe depletion amounts relate to updated proved reserve information as at January 1, 2005. Other deprecation relates to non oil and gas assets.



Summary of Quarterly Results

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($ 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
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Discontinued operations 8.6 3.4 6.9 4.2
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Corporate total 29.8 20.0 21.9 15.8
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Cash flow
---------------------------------------------------------------------
Continuing operations 12.2 10.2 7.5 6.7
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Discontinued operations 6.2 1.3 5.4 2.8
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Corporate total 18.4 11.5 12.9 9.5
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Basic per share
- continuing operations 0.14 0.13 0.09 0.09
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Diluted per share
- continuing operations 0.13 0.12 0.09 0.09
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Basic per share
- corporate total 0.21 0.14 0.16 0.13
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Diluted per share
- corporate total 0.20 0.13 0.15 0.12
---------------------------------------------------------------------
Earnings
---------------------------------------------------------------------
Continuing operations 4.3 4.1 1.9 2.3
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Discontinued operations 3.0 (0.4) 2.0 1.5
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Corporate total 7.3 3.7 3.9 3.8
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Basic per share
- continuing operations 0.05 0.05 0.02 0.03
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Diluted per share
- continuing operations 0.05 0.05 0.02 0.03
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Basic per share
- corporate total 0.08 0.04 0.05 0.05
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Diluted per share
- corporate total 0.08 0.04 0.05 0.04
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($ millions, except per share amounts)

2004 - Q1 2003 - Q4 2003 - Q3 2003 - Q2
---------------------------------------------------------------------
Sales (net of royalties)
---------------------------------------------------------------------
Continuing operations 11.1 10.5 4.4 4.0
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Discontinued operations 3.3 7.0 3.5 7.3
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Corporate total 14.4 17.5 7.9 11.3
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Cash flow
---------------------------------------------------------------------
Continuing operations 6.6 5.7 1.9 2.0
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Discontinued operations 1.6 4.0 2.5 5.9
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Corporate total 8.2 9.7 4.4 7.9
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Basic per share
- continuing operations 0.09 0.09 0.03 0.03
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Diluted per share
- continuing operations 0.08 0.09 0.03 0.03
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Basic per share
- corporate total 0.11 0.14 0.07 0.13
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Diluted per share
- corporate total 0.11 0.13 0.07 0.12
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Earnings
---------------------------------------------------------------------
Continuing operations 2.2 2.6 (0.4) (0.9)
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Discontinued operations (0.2) 1.0 1.1 3.1
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Corporate total 2.0 3.6 0.7 2.2
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Basic per share
- continuing operations 0.03 0.04 (0.01) (0.01)
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Diluted per share
- continuing operations 0.03 0.04 (0.01) (0.01)
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Basic per share
- corporate total 0.03 0.06 0.01 0.04
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Diluted per share
- corporate total 0.03 0.05 0.01 0.04
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Discontinued Operations

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 will be reported for the period of January 1, 2005 to the closing date of April 26, 2005 by Centurion.

Sales, net of royalties for Q1, 2005 were $8.6 million compared to $3.3 million in Q1, 2004. Q1, 2005 sales include the sales effect of 40,000 barrels of oil held in inventory at year end and also reflect world oil price increases over Q1, 2004.

Earnings from discontinued operations were $2.9 million for Q1, 2005 compared to a loss of $0.3 million for Q1, 2004. Q1 2005 earnings were positively affected by the increased netbacks received per barrel produced due to current oil prices and the sale of 40,000 barrels of oil held in inventory at year end. Additional increases in discontinued earnings in Q1, 2005 related to no depletion being charged on the assets held for sale since December 31, 2004. In Q1, 2004, depletion of $1.3 million was charged against these assets and reduced earnings accordingly.

Liquidity, Capital Resources and Capital Expenditures

Capital expenditures for the three months ended March 31, 2005 totaled $30.8 million including $30.7 million spent in Egypt and $0.1 million spent in Canada. The expenditures in Egypt consisted of 2005 drilling program costs, facility installation costs, 3D seismic acquisition and general geological and geophysical programs.

Cash on hand at March 31, 2005, was $60 million compared to $37.4 million at December 31, 2004. Centurion had working capital of $69.1 million at March 31, 2005, compared to working capital of $49.3 million at December 31, 2004.

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. There has been no substantial change in the business risk factors since the discussion provided in the Company's 2004 Annual Report and most recent Annual Information Form.

Forward Looking Statements

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.

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.



Centurion Energy International Inc
Consolidated Balance Sheets

($000's Canadian dollars)

As at As at
March 31 December 31
2005 2004
(unaudited) (unaudited)

Assets
Current Assets
Cash 59,920 37,416
Accounts receivable 26,295 19,512
Deposits and prepaids 974 935
Assets of discontinued operations
(note 10) 11,446 7,536
------------------------------
98,635 65,399

Capital assets 86,008 61,413
Capital assets of discontinued
operations (note 10) 52,807 52,757
Deferred financing costs 999 1,088
------------------------------
238,449 180,657
------------------------------
------------------------------

Liabilities
Current liabilities
Accounts payable 18,232 8,064
Short-term portion of capital lease
obligation (note 3) 548 531
Liabilities of discontinued operations
(note 10) 3,919 5,224
------------------------------
22,699 13,819

Capital lease obligation (Note 3) 2,013 2,133
Long-term debt (Note 2) 12,148 12,023
Asset retirement obligation (Note 8) 2,218 2,018
Liabilities of discontinued operations
(note 10) 20,915 18,561
------------------------------
59,993 48,554
------------------------------

Shareholders' Equity
Capital stock (Note 4) 142,778 104,754
Contributed surplus (Note 5) 4,021 3,168
Foreign currency translation adjustment
of continuing operations (11,805) (12,353)
Foreign currency translation adjustment
of discontinued operations (9,110) (8,764)
Retained earnings 52,572 45,298
------------------------------
178,456 132,103

------------------------------
238,449 180,657
------------------------------
------------------------------


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

($000's Canadian dollars)

For the three months ended March 31 (Unaudited)

2005 2004

Revenue
Sales - net of royalties 21,162 11,157
Other income 333 130
------------------------------
21,495 11,287
------------------------------

Expenses
Operating 3,008 1,349
Depletion, depreciation and amortization 6,738 4,210
General and administrative 731 709
Foreign prospect review 275 -
Stock based compensation (Note 6) 980 38
Interest 275 190
Amortization of deferred financing costs 89 39
Foreign exchange loss (gain) 125 (23)
Accretion 65 38
------------------------------
12,286 6,550

Income before income taxes 9,209 4,737

Current income taxes 4,882 2,438

------------------------------
Income for the period from
continuing operations 4,327 2,299
------------------------------

Income (loss) for the period from
discontinued operations 2,947 (276)

------------------------------
Income for the period 7,274 2,023
------------------------------

Retained earnings - Beginning of period 45,298 31,898
------------------------------
Retained earnings - End of period 52,572 33,921
------------------------------
------------------------------

Basic earnings per share from
continuing operations 0.05 0.03
Diluted earnings per share from
continuing operations 0.05 0.03

Basic earnings per share 0.08 0.03
Diluted earnings per share 0.08 0.03


Centurion Energy International Inc.
Consolidated Statement of Cash Flows

($000's Canadian dollars)

For the three months ended March 31 (Unaudited)

2005 2004

Cash provided by (used in) operating
activities
Income for the period from
continuing operations 4,327 2,299
Items not affecting cash
Depletion, depreciation and amortization 6,738 4,210
Amortization of deferred financing costs 89 39
Stock based compensation 980 38
Accretion 65 38

------------------------------
Funds from continuing operations 12,199 6,624
Funds from discontinued operations 6,219 1,558
------------------------------
18,418 8,182

Changes in continuing non cash
working capital items (6,863) (4,984)
Changes in discontinued working
capital items (963) (3,161)
------------------------------
10,592 37
------------------------------

Investing activities
Capital asset expenditures (30,844) (3,646)
Changes in continuing non-cash
working capital items 10,209 962
Discontinued operations (4,192) 2,034
------------------------------
(24,827) (650)
------------------------------

Financing activities
Repayments of long term debt (178) -
Issuance of capital stock 37,897 2
Discontinued operations (648) (398)
------------------------------
37,071 (396)
------------------------------

Foreign currency translation (332) 142
------------------------------
Increase / (decrease) in cash 22,504 (867)
------------------------------
Cash - Beginning of year 37,416 21,761
------------------------------
Cash - End of period 59,920 20,894
------------------------------
------------------------------


Consolidated Notes to Financial Statements
All dollar figures are in $000's of Canadian dollars unless
otherwise noted.
(Unaudited)


These unaudited interim financial statements for the periods ended March 31, 2005 and 2004 have been prepared in accordance with Canadian Generally Accepted Accounting Principles and should be read in conjunction with the annual statements prepared for the year ending December 31, 2004.

1 Accounting Policies

These interim financial statements have been prepared using the same accounting policies as used in the financial statements for the year ended December 31, 2004. Please refer to Note 1 "Summary of Accounting Policies" in the 2004 Financial Statements for a detailed description of these policies.

2 Long-Term Debt

Long-term debt consists of a credit facility with the Standard Bank London Ltd. of approximating $US 10 million. This debt bears interest at LIBOR plus 3.5%. Principal repayments are required when Centurion's debt drawings exceed the allowable borrowing base provided for in the credit facility. Management does not anticipate this to occur in the upcoming year and has accordingly classified this credit facility as a long-term obligation. The current allowable borrowing base is $US 30 million.

3 Capital Lease Obligation

The capital lease obligation of $2,013 (2004 - $2,133) represents a capital lease for compression facilities related to the Company's gas fields in Egypt. This debt is being repaid over a five-year term commencing May 2004 with a blended interest and principal payment of $US51 thousand per month. An amount of $548 (2004 - $531) has been included as a current portion of long-term debt.



4 Capital Stock

Authorized

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


Number of shares ($)
------------------------------------------------------------------------
Balance at December 31, 2004 84,055,984 104,754
------------------------------------------------------------------------
------------------------------------------------------------------------
Issued on Public Offering
(net of issue costs) 2,975,000 37,009
Issued on exercise of options 1,009,235 1,015
------------------------------------------------------------------------
Balance at March 31, 2005 88,040,219 142,778
------------------------------------------------------------------------
------------------------------------------------------------------------


During the three months ended March 31, 2005, 759,235 options were exercised by employees of the Company at an average price of $0.98 per option and 250,000 by directors of the Company at an average price of $0.58 per option.

During the quarter, the Company completed a share offering consisting of the placement of 2,975,000 Common Shares which resulted in net proceeds to the Corporation of approximately $37 million.



5 Contributed Surplus

($)
------------------------------------------------------------------------
Balance - December 31, 2003 1,676
Employee stock based compensation 1,683
Stock option benefit associated with exercised options
and share purchase warrants (191)
------------------------------------------------------------------------
Balance - December 31, 2004 3,168

Stock based compensation 980
Stock based compensation associated with exercised options (127)
------------------------------------------------------------------------
Balance - March 31, 2005 4,021
------------------------------------------------------------------------
------------------------------------------------------------------------


6 Stock Options

Share Options Weighted Average
Exercise Price $
------------------------------------------------------------------------
Balance - December 31, 2003 6,098,334 0.80
Options exercised in 2004 (1,929,100) 0.71
Options granted in 2004 1,845,000 3.62
------------------------------------------------------------------------
Balance - December 31, 2004 6,014,234 1.47

Options exercised in Q1, 2005 (1,009,235) 0.88
Options granted in Q1, 2005 975,000 13.67
------------------------------------------------------------------------
Balance - March 31, 2005 5,979,999 3.85


During the three months ended March 31, 2005, 975,000 options were granted to employees and directors of the Company at an average strike price of $13.67 per share. See note 4 for details of options exercised.

For the three month period ended March 31, 2005 an expense of $980 (2004-$38) has been recorded in respect of employee stock options. This expense has been calculated using a Black-Scholes model assuming a risk free rate
ranging from 3.40% - 4.05%, a 3 year expected option life, a share price volatility ranging from 38%-56% and no dividends.



Weighted Average Stock Option Exercise Prices and Remaining Option Lives

------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------------------------
Weighted Weighted
-Average -Average
Remaining Remaining
Contractual Contractual
Exercise Options Life in Options Life in
Price Outstanding Years Exercisable Years
------------------------------------------------------------------------
0.46 250,000 1.5 250,000 1.5
------------------------------------------------------------------------
0.60 1,967,000 2.3 1,967,000 2.3
------------------------------------------------------------------------
0.84 55,000 0.7 55,000 0.7
------------------------------------------------------------------------
1.63 1,005,966 3.4 820,633 3.4
------------------------------------------------------------------------
3.05 112,000 4.0 5,333 4.0
------------------------------------------------------------------------
3.40 1,540,033 4.4 1,166,700 4.4
------------------------------------------------------------------------
9.47 75,000 4.6 25,000 4.6
------------------------------------------------------------------------
13.75 825,000 4.8 - 4.8
------------------------------------------------------------------------
14.13 75,000 4.8 - 4.8
------------------------------------------------------------------------
17.80 75,000 4.9 - 4.9
------------------------------------------------------------------------
5,979,999 4,289,666
------------------------------------------------------------------------


7 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, 2005, the weighted average common shares outstanding were 86,880,346 securities and 4,512,693 dilutive securities existed.



8 Asset Retirement Obligation

($)
------------------------------------------------------------------------
Asset retirement obligation at December 31, 2003 1,679
Additions during 2004 310
Foreign exchange effects (122)
Accretion expense 151
------------------------------------------------------------------------
Asset retirement obligation at December 31, 2004 2,018

Additions during 2005 126
Foreign exchange effects 9
Accretion expense 65
------------------------------------------------------------------------
Asset retirement obligation at March 31, 2005 2,218


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 Tunisia and other locations in Africa.

Operations that have been discontinued are disclosed in note 10.



Geographic Segments
(in thousands of Canadian dollars)

------------------------------------------------------------------------
Three months ended Canada
March 31, 2005 Egypt Tunisia and Other Total
------------------------------------------------------------------------
Revenue 21,177 - 318 21,495
------------------------------------------------------------------------
Capital Assets 77,504 7,143 1,361 86,008
------------------------------------------------------------------------
Capital Expenditures 30,750 - 94 30,844
------------------------------------------------------------------------



------------------------------------------------------------------------
Three months ended Canada
March 31, 2004 Egypt Tunisia and Other Total
------------------------------------------------------------------------
Revenue 11,161 - 126 11,287
------------------------------------------------------------------------
Capital Assets 41,984 7,675 1,206 50,865
------------------------------------------------------------------------
Capital Expenditures 3,646 - - 3,646
------------------------------------------------------------------------


10 Discontinued Operations and Assets Held for Sale

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. The estimated pre-tax gain on sale at March 31, 2005 is $3 million subject to final purchase price adjustments and transaction costs. These assets have been classified as assets held for sale and are reflected as discontinued operations. Certain financial information has been reclassified in the prior period as discontinued operations.



Selected financial information for the operations included in
discontinued operations is reported below:

March 31, March 31,
(In Thousands of Canadian dollars) 2005 2004
------------------------------------------------------------------------
Revenues 8,613 3,322
Income form discontinued operations
before taxes 5,564 222
Income taxes 2,617 498
Income from discontinued operations 2,947 (276)
------------------------------------------------------------------------
------------------------------------------------------------------------


The major classes of assets and liabilities of discontinued operations
are as follows:


March 31, December 31,
2005 2004
------------------------------------------------------------------------
Current assets 11,446 7,536
Capital assets 52,807 52,757
------------------------------------------------------------------------
64,253 60,293
------------------------------------------------------------------------
Current liabilities 3,919 5,224
Limited recourse long-term debt 14,103 14,395
Asset retirement obligation 2,133 2,103
Future income tax liability 4,679 2,063
------------------------------------------------------------------------
24,834 18,561
------------------------------------------------------------------------
Foreign currency translation adjustment (9,110) (8,764)
------------------------------------------------------------------------
Net assets of discontinued operations 48,529 45,272
------------------------------------------------------------------------
------------------------------------------------------------------------


11 Subsequent Event

Subsequent to quarter end, the sale of the Company's Tunisian producing properties closed on April 26, 2005 for proceeds of $43.7 million (Canadian Funds) including working capital adjustments effective January 1, 2005.

Contact Information

  • Centurion Energy International
    Said S. Arrata
    President and CEO
    (+1 403 263 6002)
    or
    Centurion Energy International
    Barry W. Swan
    Senior Vice President and CFO
    (+1 403 263 6002)
    or
    Scott Koyich
    Investor Relations
    (+1 403 215 5979)
    info@centurionenergy.com
    http://www.centurionenergy.com
    or
    Citigate Dewe Rogerson
    Martin Jackson
    (+44 207 638 9751)
    or
    Citigate Dewe Rogerson
    Kate Delahunty
    (+44 207 638 9751)