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

Centurion Energy International Inc.

August 12, 2005 09:30 ET

Centurion Announces Q2 2005 Financial Results

CALGARY, ALBERTA--(CCNMatthews - Aug. 12, 2005) -

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

Centurion Energy International Inc. the Toronto (TSX:CUX) and London AIM (AIM:CUX.L) listed independent oil and gas exploration and production company, operating principally in the Egyptian Nile Delta, today announces its 2005 second 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 Audit Committee on behalf of the Board of Directors.

Highlights

- Corporate cash flow totaled $13.4 million ($0.15 per share diluted) during Q2, 2005 compared to $9.5 million ($0.12 per share diluted) in Q2, 2004.

- Corporate earnings totaled $3.9 million ($0.04 per share diluted) during Q2, 2005 compared to $3.8 million ($0.04 per share diluted) in Q2, 2004.

- Total company production reached a new plateau in July 2005, exceeding 25,000 boepd.

- Completed the sale of the Tunisian producing properties to Candax Energy Inc. for proceeds of $43.7 million on April 26, 2005.

- El Wastani-6 Development well discovered light oil and gas from a new pay zone and tested at 22mmscfpd of gas and 935 bpd of light oil.

- Drilled two Gelgel wells during the quarter, Gelgel-5 and Gelgel-7, which tested for a combined rate of 23.7 mmscfpd.

- Continued success in the West Gharib Concession (Centurion 30% WI) with the Hoshia-1 discovery being added to production in Q2 2005. Hoshia-1 is currently averaging 700 bbl/d of heavy oil and total production from the Concession is now over 2,600 bpd.

- The West Manzala and West Qantara 3D seismic program, totaling 2,250 square kilometers, is 40% complete. The drilling of one exploration well is expected to commence before the end of 2005.

- The Centurion and Hercules Petroleum Limited consortium were awarded a 10% interest in Block 4 of the Nigeria-Sao Tome Joint Development Zone. Centurion holds a minimum 75% interest of the consortium's award.

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 millions of Canadian dollars, except per share amounts)

------------------------------------------------------------------------
Three months Three months Six months Six months
ended June ended June ended June ended June
30, 2005 30, 2004 30, 2005 30, 2004
------------------------------------------------------------------------
Cashflow
------------------------------------------------------------------------

------------------------------------------------------------------------
Continuing operations 13.2 6.7 25.4 13.3
------------------------------------------------------------------------
Discontinued operations 0.2 2.8 6.5 4.4
------------------------------------------------------------------------
Corporate total 13.4 9.5 31.9 17.7
------------------------------------------------------------------------
Basic per share
- continuing operations 0.15 0.09 0.29 0.18
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.15 0.09 0.28 0.17
------------------------------------------------------------------------
Basic per share
- corporate 0.15 0.13 0.36 0.24
------------------------------------------------------------------------
Diluted per share
- corporate 0.15 0.12 0.35 0.23
------------------------------------------------------------------------

------------------------------------------------------------------------
Earnings
------------------------------------------------------------------------

------------------------------------------------------------------------
Continuing operations 4.4 2.3 8.7 4.6
------------------------------------------------------------------------
Discontinued operations (0.5) 1.5 2.4 1.2
------------------------------------------------------------------------
Corporate total 3.9 3.8 11.1 5.8
------------------------------------------------------------------------
Basic per share
- continuing operations 0.05 0.03 0.10 0.06
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.05 0.03 0.09 0.06
------------------------------------------------------------------------
Basic per share
- corporate 0.04 0.05 0.13 0.08
------------------------------------------------------------------------
Diluted per share
- corporate 0.04 0.04 0.12 0.07
------------------------------------------------------------------------
------------------------------------------------------------------------



Production Summary for the Periods Ended June 30, 2005

------------------------------------------------------------------------
Natural
Gas Condensate LPG's Oil
Field (mmscf) (bbls) (bbls) (bbls)
------------------------------------------------------------------------

------------------------------------------------------------------------
El Wastani 4,528 157,934 71,275 -
------------------------------------------------------------------------
South Manzala 4,828 - - -
------------------------------------------------------------------------
Hana - - - 39,874
------------------------------------------------------------------------
Egypt Total 9,356 157,934 71,275 39,874
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
El Biban (b) 98 - - 15,913
------------------------------------------------------------------------
Ezzaouia (b) 10 - - 12,345
------------------------------------------------------------------------
Robanna (b) - - - 1,210
------------------------------------------------------------------------
Tunisia Total 108 - - 29,468
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
Corporate Total 9,464 157,934 71,275 69,342
------------------------------------------------------------------------
------------------------------------------------------------------------


------------------------------------------------------------------------
Average YTD YTD
Total Q2 Q2 6 months 6 months
BOE's BOEPD BOE's BOEPD
Field (6:1) (6:1) (6:1) (6:1)
------------------------------------------------------------------------

------------------------------------------------------------------------
El Wastani 983,842 10,812 1,782,974 9,850
------------------------------------------------------------------------
South Manzala 804,738 8,843 1,634,782 9,032
------------------------------------------------------------------------
Hana 39,874 438 88,452 489
------------------------------------------------------------------------
Egypt Total 1,828,454 20,093 3,506,208 19,371
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
El Biban (b) 32,159 354 150,686 833
------------------------------------------------------------------------
Ezzaouia (b) 14,040 154 68,298 377
------------------------------------------------------------------------
Robanna (b) 1,210 13 4,827 27
------------------------------------------------------------------------
Tunisia Total 47,409 521 223,811 1,237
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
Corporate Total 1,875,863 20,614 3,730,019 20,608
------------------------------------------------------------------------
------------------------------------------------------------------------

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 note 11 of the financial
statements for further details.


OPERATING HIGHLIGHTS

EGYPT

El-Manzala Concession

El Wastani Development Lease

During the second quarter the El Wastani-9 well was tied-in to the existing EW facilities and commenced production from the lower Abu Madi formation. The well was initially constrained by facility capacity but since the phase-2 facilities modifications took place the well has been producing at a rate of approximately 20 mmscf/d plus associated liquids.

The El Wastani-6 Development well was spudded at the end of the first quarter, targeting Abu Madi, Qawasim and Sidi Salim formations. After drilling and logging the Qawasim section the well experienced mechanical difficulties during cementing operations, resulting in the drilling of a sidetrack wellbore. The decision was taken to secure the wellbore at the base of logged pay in the Qawasim formation and not pursue the Sidi Salim formation at this location. The Qawasim tested at a rate of 22 mmscf/d and 935 bpd of light oil from a 56 m gross pay interval. This is the first occurance of light oil in the El Wastani Production Lease. The well has since been placed on production at a facilities-constrained rate of 10 mmscf/d. The 60 m gross pay interval in the Lower Abu Madi formation was not tested as the zone has already been proved productive in the field and testing of the interval would complicate production from the Qawasim formation further downhole.

The El Wastani-5 development well was spud after the end of the second quarter, targeting the Qawasim and Lower Abu Madi formations. At the time of writing the well has reached a depth of 1280 m and intermediate casing has been run and cemented.

At least three further wells are planned for the El Wastani Production Lease before the end of the year, further appraising mapped reservoirs and allowing the field to increase production rates to the planned 150 mmscf/d year-end exit rate.

The El Wastani field produced an average of 49.8 mmscf/d of sales gas and 2,519 bpd of condensate and LPG's during Q2 2005 compared to 10.3 mmscf/d and 618 bpd of condensate and LPG's during Q2 2004. Modifications to the El Wastani facilities including additional compression and separation equipment were completed mid-quarter, allowing the field to increase production from 45 mmscf/d to the current rate of over 80 mmscf/d. A Joule-Thompson plant is currently being installed to allow an increase in gas sales of up to 150 mmscf/d before the end of the third quarter. At that time all liquid production will be sent to the Abu Madi plant using the existing gas and liquids lines. In the meantime the construction of a stand-alone 150 mmscf/d refridgeration plant has commenced which will replace the temporary Joule-Thompson plant, followed by additional liquids-recovery capacity allowing Centurion to fully recover its own LPGs later in 2006.

South Manzala Development Lease

The Gelgel-5 well was drilled to a total depth of 1,041m, encountering a total of 18m of net gas pay in the El Wastani formation and a new, deeper Kafr El Sheikh pay zone. The Kafr El Sheikh pay was tested through a 6m perforated interval at a rate of 14.2 mmscf/d. The well has since been placed on production through the existing SEM facilities at a restricted rate of 4 mmscf/d.

At quarter-end, the Gelgel-7 well was drilled and logged to a depth of 1,121m. A total of 11.9m of net gas pay was logged in the El Wastani formation. Since the end of the quarter, the lower of the two intervals encountered has been tested at a rate of 9.5 mmscf/d and the well is being tied-in for production at an expected sustained rate of 8 mmscf/d by mid-August.

Work is underway to further modify the South El Manzala facilities and to complete the installation of the new 12" sales gas pipeline twinning the existing 33 km 8" line to El Hourany. This will double the sales capacity from the area to 120 mmscf/d by the end of Q3, 2005.

The South Manzala field produced an average of 53.1 mmscf/d of sales gas during Q2 2005 compared to an average of 33 mmscf/d during Q2 2004.

West Gharib Concession

Hana Field

Production from the Hana field averaged 438 bopd (net to Centurion) during Q2 2005 compared to 489 bopd during Q2 2004.

In the second quarter the Hoshia-1 discovery was placed on production, averaging 700 bbl/d heavy oil from the Rudeis formation. The appraisal well Hoshia-2 was completed in an updip position from Hoshia-1, and the follow-up Hoshia-3 well was spudded. An Early Production Plan was submitted to the government by the operator.

Early Production Plans were also submitted for the other two discovery wells drilled on the permit, Fadl-1 which tested 250 bbl/d and West Hoshia-1 which tested 300 bbl/d. Altogether, the operator plans to drill 12 exploration and development wells on the Concession. Centurion has a 30% working interest in the West Gharib Concession including the Hana field and total gross production is currently in excess of 2,600 bopd.

West Manzala and West Qantara

Exploration Blocks in Egypt

Acquisition of 3-D seismic program covering most of the area of the two adjoining exploration blocks continued during the second quarter, with approximately 40% having been acquired to date. 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. Based on the interpretation done to date, Centurion has already begun sourcing materials for 33 new wells in the West Manzala and West Qantara concessions. The first exploration well to be drilled in the new concessions is expected to spud before the end of September 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, reached a total depth of 2,860m during the quarter but was plugged and abandoned. 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. PetroCanada has contracted a jack-up drilling rig to drill an offshore exploration well, Amira-1. The rig is expected to commence drilling operations late October 2005, targeting the Cretaceous Zeebag and Meloussi formations.

NIGERIA-SAO TOME

Joint Development Zone

The Centurion and Hercules Petroleum Limited consortium were awarded a 10% interest in Block 4 of Nigeria-Sao Tome Joint Development Zone. Centurion will hold a minimum 75% of the consortium's award, equating to a minimum 7.5% equity interest in JDZ Block 4. The signing bonus due for the Block 4 has been set at $US 90 million. Centurion is required to pay $US 6.75 million of the total signature bonus.

The Nigeria Sao Tome and Principe Joint Development Zone is an area of overlapping maritime boundary claims situated in the Gulf of Guinea that is being jointly developed and administered by Nigeria and Sao Tome and Principe. Block 4 is a 857 square km offshore block that will be operated by a consortium of Noble and ERHC Energy Inc. which was awarded a 60% equity interest in the block. Exploration on the block is to be conducted in three phases over a period of eight years.

Block 4 is an extension of the prolific Nigeria deepwater play where a number of world class oil discoveries have been made recently. Based on the interpretation of 3D seismic several large structures capable of containing giant size oil fields have been identified and mapped.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the unaudited financial statements of Centurion for the periods ended June 30, 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's Discussion and Analysis is dated August 11, 2005.

Trends Observed During the Quarter

Commodity Prices

2005 has been a period of record breaking world oil prices. Supply interruptions, transportation limitations and an uncertainty as to production stability have contributed to driving Brent oil prices to current levels in excess of $US 60 per bbl while averaging $US 51.87 per bbl in Q2 2005. Prices realized by Centurion per commodity in Q2 2005 were $US 2.71 per mscf of gas, $US 48.49 per bbl of condensate and natural gas liquids and $US 32.60 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 Q2, 2005, the average Canadian to US dollar exchange rate was $0.80 compared to $0.74 in Q2, 2004. The strengthening Canadian dollar in Q2, 2005 had the effect of reducing all US dollar translated amounts by 8% compared to Q2 2004 and reduced each of earnings and cashflow by less than one cent per share.

Dilution Impacts

Since Q2 2004, Centurion has participated in two share offerings; August 2004 and January 2005. The funds raised through these share offerings are currently financing Centurion's 2005 drilling and development programs in Egypt. A consequence of such share offerings is dilution of per share results until the benefit of expenditures made from funds raised translates into new production, cashflow and earnings. The dilution associated with these two stock issues decreased cashflow and earnings for the three months ended June 30, 2005 by $0.02 and $0.01 per share respectively.

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 all working capital adjustments.

As a result of this transaction, Centurion has presented all of the revenues and expenses associated with the operations included in the sale as discontinued operations for financial reporting purposes. All assets and liabilities associated with the discontinued operations sold have been written off of the balance sheet and are netted against proceeds received on the sale. This resulted in income from discontinued operations of approximately $2.5 million being recorded in Q2 2005. Note 11 to the interim financial statements provides further details related to the sale of these assets.

As a result of the sale of the Tunisian producing assets, the Management's Discussion and Analysis has been 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.

Continuing Operations

Revenue

Sales, net of royalties for Q2 2005 were $22.9 million compared to $11.6 million for Q2 2004, and were $44.1 million for the six months ended June 30, 2005 compared to $22.8 million for the comparable period in 2004, an increase of 93%. This increase in sales is a combination of a 135% increase in production from El Wastani and South Manzala offset by foreign currency effects and a 9% reduction in Centurion's share of Egyptian production from 47.5% in 2004 to approximately 38.5% year to date 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 38.5% 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 38.5% 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. For the six months ended June 30, 2005, the royalty expense approximated $43.4 million (49% of gross sales) compared to $14.4 million (40% of gross sales) for the comparable period in 2004. The 9% increase in royalty rate is commensurate with the increased production allocation to the Egyptian Government discussed above.

Operating Expense

Operating expense for Q2, 2005 amounted to $3.9 million ($2.13 per boe) compared to $1.6 million ($2.05 per boe) for Q2, 2004. For the six months ended June 30, 2005, operating expense totaled $6.9 million ($1.97 per boe) compared to $2.9 million ($1.88 per boe) for the comparable period in 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 $2.9 million ($0.78 per boe) year to date Q2 2005 compared to $ 0.7 million ($0.36 per boe) for the same period in 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 $0.99 per boe in Q2 2005 compared to $1.25 per boe in Q2 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 Q2, 2005 and Q2 2004 amounted to $0.7 million. Centurion's cost per boe produced is $0.40 for Q2 2005 compared to $0.87 for Q2, 2004. For the six months ended June 30, 2005, general and administrative expenses for both Q2, 2005 and Q2 2004 were $1.5 million. On a per boe basis, the costs were $0.42 for year to date Q2 2005 compared to $0.81 for the comparable period in 2004.

Interest and Finance Costs

Interest for Q2, 2005 amounted to $0.3 million compared to $0.1 million for Q2, 2004. For the six months ended June 30, 2005, interest cost totaled $0.6 million compared to $0.3 million for the comparable period in 2004. The 2005 costs represent interest on both the bank indebtedness and the capital lease.

Depreciation, Depletion and Amortization

The depletion provision for Q2, 2005 amounted to $7.5 million ($4.13 per boe) compared to $4.1 million ($5.41 per boe) for Q2, 2004. For the six months ended June 30, 2005, the provision totaled $14.1 million ($4.02 per boe) compared to $8.3 million ($5.35 per boe) in 2004. Decreases in the per boe depletion amounts relate to updated proved reserve information as at January 1, 2005. Other depreciation relates to non oil and gas assets.



Summary of Quarterly Results

------------------------------------------------------------------------
($ millions,
except per share amounts) 2005 - Q2 2005 - Q1 2004 - Q4 2004 - Q3
------------------------------------------------------------------------
Sales (net of royalties)
------------------------------------------------------------------------
Continuing operations 22.9 21.2 16.6 15.0
------------------------------------------------------------------------
Discontinued operations 0.3 8.6 3.4 6.9
------------------------------------------------------------------------
Corporate total 23.2 29.8 20.0 21.9
------------------------------------------------------------------------
Cash flow
------------------------------------------------------------------------
Continuing operations 13.2 12.2 10.2 7.5
------------------------------------------------------------------------
Discontinued operations 0.2 6.2 1.3 5.4
------------------------------------------------------------------------
Corporate total 13.4 18.4 11.5 12.9
------------------------------------------------------------------------
Basic per share
- continuing operations 0.15 0.14 0.13 0.09
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.15 0.13 0.12 0.09
------------------------------------------------------------------------
Basic per share
- corporate total 0.15 0.21 0.14 0.16
------------------------------------------------------------------------
Diluted per share
- corporate total 0.15 0.20 0.13 0.15
------------------------------------------------------------------------
Earnings
------------------------------------------------------------------------
Continuing operations 4.4 4.3 4.1 1.9
------------------------------------------------------------------------
Discontinued operations (0.5) 3.0 (0.4) 2.0
------------------------------------------------------------------------
Corporate total 3.9 7.3 3.7 3.9
------------------------------------------------------------------------
Basic per share
- continuing operations 0.05 0.05 0.05 0.02
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.05 0.05 0.05 0.02
------------------------------------------------------------------------
Basic per share
- corporate total 0.04 0.08 0.04 0.05
------------------------------------------------------------------------
Diluted per share
- corporate total 0.04 0.08 0.04 0.05
------------------------------------------------------------------------
------------------------------------------------------------------------

------------------------------------------------------------------------
($ millions,
except per share amounts) 2004 - Q2 2004 - Q1 2003 - Q4 2003 - Q3
------------------------------------------------------------------------
Sales (net of royalties)
------------------------------------------------------------------------
Continuing operations 11.6 11.1 10.5 4.4
------------------------------------------------------------------------
Discontinued operations 4.2 3.3 7.0 3.5
------------------------------------------------------------------------
Corporate total 15.8 14.4 17.5 7.9
------------------------------------------------------------------------
Cash flow
------------------------------------------------------------------------
Continuing operations 6.7 6.6 5.7 1.9
------------------------------------------------------------------------
Discontinued operations 2.8 1.6 4.0 2.5
------------------------------------------------------------------------
Corporate total 9.5 8.2 9.7 4.4
------------------------------------------------------------------------
Basic per share
- continuing operations 0.09 0.09 0.09 0.03
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.09 0.08 0.09 0.03
------------------------------------------------------------------------
Basic per share
- corporate total 0.13 0.11 0.14 0.07
------------------------------------------------------------------------
Diluted per share
- corporate total 0.12 0.11 0.13 0.07
------------------------------------------------------------------------
Earnings
------------------------------------------------------------------------
Continuing operations 2.3 2.2 2.6 (0.4)
------------------------------------------------------------------------
Discontinued operations 1.5 (0.2) 1.0 1.1
------------------------------------------------------------------------
Corporate total 3.8 2.0 3.6 0.7
------------------------------------------------------------------------
Basic per share
- continuing operations 0.03 0.03 0.04 (0.01)
------------------------------------------------------------------------
Diluted per share
- continuing operations 0.03 0.03 0.04 (0.01)
------------------------------------------------------------------------
Basic per share
- corporate total 0.05 0.03 0.06 0.01
------------------------------------------------------------------------
Diluted per share
- corporate total 0.04 0.03 0.05 0.01
------------------------------------------------------------------------
------------------------------------------------------------------------


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

Sales, net of royalties for the six months ending June 30, 2005 were $9.0 million compared to $7.6 for the same period in 2004. The increase is a result of oil price increases over 2004.

Earnings from discontinued operations for the six months ending June 30, 2005 were $2.5 million compared to $1.3 million for the comparable period in 2004. 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 2005 related to no depletion being charged on the assets held for sale since December 31, 2004. In 2004, depletion of $1.5 million was charged against these assets and reduced earnings accordingly.

Liquidity, Capital Resources and Capital Expenditures

Capital expenditures for the six months ended June 30, 2005 totaled $59.0 million including $58.6 million spent in Egypt and $0.1 million spent in Canada and $0.3 million spent in Tunisia. 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 June 30, 2005, was $67.2 million compared to $37.4 million at December 31, 2004. Centurion had working capital of $85.0 million at June 30, 2005, compared to working capital of $49.3 million at December 31, 2004. Not included in working capital is the restricted cash $17.0 million which is a work commitment deposit that will be used to fund 2005 seismic activity on the West Manzala and West Qantara concessions.

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
June 30 December 31
2005 2004
(unaudited) (unaudited)
Assets
Current Assets
Cash 67,226 37,416
Accounts receivable 35,534 19,512
Deposits and prepaids 813 935
Assets of discontinued operations (note 11) - 7,536
--------- ---------
103,573 65,399

Capital assets 104,287 61,413
Capital assets of discontinued operations (note 11) - 52,757
Deferred financing costs 910 1,088
Restricted cash (note 2) 17,030 -
--------- ---------
225,800 180,657
--------- ---------
--------- ---------

Liabilities
Current liabilities
Accounts payable 17,972 8,064
Short-term portion of capital lease obligation
(note 4) 565 531
Liabilities of discontinued operations (note 11) - 5,224
--------- ---------
18,537 13,819


Capital lease obligation (Note 4) 1,887 2,133
Long-term debt (Note 3) 12,261 12,023
Asset retirement obligation (Note 9) 2,495 2,018
Liabilities of discontinued operations (note 11) - 18,561
--------- ---------
35,180 48,554
--------- ---------

Shareholders' Equity
Capital stock (Note 5) 143,182 104,754
Contributed surplus (Note 6) 4,897 3,168
Foreign currency translation adjustment
of continuing operations (13,903) (12,353)
Foreign currency translation adjustment
of discontinued operations - (8,764)
Retained earnings 56,444 45,298
--------- ---------
190,620 132,103

--------- ---------
225,800 180,657
--------- ---------


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


($000's Canadian dollars)

Periods ending June 30, 2005 and 2004 (Unaudited)

Three months ended June 30 Six months ended June 30

2005 2004 2005 2004

Revenue
Sales - net of royalties 22,892 11,604 44,054 22,761
Other income 498 68 831 198
-------- -------- -------- --------
23,390 11,672 44,885 22,959
-------- -------- -------- --------
Expenses
Operating 3,897 1,550 6,905 2,899
Depletion, depreciation
and amortization 7,764 4,198 14,502 8,408
General and administrative 736 742 1,467 1,451
Foreign prospect review 164 - 439 -
Stock based compensation
(Note 7) 967 85 1,947 123
Interest 295 124 570 314
Amortization of deferred
financing costs 89 52 178 91
Foreign exchange loss (gain) 12 3 137 (20)
Accretion 68 42 133 80
-------- -------- -------- --------
13,992 6,796 26,278 13,346

Income before income taxes 9,398 4,876 18,607 9,613

Current income taxes 5,053 2,554 9,935 4,992

-------- -------- -------- --------
Income for the period from
continuing operations 4,345 2,322 8,672 4,621
-------- -------- -------- --------

Income (loss) for the
period from discontinued
operations (473) 1,486 2,474 1,210

-------- -------- -------- --------
Income for the period 3,872 3,808 11,146 5,831
-------- -------- -------- --------

Retained earnings
- Beginning of period 52,572 33,921 45,298 31,898
-------- -------- -------- --------
Retained earnings
- End of period 56,444 37,729 56,444 37,729
-------- -------- -------- --------
-------- -------- -------- --------

Basic earnings per
share from continuing
operations 0.05 0.03 0.10 0.06
Diluted earnings per
share from continuing
operations 0.05 0.03 0.09 0.06

Basic earnings per share 0.04 0.05 0.13 0.08
Diluted earnings per share 0.04 0.04 0.12 0.07



Centurion Energy International Inc.
Consolidated Statement of Cash Flows

($000's Canadian dollars)

Periods ending June 30, 2005 and 2004 (Unaudited)
Three months ended June 30 Six months ended June 30

2005 2004 2005 2004

Cash provided by (used in)
operating activities
Income for the period from
continuing operations 4,345 2,322 8,672 4,621
Items not affecting cash
Depletion, depreciation
and amortization 7,764 4,198 14,502 8,408
Amortization of deferred
financing costs 89 52 178 91
Stock based compensation 967 85 1,947 123
Accretion 68 42 133 80

-------- -------- -------- --------
Funds from continuing
operations 13,233 6,699 25,432 13,323
Funds from discontinued
operations 211 2,772 6,430 4,330
-------- -------- -------- --------
13,444 9,471 31,862 17,653

Changes in continuing
non cash working capital
items (10,669) 169 (17,532) (4,815)
Changes in discontinued
working capital items 2,743 (7,182) 1,780 (10,343)
-------- -------- -------- --------
5,518 2,458 16,110 2,495
-------- -------- -------- --------

Investing activities
Capital asset
expenditures (28,115) (11,653) (58,959) (15,299)
Changes in continuing
non-cash working
capital items 1,331 3,603 11,540 4,565
Restricted cash (note 2) (17,030) - (17,030) -
Discontinued operations 45,634 (2,286) 41,442 (252)
-------- -------- -------- --------
1,820 (10,336) (23,007) (10,986)
-------- -------- -------- --------

Financing activities
Repayments of long term
debt (87) 3,212 (265) 3,212
Issuance of capital stock 313 667 38,210 669
Discontinued operations (5) (167) (653) (565)
-------- -------- -------- --------
221 3,712 37,292 3,316
-------- -------- -------- --------

Foreign currency
translation (253) (124) (585) 18
-------- -------- -------- --------
Increase / (decrease)
in cash 7,306 (4,290) 29,810 (5,157)
-------- -------- -------- --------
Cash - Beginning of period 59,920 20,894 37,416 21,761
-------- -------- -------- --------
Cash - End of period 67,226 16,604 67,226 16,604
-------- -------- -------- --------
-------- -------- -------- --------


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


During the three months ended June 30, 2005, 218,333 options were exercised by employees of the Company at an average price of $1.44 per option.

During Q1 2005, 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.



6 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)

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Balance - December 31, 2004 3,168

Stock based compensation 1,947
Stock based compensation associated with exercised options (218)

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Balance - June 30, 2005 4,897
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7 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
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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
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Balance - March 31, 2005 5,979,999 3.85

Options exercised in Q2, 2005 (218,333) 1.44
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Balance - June 30, 2005 5,761,666 3.94


For the three month period ended June 30, 2005 an expense of $967 (2004-$85) 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 Options Life
Price Outstanding in Years Exercisable in Years
---------------------------------------------------------------------
0.46 225,000 1.3 225,000 1.3
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0.60 1,892,000 2.1 1,892,000 2.1
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0.84 50,000 0.4 50,000 0.4
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1.63 932,633 3.2 779,300 3.2
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3.05 107,000 3.8 63,667 3.8
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3.40 1,505,033 4.1 1,155,033 4.1
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9.47 75,000 4.4 25,000 4.4
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13.75 825,000 4.5 - 4.5
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14.13 75,000 4.6 - 4.6
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17.80 75,000 4.7 - 4.7
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5,761,666 4,190,000
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8 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 June 30, 2005, the weighted average common shares outstanding were 88,067,512 securities and 4,281,699 dilutive securities existed. For the six months ended June 30, 2005, the weighted average common shares outstanding were 87,490,779 securities and 4,179,246 dilutive securities existed.



9 Asset Retirement Obligation

($)
---------------------------------------------------------------------
---------------------------------------------------------------------

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

Additions during 2005 316
Foreign exchange effects 28
Accretion expense 133
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Asset retirement obligation at June 30, 2005 2,495


10 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. During Q2, 2005 Centurion and the Hercules Petroleum Limited consortium were awarded a 10% equity interest in Block 4 of the Nigeria-Sao Tome Joint Development Zone. Centurion will hold a minimum 75% of the consortium's award, equating to a minimum 7.5% equity interest in JDZ Block 4.

Operations that have been discontinued are disclosed in note 11.



Geographic Segments
(in thousands of Canadian dollars)

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Three months
ended Nigeria -
June 30, Sao Tome Canada and
2005 Egypt Tunisia (JDZ) Other Total
---------------------------------------------------------------------
Revenue 22,892 - - 498 23,390
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Capital
Expenditures 27,823 282 - 10 28,115
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---------------------------------------------------------------------
Six months
ended Nigeria -
June 30, Sao Tome Canada and
2005 Egypt Tunisia (JDZ) Other Total
---------------------------------------------------------------------
Revenue 44,054 - 831 44,885
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Capital
Assets 95,567 7,492 1,022 206 104,287
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Capital
Expenditures 58,573 282 - 104 58,959
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---------------------------------------------------------------------
Three months
ended Nigeria -
June 30, Sao Tome Canada and
2004 Egypt Tunisia (JDZ) Other Total
---------------------------------------------------------------------
Revenue 11,604 - - 68 11,672
---------------------------------------------------------------------
Capital
Expenditures 11,521 - - 132 11,653
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---------------------------------------------------------------------
Six months
ended Nigeria -
June 30, Sao Tome Canada and
2004 Egypt Tunisia (JDZ) Other Total
---------------------------------------------------------------------
Revenue 22,761 - - 198 22,959
---------------------------------------------------------------------
Capital
Expenditures 15,167 - - 132 15,299
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11 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 is reported below:



June 30, June 30,
(In Thousands of Canadian dollars) 2005 2004
---------------------------------------------------------------------

Revenues 8,979 7,586
Income from discontinued operations
before taxes 5,774 2,393
Income taxes 2,617 1,154
Loss on disposal of discontinued operations 683 -
Income from discontinued operations 2,474 1,239
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12 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 the next twelve months and is included in Centurion's 2005/2006 capital budget. No amount was due under the terms of the contract as at June 30, 2005.

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. Statements related to "reserves" or "resources" are deemed to be Forward Looking Statements 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.

Boe's disclosed in this new release 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.

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
    Centurion Energy International
    Scott Koyich
    Investor Relations
    (+1 403 215 5979)
    Email: info@centurionenergy.com
    Website: www.centurionenergy.com
    or
    Citigate Dewe Rogerson, London
    Martin Jackson
    (+44 207 638 9571)
    or
    Citigate Dewe Rogerson, London
    Rachel Lankester
    (+44 207 638 9571)