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

Centurion Energy International Inc.

November 14, 2005 09:30 ET

Centurion Energy International Inc. Interim Financial Statements Nine months ended September 30, 2005

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2005) -

REPORT TO SHAREHOLDERS

Centurion Energy International Inc. a 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 third quarter report. The unaudited interim consolidated 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 $15.6 million ($0.17 per share diluted) for Q3, 2005 compared to $12.9 million ($0.15 per share diluted) in Q3, 2004.

- Corporate earnings totaled $7.6 million ($0.08 per share diluted) for Q3, 2005 compared to $3.9 million ($0.05 per share diluted) in Q3, 2004.

- Production is currently at 27,000 boepd with production capability of 35,000 boepd. Centurion plans to continue ramping up production to reach a year-end exit production rate of 43,000 to 45,000 boepd, which would double the prior year's rate for a fourth year in a row.

- The mid-year reserve update completed by Ryder Scott Company, Petroleum Consultants at June 30, 2005 added 43.2 million barrels of oil equivalent, an increase of 95% over reserves reported for December 31, 2004.

- The offshore Amira-1 exploration well in Tunisia spudded on October 16, 2005.

- Tested El Wastani-5 during the quarter in the Abu Madi zone, at a rate of 21 mmscfd of gas and 440 of associated liquids. Spudded El Wastani-7 prior to quarter end.

- Drilled 2 successful Gelgel wells during the quarter, Gelgel-6 and Gelgel-11, which tested for a combined rate of 13 mmscfd.

- The Abu Monkar-3 exploration well, a deep test in the South Manzala area, is expected to spud on November 12, 2005.

- The West Manzala and West Qantara 3D seismic program, approximately 2,000 square kilometers, is 63% complete. The first exploration well, Hamra-1, is expected to spud in early January 2006.

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.

Boe Conversion

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



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

------------------------------------------------------------------------
Three months Three months Nine months Nine months
ended ended ended ended
September September September September
30, 2005 30, 2004 30, 2005 30, 2004
------------------------------------------------------------------------
Cashflow
------------------------------------------------------------------------
Continuing operations 15.6 7.5 41.0 20.9
------------------------------------------------------------------------
Discontinued operations - 5.4 6.4 9.7
------------------------------------------------------------------------
Corporate total 15.6 12.9 47.4 30.6
------------------------------------------------------------------------
Basic per share -
continuing operations 0.18 0.09 0.47 0.27
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.17 0.09 0.45 0.26
------------------------------------------------------------------------
Basic per share -
corporate 0.18 0.16 0.54 0.40
------------------------------------------------------------------------
Diluted per share -
corporate 0.17 0.15 0.52 0.38
------------------------------------------------------------------------

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

------------------------------------------------------------------------
Continuing operations 7.6 1.9 16.3 6.5
------------------------------------------------------------------------
Discontinued operations - 2.0 2.5 3.2
------------------------------------------------------------------------
Corporate total 7.6 3.9 18.7 9.7
------------------------------------------------------------------------
Basic per share -
continuing operations 0.09 0.02 0.19 0.08
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.08 0.02 0.18 0.08
------------------------------------------------------------------------
Basic per share -
corporate 0.09 0.05 0.21 0.13
------------------------------------------------------------------------
Diluted per share -
corporate 0.08 0.05 0.20 0.12
------------------------------------------------------------------------


Production Summary for the Periods Ended September 30, 2005

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

El Wastani 6,926 238,876 131,284 -
------------------------------------------------------------------------
South Manzala 3,883 - - -
------------------------------------------------------------------------
Hana - - - 61,893
------------------------------------------------------------------------
Egypt Total 10,809 238,876 131,284 61,893
------------------------------------------------------------------------
------------------------------------------------------------------------
Tunisia Total (a) - - - -
------------------------------------------------------------------------
------------------------------------------------------------------------
Corporate Total 10,809 238,876 131,284 61,893
------------------------------------------------------------------------


------------------------------------------------------------------------
Total Q3 Average Q3 YTD 9 months YTD 9 months
Field BOE's (6:1) BOEPD (6:1) BOE's (6:1) BOEPD (6:1)
------------------------------------------------------------------------
------------------------------------------------------------------------
El Wastani 1,524,490 16,571 3,307,463 12,115
------------------------------------------------------------------------
South Manzala 647,148 7,034 2,281,930 8,359
------------------------------------------------------------------------
Hana 61,893 672 150,345 551
------------------------------------------------------------------------
Egypt Total 2,233,531 24,277 5,739,738 21,025
------------------------------------------------------------------------
------------------------------------------------------------------------
Tunisia Total (a) - - 223,811 820
------------------------------------------------------------------------
------------------------------------------------------------------------
Corporate Total 2,233,531 24,277 5,963,549 21,845
------------------------------------------------------------------------

(a): 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
(Centurion 100% WI)


Facility expansion and continued development drilling were the focus in the El Wastani concession during the third quarter raising current production rates to 22,100 boepd from the concession.

Subsequent to the end of the third quarter, El Wastani-5 tested gas at 21 mmscf per day plus 440 bopd of associated liquids and was completed as a lower Abu Madi producer. El Wastani-7 has reached total depth of 3,050 meters and logs indicate productive zones in the Abu Madi and Qawasim reservoirs. Testing is expected to be completed in the next two weeks. El Wastani East-3 has reached total depth of 3,068 meters. Logs indicate approximately 20 meters of net pay in the Abu Madi reservoirs. Testing is expected to commence shortly. The remaining development wells to be drilled before year-end (El Wastani-10 and El Wastani-11) will be tied into gathering systems as soon as they are completed.

In mid-October the company commissioned a Joule-Thomson (J-T) plant at the El Wastani facilities site. This represents the first of three steps in expanding gas processing and liquid sales from the development lease.

The J-T plant is designed to recover raw condensate at El Wastani and to deliver high-btu content gas directly into the National Gas Grid. The plant was commissioned in late October and production is being ramped up. The plant is currently delivering 100 mmscfd of sales gas. The raw condensate will continue to be sent to the third-party Abu Madi gas plant along with gas production that is above the processing limit of the J-T plant. Current deliveries to the Abu Madi plant are 15 mmscfd for a total of 115 mmscfd production for the El Wastani field.

Centurion is also progressing with the construction of a 100%-owned Mechanical Refrigeration Plant that will replace the J-T plant in El Wastani at the start of the second quarter in 2006. The refrigeration plant will recover a greater amount of condensate from the raw gas stream. The final phase of the plant upgrades will be the addition of a Turbo Expander unit in the fourth quarter of 2006, allowing for the recovery of condensate and LPG's and the direct sale of gas and liquids from the field.

The El Wastani field produced an average of 75.3 mmscf/d of sales gas and 4,023 bpd of condensate and LPG's during Q3 2005 compared to 17.7 mmscf/d and 893 bpd of condensate and LPG's during Q3 2004 (increases of 325% and 351% respectively). For the nine months ended September 30, 2005 the El Wastani field produced an average 55.6 mmscf/d and 2,852 bpd of condensate and LPG's compared to 12.8 mmscf/d and 719 bpd for 2004 (increases of 334% and 297% respectively).

The proved plus probable reserves (before deduction of royalties, production taxes or their equivalent) for the El Wastani Development Lease updated at June 30, 2005 are 80.0 mmboe.

South Manzala Development Lease

(Centurion 100% WI)

Gelgel-11 is expected to be tied-in shortly and is expected to increase production to approximately 30 mmscfd from the South Manzala Development Lease. During the quarter it was noted that certain Gelgel wells were producing less than expected and as a result, remedial work is being carried out to recomplete the affected wells in different pay zones in order to mitigate the decline in field production. The current production from the South Manzala Development Lease is approximately 25 mmscfd.

Three wells were drilled at South Manzala during the quarter resulting in two gas producers and one dry hole. Gelgel-6 and 7 were drilled and completed in the El Wastani formation while Gelgel-8 delineated the northern extension of the Gelgel gas field and will be used as a water disposal well.

The contract for the ZD-50 rig, that has been drilling Gelgel wells during 2005, has been terminated in accordance with the original contract term. A new rig capable of drilling operations in these shallow wells, Valve and Tools Rig #1 (V&T-1), is currently being rigged up and inspected prior to carrying out recompletions in the existing Gelgel wells and will replace the ZD-50 rig for future drilling.

The South Manzala facility upgrades were completed in early October including the twinning of the gas sales pipeline to El Hourany. The increase in pipeline capacity from South Manzala will allow Centurion to transport future gas discoveries from the area to market.

The South Manzala field produced an average of 42.2 mmscfd of sales gas during Q3 2005 compared to an average of 34.7 mmscfd during Q3 2004 (an increase of 22%). For the nine months ended September 30, 2005, the South Manzala field produced an average of 50.1 mmscfd compared to 34.2 mmscfd for 2004 (an increase of 46%).

The proved plus probable reserves (before deduction of royalties, production taxes or their equivalent) for the South Manzala Development Lease updated as of June 30, 2005 are 7.7 mmboe.

Abu Monkar-3 Exploration Well

(Centurion 100% WI)

The ECDC-6 rig is currently on location at Abu Monkar-3 and is expected to commence drilling November 12, 2005. Abu Monkar-3 will be drilled 75 meters to the southwest of Abu Monkar-2 targeting the same Sidi Salem sands. Abu Monkar-2 was drilled in March 2005 and encountered strong gas shows upon entering the Sidi Salem formation, however mechanical difficulties and the loss of circulation down-hole prevented testing of the formation. Drilling to the planned total depth of 2,700 meters is anticipated to take 45 days. If successful, Abu Monkar-3 would be the first liquid rich gas discovery in the South Manzala Development Lease.

West Manzala and West Qantara

Exploration Blocks in Egypt

(Centurion 75% WI)

Site preparation work is underway for the first exploration well in the West Manzala concession. Al Hamra-1 will be drilled on a structure between Centurion's El Wastani concession and the multi-TCF Abu Madi field to the west. The Al Hamra-1 prospect was identified using the 3D seismic amplitude analysis technique proven successful in the El Wastani field and is targeting the same Abu Madi, Qawasim and Sidi Salem formations. Spudding of Al Hamrah-1 is expected in early January 2006.

Seismic acquisition on the West Manzala concession is nearing completion with 1,250 square kilometers having been acquired. The seismic crew will now be temporarily released to another operator and will return to complete the approximate 750 square kilometer program in the West Qantara Concession in mid-2006. Seismic processing of the acquired data has been ongoing since Q2 2005 and Centurion has recently added additional geotechnical staff to increase our focus on these new exploration concessions. To date, 10 separate multi-target structures have been identified on the West Manzala concession and 15 wells have been budgeted for 2006.

West Gharib Concession

(Centurion 30% WI)

In the third quarter the Hoshia-3 development well was completed and is currently producing from the Rudeis reservoir. Following discoveries at Fadl-1 & 2, an early production plan for the Fadl field was submitted to the Government and was recently approved. The plan of development for the West Hoshia field was also approved and the West Hoshia-3 development well is currently drilling.

The operator continues to drill exploration and development wells in the Concession and has spudded the Arta-1 exploration well targeting the Rudeis and Matulla reservoirs. The operator anticipates drilling an additional four wells during Q4 2005.

Total production from the West Gharib Concession averaged 2,267 bopd (672 bopd net) during Q3 2005 compared to 1,690 bopd (507 bopd net) during Q3 2004 (an increase 34%). For the nine months ended September 30, 2005 the West Gharib Concession produced an average of 1,842 bopd (553 bopd net) compared to 1,683 bopd (505 bopd net) during 2004 (an increase 9%).

Kom Ombo Concession

(Centurion 100% WI)

The reprocessing of 1,500 kilometers of 2D seismic and surface geology mapping has been completed in the Kom Ombo Concession. A seismic crew has been mobilized to acquire 500 kilometers of new 2D seismic with acquisition expected to start in Q4.

TUNISIA

Mellita Permit

PetroCanada, as operator of the Mellita Permit, spudded the Amira-1 offshore well in the Gulf of Gabes on October 16, 2005. Amira-1 is targeting the Zebagg and Meloussi formations which are the main producing zones in Robanna, El Bibane and Ezzaouia.

NIGERIA-SAO TOME

Joint Development Zone

Negotiations to finalize the Production Sharing Contract (PSC) and the Joint Operating Agreement (JOA) are progressing. Signature of the PSC and JOA is expected during 2006.

Block 4 is an extension of the prolific Nigeria deep water play where a number of significant oil discoveries have been made. Interpretation and mapping of the 3D seismic indicates the presence of several large potentially oil bearing structures. The Centurion and Hercules Petroleum consortium were awarded a 10% interest in Block 4 of the Nigeria-Sao Tome and Principe JDZ. Centurion holds a 7.5% equity interest in Block 4 with an option to increase to a 10% working interest.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the unaudited consolidated financial statements of Centurion for the periods ended September 30, 2005 and 2004. The unaudited interim consolidated 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 November 11, 2005.

Trends Observed During the Quarter

Commodity Prices

Centurion's gas price is capped at $US 2.65 per mmbtu giving an average price of $US 2.75 per mscf of gas during the quarter. Continuing favorable commodity prices have seen Centurion realize $US 59.55 per bbl of condensate and $US 42.66 per bbl of oil for the third quarter of 2005.

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 reports 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 Q3, 2005, the average Canadian to US dollar exchange rate was $0.83 compared to $0.76 in Q3, 2004. For the nine month period ended September 30, 2005, the average exchange rate was $0.82 compared to $0.75 in 2004. The strengthening Canadian dollar in Q3 and year to date 2005 had the effect of reducing all US dollar translated amounts by 9% compared to Q3 and year to date 2004. The effect of this reduction on each of earnings and cashflow was approximately $0.01 and $0.02 per share for the quarter and $0.02 and $0.04 per share for the nine month period.

Dilution Impacts

In January, 2005, Centurion issued 3.0 million common shares for proceeds of $37.0 million net of issue costs. The proceeds from the share offering continue to finance Centurion's 2005 drilling and development programs in Egypt. As a result of the share offering, a dilution impact is noted on per share results until the benefit of the expenditures made from funds raised translates into new production, cashflow and earnings. The dilution associated with this stock issue resulted in a decrease in cash flow and earnings for the three months ended September 30, 2005 of $0.01 per share and for the nine months ended September 30, 2005 of $0.01 and $0.02 per share, respectively.

Continuing Operations - Egypt

Revenue

Sales, net of royalties for Q3 2005 were $28.8 million compared to $15.0 million for Q3 2004, and were $72.9 million for the nine months ended September 30, 2005 compared to $37.8 million for the comparable period in 2004, an increase of 92% and 93%, respectively. This increase in sales is a combination of a 132% increase in production from El Wastani and South Manzala offset by foreign currency effects and an 11.5% reduction in Centurion's share of Egyptian production from 47.5% in 2004 to approximately 36% 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 i) 30% of gross sales and ii) 20% of non-recovered capital costs plus 100% of current operating costs. The remaining production is deemed the "profit portion" which Centurion and the Egyptian Government share at 25% and 75% respectively.

In prior years, 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. As a result of increased commodity prices coupled with lower than anticipated capital spending in the year, the percentage of gross production Centurion has received in 2005 has decreased to approximately 36% from the previous year level of 47.5%. The production volumes taken by the Egyptian Government are in lieu of any further taxes and royalties and the 36% allocation Centurion received had no further financial encumbrances upon it. In future periods, Centurion's substantial growth in production and sales are expected to result in cost recovery being limited to 20% of capital plus 100% of operating costs.

Centurion accounts for the Egyptian State share of production volumes as royalty and tax expense. For the three and nine months ended September 30, 2005, the royalty expense approximated $36.5 million and $79.9 million, respectively (56% and 52% of gross sales) compared to $8.5 million and $23.4 million (36% and 38% of gross sales) for the comparable periods in 2004. The increase in royalty rate is commensurate with the increased production allocation to the Egyptian State discussed above while the income tax portion remains at 43.5%.

Operating Expense

Total operating expense for Q3, 2005 amounted to $5.1 million ($2.29 per boe) compared to $1.5 million ($1.64 per boe) for Q3, 2004. For the nine months ended September 30, 2005, operating expense totaled $12.0 million ($2.09 per boe) compared to $4.4 million ($1.79 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 $6.0 million ($1.04 per boe) year to date Q3 2005 compared to $1.1 million ($0.45 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 $0.98 per boe for the nine months ended September 30, 2005 compared to $1.29 per boe for the comparable period in 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 Q3, 2005 were $0.6 million compared to $0.8 million for Q3 2004. Centurion's cost per boe produced is $0.28 for Q3 2005 compared to $0.86 for Q3, 2004. For the nine months ended September 30, 2005, general and administrative expenses for were $2.1 million compared to $2.2 million for 2004. On a per boe basis, the costs were $0.37 for year to date 2005 compared to $0.91 for the comparable period in 2004.

Interest and Finance Costs

Interest and finance costs for Q3, 2005 were consistent with Q3, 2004 at $0.3 million. For the nine months ended September 30, 2005, interest and finance costs totaled $0.9 million compared to $0.7 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 Q3, 2005 amounted to $6.9 million ($3.07 per boe) compared to $4.2 million ($4.47 per boe) for Q3, 2004. For the nine months ended September 30, 2005, the provision totaled $21.4 million ($3.72 per boe) compared to $12.4 million ($5.02 per boe) in 2004. The increase in proved reserve volumes at June 30, 2005 resulted in a decrease in the per boe depletion rate. Other depreciation relates to non oil and gas assets.



Summary of Quarterly Results

------------------------------------------------------------------------
($ millions, except per
share amounts) 2005 - Q3 2005 - Q2 2005 - Q1 2004 - Q4
------------------------------------------------------------------------
Sales (net of royalties)
------------------------------------------------------------------------
Continuing operations 28.8 22.9 21.2 16.6
------------------------------------------------------------------------
Discontinued operations - 0.3 8.6 3.4
------------------------------------------------------------------------
Corporate total 28.8 23.2 29.8 20.0
------------------------------------------------------------------------
Cash flow
------------------------------------------------------------------------
Continuing operations 15.6 13.2 12.2 10.2
------------------------------------------------------------------------
Discontinued operations - 0.2 6.2 1.3
------------------------------------------------------------------------
Corporate total 15.6 13.4 18.4 11.5
------------------------------------------------------------------------
Basic per share -
continuing operations 0.18 0.15 0.14 0.13
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.17 0.15 0.13 0.12
------------------------------------------------------------------------
Basic per share -
corporate total 0.18 0.15 0.21 0.14
------------------------------------------------------------------------
Diluted per share -
corporate total 0.17 0.15 0.20 0.13
------------------------------------------------------------------------
Earnings
------------------------------------------------------------------------
Continuing operations 7.6 4.4 4.3 4.1
------------------------------------------------------------------------
Discontinued operations - (0.5) 3.0 (0.4)
------------------------------------------------------------------------
Corporate total 7.6 3.9 7.3 3.7
------------------------------------------------------------------------
Basic per share -
continuing operations 0.09 0.05 0.05 0.05
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.08 0.05 0.05 0.05
------------------------------------------------------------------------
Basic per share -
corporate total 0.09 0.04 0.08 0.04
------------------------------------------------------------------------
Diluted per share -
corporate total 0.08 0.04 0.08 0.04
------------------------------------------------------------------------

------------------------------------------------------------------------
($ millions, except per
share amounts) 2004 - Q3 2004 - Q2 2004 - Q1 2003 - Q4
------------------------------------------------------------------------
Sales (net of royalties)
------------------------------------------------------------------------
Continuing operations 15.0 11.6 11.1 10.5
------------------------------------------------------------------------
Discontinued operations 6.9 4.2 3.3 7.0
------------------------------------------------------------------------
Corporate total 21.9 15.8 14.4 17.5
------------------------------------------------------------------------
Cash flow
------------------------------------------------------------------------
Continuing operations 7.5 6.7 6.6 5.7
------------------------------------------------------------------------
Discontinued operations 5.4 2.8 1.6 4.0
------------------------------------------------------------------------
Corporate total 12.9 9.5 8.2 9.7
------------------------------------------------------------------------
Basic per share -
continuing operations 0.09 0.09 0.09 0.09
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.09 0.09 0.08 0.09
------------------------------------------------------------------------
Basic per share -
corporate total 0.16 0.13 0.11 0.14
------------------------------------------------------------------------
Diluted per share -
corporate total 0.15 0.12 0.11 0.13
------------------------------------------------------------------------
Earnings
Continuing operations 1.9 2.3 2.2 2.6
------------------------------------------------------------------------
Discontinued operations 2.0 1.5 (0.2) 1.0
------------------------------------------------------------------------
Corporate total 3.9 3.8 2.0 3.6
------------------------------------------------------------------------
Basic per share -
continuing operations 0.02 0.03 0.03 0.04
------------------------------------------------------------------------
Diluted per share -
continuing operations 0.02 0.03 0.03 0.04
------------------------------------------------------------------------
Basic per share -
corporate total 0.05 0.05 0.03 0.06
------------------------------------------------------------------------
Diluted per share -
corporate total 0.05 0.04 0.03 0.05
------------------------------------------------------------------------
------------------------------------------------------------------------


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. The carrying amount of assets and liabilities associated with the discontinued operations sold are no longer included 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 the nine months ended September 30, 2005. Note 11 to the interim financial statements provides further detail related to the sale of these assets.

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

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 nine months ending September 30, 2005 were $9.0 million compared to $14.5 million for the same period in 2004. The decrease is a result of operations in 2005 reported through April 26, 2005 as compared to nine months ended 2004.

Earnings from discontinued operations for the nine months ending September 30, 2005 were $2.5 million compared to $3.2 million for the comparable period in 2004. As the sale of the operations closed on April 26, 2005, there were no discontinued operation earnings to report for the third quarter of 2005, compared with $2.0 million of earnings in 2004. Prior to the closing of the sale, the 2005 earnings were positively affected by 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 $3.1 million was charged against these assets for the nine months ended September 30, 2004 and reduced earnings accordingly.

Liquidity, Capital Resources and Capital Expenditures

Capital expenditures for the nine months ended September 30, 2005 totaled $110.3 million including $109.7 million spent in Egypt, $0.1 million spent in Canada and $0.4 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 September 30, 2005, was $43.3 million compared to $37.4 million at December 31, 2004. Centurion had working capital of $49.4 million at September 30, 2005, compared to working capital of $49.3 million at December 31, 2004.

Subsequent to quarter end, Centurion signed a letter of intent with the Standard Bank PLC to enter into to a revised credit facility. This facility has a credit limit of $150 million USD, with $100 million USD available immediately and an option of an additional $50 million USD subject to certain bank restrictions. This new facility will replace the existing $40 million USD facility under which $10 million USD is currently drawn. This revised facility in addition to forecast 2006 cashflow from operations is expected to meet the anticipated 2006 capital program requirements and allow for continued exploration and development growth in focus areas.

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
September 30 December 31
2005 2004
(unaudited) (unaudited)

Assets
Current Assets
Cash 43,263 37,416
Accounts receivable 38,970 19,512
Deposits and prepaids 805 935
Assets of discontinued operations (note 11) - 7,536
--------------------------
83,038 65,399

Capital assets 145,491 61,413
Capital assets of discontinued
operations (note 11) - 52,757
Deferred financing costs 823 1,088
Restricted cash (note 2) 15,813 -
--------------------------
245,165 180,657
--------------------------
--------------------------


Liabilities
Current liabilities
Accounts payable 33,103 8,064
Short-term portion of capital lease
obligation (note 4) 550 531
Liabilities of discontinued
operations (note 11) - 5,224
--------------------------
33,653 13,819


Capital lease obligation (Note 4) 1,656 2,133
Long-term debt (Note 3) 11,689 12,023
Asset retirement obligation (Note 5) 2,711 2,018
Liabilities of discontinued operations (note 11) - 18,561
--------------------------
49,709 48,554
--------------------------

Shareholders' Equity
Capital stock (Note 6) 143,727 104,754
Contributed surplus (Note 7) 5,759 3,168
Foreign currency translation adjustment
of continuing operations (18,070) (12,353)
Foreign currency translation adjustment
of discontinued operations - (8,764)
Retained earnings 64,040 45,298
--------------------------
195,456 132,103

--------------------------
245,165 180,657
--------------------------
--------------------------


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

($000's Canadian dollars)

Periods ending September 30, 2005 and 2004 (Unaudited)

Three months ended Nine months ended

2005 2004 2005 2004

Revenue
Sales - net of royalties 28,844 15,019 72,898 37,722
Other income 376 128 1,207 384
----------------- ------------------
29,220 15,147 74,105 38,106
----------------- ------------------

Expenses
Operating 5,108 1,523 12,013 4,422
Depletion, depreciation and
amortization 6,867 4,257 21,369 12,665
General and administrative 635 799 2,102 2,204
Foreign prospect review 396 573 835 619
Stock based compensation (Note 8) 972 1,335 2,919 1,458
Interest 297 349 867 663
Amortization of deferred
financing costs 87 49 265 140
Foreign exchange loss (gain) (3) 280 134 260
Accretion 54 39 187 119
----------------- ------------------
14,413 9,204 40,691 22,550
----------------- ------------------

Income before income taxes 14,807 5,943 33,414 15,556

Current income taxes 7,211 4,093 17,146 9,085

----------------- ------------------
Income for the period from
continuing operations 7,596 1,850 16,268 6,471
----------------- ------------------

Income for the period from
discontinued operations - 2,006 2,474 3,216

----------------- ------------------
Income for the period 7,596 3,856 18,742 9,687
----------------- ------------------

----------------- ------------------
Retained earnings -
Beginning of period 56,444 37,729 45,298 31,898
----------------- ------------------
Retained earnings -
End of period 64,040 41,585 64,040 41,585
----------------- ------------------
----------------- ------------------

Basic earnings per share from
continuing operations 0.09 0.02 0.19 0.08
Diluted earnings per share from
continuing operations 0.08 0.02 0.18 0.08

Basic earnings per share 0.09 0.05 0.21 0.13
Diluted earnings per share 0.08 0.05 0.20 0.12
----------------- ------------------
----------------- ------------------


Centurion Energy International Inc.
Consolidated Statement of Cash Flows

($000's Canadian dollars)

Periods ending September 30, 2005 and 2004 (Unaudited)

Three months ended Nine months ended

2005 2004 2005 2004

Cash provided by (used in)
operating activities
Income for the period from
continuing operations 7,596 1,850 16,268 6,471
Items not affecting cash
Depletion, depreciation and
amortization 6,867 4,257 21,369 12,665
Amortization of deferred
financing costs 87 49 265 140
Stock based compensation 972 1,335 2,919 1,458
Accretion 54 39 187 119

----------------- ------------------
Funds from continuing operations 15,576 7,530 41,008 20,853
Funds from discontinued operations - 5,368 6,430 9,698
----------------- ------------------
15,576 12,898 47,438 30,551

Changes in continuing non cash
working capital items (968) (3,798) (18,500) (8,613)
Changes in discontinued working
capital items - 3,851 1,780 (6,492)
----------------- ------------------
14,608 12,951 30,718 15,446
----------------- ------------------

Investing activities
Capital asset expenditures (51,348) (5,879)(110,307) (21,178)
Changes in continuing non-cash
working capital items 12,671 (2,417) 24,211 2,148
Restricted cash (note 2) - - (17,030) -
Discontinued operations - (2,028) 41,442 (2,280)
----------------- ------------------
(38,677) (10,324) (61,684) (21,310)
----------------- ------------------

Financing activities
Repayments of long term debt (136) (69) (401) 3,143
Issuance of capital stock 435 23,600 38,645 24,269
Discontinued operations - (156) (653) (721)
----------------- ------------------
299 23,375 37,591 26,691
----------------- ------------------

Foreign currency translation (193) 49 (778) 67
----------------- ------------------
Increase / (decrease) in cash (23,963) 26,051 5,847 20,894
----------------- ------------------
Cash - Beginning of period 67,226 16,604 37,416 21,761
----------------- ------------------
Cash - End of period 43,263 42,655 43,263 42,655
----------------- ------------------
----------------- ------------------


CENTURION ENERGY INTERNATIONAL INC.
Notes to the Consolidated Financial Statements
Nine months ended September 30, 2005
All dollar figures are in $000's of Canadian dollars unless otherwise
noted.
(Unaudited)


These unaudited interim consolidated financial statements for the periods ended September 30, 2005 and 2004 have been prepared in accordance with Canadian Generally Accepted Accounting Principles and should be read in conjunction with the annual financial statements prepared for the year ending December 31, 2004.

1 Accounting Policies

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

2 Restricted Cash

Restricted cash of $15,813 at September 30, 2005 (2004 - nil), represents funds on deposit to guarantee work commitments on the West Manzala and West Qantara blocks in Egypt. As the work commitments are fulfilled, the restriction on the cash will be removed.

3 Long-Term Debt

Long-term debt consists of drawings of approximately $US 10 million on a credit facility with Standard Bank PLC ("Standard Bank"). 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.

On October 21, 2005, Centurion signed a letter of intent with the Standard Bank to enter into a revised credit facility for $150 million US. An initial credit limit of $100 million USD will be made available immediately, with an option for an additional $50 million USD subject to certain bank conditions. This new facility will replace the existing $40 million USD facility under which $10 million USD is currently drawn. The facility is in the form of a Revolving Credit Facility which can be drawn down as required in accordance with certain borrowing criteria established by the lender. This debt facility is secured by an assignment of all the shares of the operating legal entities. Interest on the new facility is payable quarterly at LIBOR plus 3.00 - 3.45% with no repayments until the end of the 48 month agreement.

4 Capital Lease Obligation

The capital lease obligation of $1,656 (2004 - $2,133) represents a capital lease for compression facilities related to the Company's gas fields in Egypt. This obligation is being repaid over a five-year term commencing May 2004 with a blended interest and principal payment of $US51 thousand per month. An amount of $550 (2004 - $531) has been included as a current portion of long-term debt.



5 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 619
Foreign exchange effects (113)
Accretion expense 187
------------------------------------------------------------------------
Asset retirement obligation at September 30, 2005 2,711


To date, Centurion has not retired any wells or facilities from its continuing operations, nor has it segregated or restricted any funds to fulfill these future liabilities and obligations. Such future obligations will be funded from future cash flows, including future salvage value on existing capital equipment. Existing obligations are estimated to become due through the periods 2009 to 2015.



6 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
(including allocation of contributed surplus) 1,496,001 1,964
------------------------------------------------------------------------
Balance at September 30, 2005 88,526,985 143,727
------------------------------------------------------------------------

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


During the three months ended September 30, 2005, 268,433 options were exercised by employees of the Company at an average price of $1.62 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.



7 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 2,919
Stock based compensation associated
with exercised options (328)
------------------------------------------------------------------------
Balance - September 30, 2005 5,759
------------------------------------------------------------------------
------------------------------------------------------------------------

8 Stock Options
Weighted Average
Share Options 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 2005 (1,496,001) 1.09
Options granted in 2005 1,020,000 13.61
------------------------------------------------------------------------
Balance - September 30, 2005 5,538,233 4.12


For the three and nine month periods ended September 30, 2005 an expense of $972 and $2,919, respectively (2004-$1,335 and $1,458) have 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


Weighted -Average
Remaining
Exercise Options Contractual Life in Options
Price Outstanding Years Exercisable
------------------------------------------------------------------------
0.46 225,000 1.0 225,000
------------------------------------------------------------------------
0.60 1,742,000 1.8 1,742,000
------------------------------------------------------------------------
0.84 50,000 0.1 50,000
------------------------------------------------------------------------
1.63 903,833 2.9 903,833
------------------------------------------------------------------------
3.05 87,000 3.5 43,666
------------------------------------------------------------------------
3.40 1,435,400 3.8 1,260,400
------------------------------------------------------------------------
9.47 75,000 4.1 25,000
------------------------------------------------------------------------
11.25 25,000 4.8 -
------------------------------------------------------------------------
13.70 20,000 4.8 -
------------------------------------------------------------------------
13.75 825,000 4.2 -
------------------------------------------------------------------------
14.13 75,000 4.3 -
------------------------------------------------------------------------
17.80 75,000 4.4 -
------------------------------------------------------------------------
5,538,233 4,249,899
------------------------------------------------------------------------
------------------------------------------------------------------------


Subsequent to quarter end, a further 1,429,500 and 70,000 options were granted with exercise prices of $11.95 and $12.25 per option, respectively.

9 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 September 30, 2005, the weighted average basic common shares outstanding were 88,330,390 securities and 3,857,895 dilutive securities existed (2004 - 79,003,342 basic and 4,653,804 dilutive). For the nine months ended September 30, 2005, the weighted average common shares outstanding were 87,773,725 securities and 3,902,089 dilutive securities existed (2004 - 76,244,380 basic and 4,653,904 dilutive).

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)

------------------------------------------------------------------------
Nigeria -
Three months ended Egypt Tunisia Soa Tome Canada and Total
September 30, 2005 (JDZ) Other
------------------------------------------------------------------------
Revenue 28,844 - - 376 29,220
------------------------------------------------------------------------
Capital Expenditures 51,170 151 - 27 51,348
------------------------------------------------------------------------


Nigeria -
Nine months ended Egypt Tunisia Soa Tome Canada and Total
September 30, 2005 (JDZ) Other
------------------------------------------------------------------------
Revenue 72,898 - - 1,207 74,105
------------------------------------------------------------------------
Capital Assets 137,249 7,069 1,022 151 145,491
------------------------------------------------------------------------
Capital Expenditures 109,743 433 - 131 110,307
------------------------------------------------------------------------

Nigeria -
Three months ended Egypt Tunisia Soa Tome Canada and Total
September 30, 2004 (JDZ) Other
------------------------------------------------------------------------
Revenue 15,019 - - 128 15,147
------------------------------------------------------------------------
Capital Expenditures 5,721 - - 158 5,879
------------------------------------------------------------------------


Nigeria -
Nine months ended Egypt Tunisia Soa Tome Canada and Total
September 30, 2004 (JDZ) Other
------------------------------------------------------------------------
Revenue 37,780 - - 326 38,106
------------------------------------------------------------------------
Capital Expenditures 20,888 - - 290 21,178
------------------------------------------------------------------------


Subsequent to quarter end, an exploration well was spudded in Tunisia (Amira-1), which is anticipated to be completed during November. Should the well be unsuccessful, the Company will review the carrying value of the Tunisian assets and assess for potential impairment. There is no current information available which would indicate the outcome of the well.

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 for the nine months ended is reported below:



September 30, September 30,
(In Thousands of Canadian dollars) 2005 2004
------------------------------------------------------------------------
Revenues 8,979 14,511
Income from discontinued
operations before taxes 5,774 6,461
Income taxes 2,617 3,245
Loss on disposal of discontinued operations 683 -
Income from discontinued operations 2,474 3,216
------------------------------------------------------------------------
------------------------------------------------------------------------


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 nine months and is included in Centurion's 2005/2006 capital budget. No amount was due under the terms of the contract as at September 30, 2005.

Centurion has contracted four drilling rigs in connection with the 2006 budgeted drilling program in Egypt. In the event that Centurion does not proceed with planned drilling for these rigs, the Company would be obligated to pay the rig operators a variable rate based on days not utilized under the contract. The maximum commitment at September 30, 2005 related to these contracts is approximately $14.6 million.


13 Financial Instruments

Balance Sheet Financial Instruments

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

Concentration of Credit Risk

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

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
    www.centurionenergy.com
    or
    Citigate Dewe Rogerson, London
    Martin Jackson or Rachel Lankester
    +44 207 638 9571