Eurogas Corporation Announces Financial Results for the Three Months Ended March 31, 2011

TORONTO, ONTARIO--(Marketwire - April 29, 2011) - Eurogas Corporation ("Eurogas" or the "Corporation") (TSX:EUG) today announced its financial results for the three months ended March 31, 2011.

• Cash flow from operating activities was $3.5 million in the first quarter of 2011 compared with cash outflows of $0.6 million in the first quarter of the prior year. In June 2010, the Corporation completed the acquisition of oil and natural gas properties in southern Ontario, significantly impacting operating cash flow in the first quarter of this year, relative to the same period of the prior year.
  
  
• Production volumes for the first quarter of 2011 on a net basis totalled 10,164 Mcf/d of natural gas and 651 bbls/d of oil and liquids.
  
  
• Revenue from the sale of oil and gas was $9.6 million in the first quarter of 2011. The Corporation realized an average price of $4.69/Mcf on sales of natural gas and an average price of $91.18/bbl on sales of crude oil.
  
  
• Field netbacks were $2.06/Mcf from sales of natural gas and $56.10/bbl from sales of oil and liquids.
  
  
• Capital expenditures in the first quarter of 2011 were $0.9 million.
  
  
• Cash and available credit under the Corporation's $80 million credit facility totalled $18.5 million at March 31, 2011. At March 31, 2011, the Corporation had drawn $60.3 million against its credit facility. In addition, the Corporation had issued a letter of credit of $3.3 million in accordance with regulatory requirements.
  
  
• Net loss for the quarter ended March 31, 2011 was $2.1 million, or approximately $0.01 per share. This compares with a net loss of $0.4 million incurred in the first quarter of 2010.

IMPLEMENTATION OF IFRS

This reporting period is the Corporation's first reporting period under International Financial Reporting Standards ("IFRS"). A detailed analysis of the significant accounting policies adopted by the Corporation on the transition to IFRS and a reconciliation of the Corporation's financial position and results of operations between IFRS and Canadian generally accepted accounting principles are provided in the footnotes to the Corporation's financial statements which have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") and which may be viewed under the Company's profile at www.sedar.com or the Corporation's website at www.eurogascorp.com.

REVIEW OF OPERATIONS

SOUTHERN ONTARIO ASSETS

Revenues from Oil and Gas Sales

During the first quarter of 2011, the Corporation realized an average price of $4.69/Mcf on sales of natural gas, representing a positive basis differential from the average NYMEX price of US$4.21/Mcf. The positive basis differential is due, in part, to the Corporation's proximity to the Dawn hub, which is located in southwestern Ontario and which is a leading provider of natural gas supply to the greater Toronto market area. Despite the positive basis differential, revenues from natural gas sales in the first quarter of 2011 continue to be affected by a low North American natural gas price which reflects excess supply of this commodity.

During the first quarter of 2011, the Corporation realized an average price of $91.18/bbl on sales of oil. While world oil consumption continues to grow, significant uncertainties in world markets have caused substantial volatility in the price of oil.

Production

Due to the effect of severe weather conditions experienced during the winter season, the Corporation was required to make unanticipated repairs to its gas pipeline, resulting in a production loss of approximately 1.6 million Mcf in the first quarter of 2011.

Field Level Cash Flows

Capital Expenditures

During the three months ended March 31, 2011, the Corporation incurred capital expenditures on the southern Ontario assets of $0.9 million. Planned capital expenditures during the remainder of 2011 are estimated at $8.1 million towards upgrading productivity, which includes approximately $4.7 million for onshore projects and a further $3.4 million for offshore projects.

Price Risk Management

The Corporation has entered into fixed price derivative contracts for the purpose of protecting its oil and natural gas revenue from the volatility of oil and natural gas prices and the volatility in Canadian to US foreign exchange rates. At April 26, 2011, the Corporation had locked in pricing for 550 bbls/d of oil production at a weighted average rate of Cdn$93.79/bbl through to December 2011 and 6.5 million btu/day of natural gas from June 1, 2011 to February 28, 2012 at a fixed price of Cdn$4.66/MMbtu. With these risk management contracts, the Corporation has hedged approximately 87% of its oil production and 64% of its natural gas production during the periods covered by the hedges.

DEVELOPMENTS - CASTOR UNDERGROUND GAS STORAGE PROJECT

The project construction and development of the Castor Project, including the well drilling program, continued to advance throughout the first quarter of 2011. The routing of the subsea pipeline from the shore to the site of the onshore facilities was established and the necessary right of ways were granted as part of the Administrative Authorization Permit received in June 2010. Construction of the offshore pipeline crossing at the coastal cliff commenced in late 2010 and the onshore pipeline commenced early in 2011. Both are scheduled to be completed in 2011.

NON-IFRS MEASURES

The Corporation believes that important measures of operating performance include certain measures that are not defined under IFRS and as such, may not be comparable to similar measures used by other companies. While these measures are non-IFRS, they are common benchmarks in the oil and natural gas industry, and are used by the Corporation as supplementary measures to net earnings and assist management in the estimation of future cash flows.

• "Field Level Cash Flows" is calculated as revenues from oil and gas sales, less royalties and production expenditures.
• "Field Netbacks" refers to field level cash flows expressed on a measurement unit or barrel of oil equivalent basis.

ABOUT THE CORPORATION

Eurogas Corporation is a Canadian-based company whose common shares currently trade on the Toronto Stock Exchange under the symbol "EUG". The Corporation is focused on creating long-term value for its shareholders through the development and acquisition of high-impact energy projects. Eurogas Corporation holds interests, both directly and indirectly, in the largest accumulation of producing oil and gas assets in Ontario, in the development of an offshore underground natural gas storage facility in Spain and, through a preferred share investment, in certain exploration and evaluation programs for oil and natural gas offshore of Tunisia. Prior to February 4, 2011, the Corporation's common shares were trading on the TSX Venture Exchange.

Eurogas has filed its interim consolidated financial statements and related management's discussion and analysis for the three month period ended March 31, 2011 with the Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval ("SEDAR"). All documentation may be viewed under the Corporation's profile on SEDAR (www.sedar.com), the Corporation's website at www.eurogascorp.com or by contacting Eurogas Corporation directly.

FORWARD LOOKING STATEMENTS

Certain information set forth in these documents, including management's assessment of each of the Corporation's future plans and operations, contains forward-looking statements. Forward-looking statements are statements that are predictive in nature, depend upon or refer to future events or conditions or include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates" or similar expressions. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including: exploration, development and production risks; uncertainty of reserve estimates; reliance on operators, management and key personnel; cyclical nature of the business; economic dependence on a small number of customers; additional funding that may be required to execute on exploration and development work; the ability to obtain, sustain or renew licenses and permits; risks inherent to operating and investing in foreign countries; availability of drilling equipment and access; industry competition; environmental concerns; climate change regulations; volatility of commodity prices; hedging activities; no history of earnings; potential defects in title to properties; potential conflicts of interest; changes in taxation legislation; insurance, health, safety and litigation risk; labour costs and labour relations; geo- political risks; risks relating to management of growth; aboriginal claims; volatility of the Corporation's share price; royalty rates and incentives; regulatory risks relating to oil and natural gas exploration; marketability and price of oil and natural gas; failure to realize anticipated benefits of acquisitions and dispositions; information system risk; and other risk factors discussed or referred to in the section entitled "Business Risks" in the Corporation's Management's Discussion and Analysis as at and for the year ended December 31, 2010. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The Corporation's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits the Corporation will derive from them. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.