Eurogas Corporation

Eurogas Corporation

November 14, 2006 17:25 ET

Eurogas Corporation Announces Third Quarter Financial Results

CALGARY, ALBERTA--(CCNMatthews - Nov. 14, 2006) - Eurogas Corporation (TSX VENTURE:EUG) ("Eurogas" or the "Corporation") today announced its financial results for the three and nine months ended September 30, 2006. Eurogas' activities during the quarter focused on the commissioning of the FEED and related studies for the development of the Castor Underground Natural Gas Storage Project in Spain and on the Sfax permit, offshore Tunisia. During the first nine months of 2006, the Corporation invested $4.1 million in Spain and $1.3 million in Tunisia. As at September 30, 2006, the Corporation's financial position was strong, with $19.8 million in working capital and an available $6 million line of credit with Dundee Corporation. As the Corporation is in the development stage, it incurred a net loss of $488,311 during the quarter and $1.6 million year-to-date.

Eurogas has filed its consolidated financial statements and related Management Discussion and Analysis for the period ended September 30, 2006 with Canadian securities regulatory authorities on the System for Electronic Document Analysis and Retrieval ("SEDAR").

Spain - Castor Underground Gas Storage (UGS) Project

The Castor UGS Project is considered by interested parties, industrial and governmental, to be the preeminent underground gas storage project in Spain, and essential for the Spanish gas system, as reflected in it being assigned the highest category, 'A' Urgent, in the updated Energy Infrastructure Plan (2005-2011) approved by the Government in 2006.

The Corporation continues to work hard simultaneously on the many fronts that are required in the implementation of the Castor UGS Project. The very nature of a large underground gas storage and infrastructure project entails a lengthy regulatory and permitting process. It also requires a thorough understanding of the characteristics of the underlying reservoir in order to enable the right selection and configuration of the facilities. Castor UGS reservoir performance has three highly attractive features:

1. Large nominal capacity, estimated at 1.3 billion cubic meters

2. High deliverability rate, estimated at 25 million cubic meters

3. Deliverability rate can be maintained at much lower levels of stored gas, compared to most other UGS facilities, where deliverability rate starts to decline as gas is withdrawn.

Castor's high deliverability could allow the facility to be utilized to full nominal capacity the equivalent of two times a year, thereby materially increasing its throughput capacity. This will be of tremendous value to the gas system, in providing both strategic and operational usage.

The needs of the gas system are evolving and are such that the Spanish administration is giving high priority to the development of underground gas storage capacity, which is one of the lowest of the major economies of Europe. Demand for gas to power electricity generation grew at a year on year rate of 30% in September. The Government has sent to Parliament an amendment to the Hydrocarbons Law and is developing associated regulations, which will govern the gas distribution and transportation sector, including underground gas storage activities. Importantly, the Spanish administration is committed to advancing the administrative and environmental approvals required for the implementation of Castor UGS Project, as well as other Category 'A' projects, in parallel to the processing of the above-mentioned amendment and regulations. The Corporation and the Administration are working closely to define and satisfy the requirements for the grant of a Development Concession for Castor UGS Project, including the issue of the extraction of residual oil as a simultaneous activity with the construction of UGS facilities.

With respect to the technical program, progress has been made in several areas. The reservoir analysis and other technical studies are now complete, the results of which were considered essential before embarking on the commissioning of the Front End Engineering and Design ("FEED") study.

In October 2006, the Corporation entered into an Assistance Contract with the ACS Group, the largest construction group in Spain, related to the development of the Castor Underground Gas Storage project. This agreement is expected to be the first step in a broader collaboration. Under the terms of this contract, ACS Group will undertake the FEED study and provide permitting and licensing services. The FEED work will take approximately 6 months, and will result in a fixed price determination for the project investment. It will form the basis for an award of a turnkey contract for Engineering, Procurement and Construction ("EPC"). The awarding of the EPC contract will comply with applicable public procurement provisions. The contract cost of this work is expected to be EUR 1.5 - 2 million. Regional and local permitting is a critical activity and will require sustained effort. Support from the ACS Group will be of great value.

ACS Group is a global leader in the creation, construction and operation of infrastructure in a variety of industrial sectors such as oil & gas, LNG and re-gasification, power generation and grids, and railways. It is one of the world leaders in the construction and installation of off-shore platforms and infrastructure topsides, and offers extensive experience in transportation and distribution networks, onshore natural gas pipelines and gas compression stations. Its industrial investments include a 35% stake in Union Fenosa, and a 10% stake in Iberdrola - both leading Spanish utility companies.

Eurogas owns 73% of Castor UGS project and the Castor Exploration Permit, through its Spanish subsidiary Escal UGS S.L.

Tunisia - Sfax Permit

The Sfax Permit, in which Eurogas has a 45% working interest, is located offshore in the Gulf of Gabes in eastern Tunisia. It lies within a prolific hydrocarbon fairway that crosses Libya and Tunisia and includes major oil and gas fields. The Sfax Permit is surrounded by producing oil and gas fields to the east, north and west, and previous operators drilled and tested oil on three separate structures on the permit. Eurogas and its operating partner, Atlas Exploration Worldwide Ltd. ("APEX"), have implemented a strategy to develop past discoveries and to farm out the evaluation of the exploration acreage as described below.

The first development project will be at Ras El Besh where a major company flow tested 612 bopd from 20 meters of El Garia carbonates in 1997. A modern, 3-D seismic program acquired by partners in 2004 confirmed the discovery well was drilled on the flank of the structure and that a new well located higher on the structure would encounter a minimum of 40 meters of pay. The partners applied for a Development Concession over the Ras El Besh area, and in July 2006 received approval from the Tunisian authorities for a 30-year concession.

Elevated oil prices over the past several years have resulted in 100% rig utilization rates in the Mediterranean, West Africa and the North Sea, very high rates for drilling equipment and services, and long lead times for single well drilling programs. The operator is investigating the availability of shallow-water jack-ups and barge rigs to maintain costs.

In order to accelerate production at Ras El Besh, the partners are purchasing the Ocean Patriot, a production jack-up rig, and will take possession of the vessel in December 2006. The purchase price is US$ 2.5 million and additional funds will be required for refurbishment. The Ocean Patriot jack-up is capable of working in water depths up to 50 meters and is therefore well suited for development activity on the Sfax Permit.

The exploration strategy for the Sfax Permit was implemented in May 2006 when Anadarko Petroleum Corporation entered into a Farmout Option Agreement with Eurogas and APEX. Anadarko can earn a maximum of 75% working interest in the farmout lands by acquiring two seismic acquisition programs, drilling two exploration wells, and reimbursing partners for up to $4.5 million of past costs. The first seismic acquisition program of 420 km2 of 3-D shallow water seismic and 115 km of 2-D marine seismic has been approved by the Tunisian authorities. The 3-D will target large, undrilled structures in the northwest portion of the permit while the 2-D will focus on exploration prospects west of the producing Ashtart oil field (350 million bbls) in the southeast portion of the permit. An environmental impact assessment is being prepared for the seismic program, mobilization has begun and plans are to commence data acquisition in early 2007.

Eurogas Corporation is an independent oil and gas exploration company listed on the TSX Venture Exchange under the symbol EUG and is engaged in development of a major underground storage facility offshore the east coast of Spain, and the exploration and development of oil and gas in Tunisia's Gulf of Gabes. For more information on the Company, visit the website

Jaffar Khan, President & CEO

Certain information set forth in this document, including management's assessment of the Corporation's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. 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 there. 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

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Eurogas Corporation
    Jaffar Khan
    President & CEO
    (403) 264-4985
    (403) 262-8299 (FAX)
    Eurogas Corporation
    Andrew Constantinidis
    Vice President & CFO
    (403) 264-4985
    (403) 262-8299 (FAX)
    Eurogas Corporation
    250, 435 - 4 Avenue S.W.
    Calgary, Alberta, Canada
    T2P 3A8