Eurogas Corporation

Eurogas Corporation

March 26, 2007 14:25 ET

Eurogas Corporation: News Release

CALGARY, ALBERTA--(CCNMatthews - March 26, 2007) - Eurogas Corporation ("Eurogas" or the "Corporation") (TSX VENTURE:EUG) today announced its financial results for the year ending December 31, 2006. For the year, the Corporation invested $6.5 million in its Castor Underground Natural Gas Storage Project (the "Castor UGS Project" or "Castor") in Spain and $1.8 million on its Sfax exploration program in Tunisia. At December 31, 2006, Eurogas had working capital of $17.0 million and a $6 million line of credit available. As the Corporation is in the development stage, it has not earned any business income and incurred a net loss of $2.7 million during the year.

Eurogas has filed its consolidated financial statements and related Management Discussion and Analysis for the year ended December 31, 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 experienced considerable development in 2006. Eurogas advanced the project on technical, financial and managerial levels, while Spain's Ministry of Industry continued to work positively in advancing the underground gas storage sector's regulatory framework.

Regulatory Progress

Spain's Ministry of Industry published a ministerial order on December 29, 2006 setting out important changes to the remuneration regime which will apply to the UGS sector. The new order is a significant step forward for regulatory clarity and for the Castor UGS Project. The changes are meant to provide a stable and acceptable financial regime for UGS development.

The updated regime provides important incentives to developers by shifting certain risks from the developers to the energy system. It shortens the payback period for investment in facilities from 20 years to 10 years and provides 50 percent of the annual financial returns for the following 40 years. The Ministerial Order also articulated certain guarantees with respect to the pre-operational period, which protects the Corporation's investment and reduces certain risks. Eurogas is pleased with the outcome and is optimistic that the new rules will provide the basis for strong project financing, a prerequisite for any large infrastructure project.

Another element of the approval process was the independent study by the Spanish Geological Survey, at the request of the Ministry of Industry. The study analysed Eurogas' modelling and conclusions concerning the depleted oil reservoir and its suitability for UGS service. The Survey's strong positive response in January 2007 has provided technical affirmation from an independent, official and respected third party.

Augmenting Capabilities in Spain

In 2006 Eurogas took two important steps to strengthen its ability to fulfill all of the technical and regulatory tasks that lie ahead. First, the Corporation felt it would be important to have an alliance with a credible company in Spain. Last year's agreement with ACS, one of Spain's leading companies, to provide engineering services and to act on the Corporation's behalf in dealings with governmental and regulatory authorities, strengthens the Corporation's position substantially. ACS quickly initiated the FEED study, a crucial engineering document.

Enhancing Eurogas' Castor team in Spain was another important task. The individuals who joined in 2006 strengthen the Corporation's capabilities in Spain immensely. The team includes specialists in facilities and pipeline design, procurement, permitting, project development and other areas, who will participate in and support all the required tasks including permitting, award of the EPC contract, construction and commissioning.

Project Financing

On March 5, 2007 the Corporation announced an agreement with Deutsche Bank, whereby Deutsche Bank will act as financial advisor for the Project with a view to structuring the senior debt financing that will fund the Castor UGS Project. The Corporation believes the relationship with Deutsche Bank enhances the credibility of the project and bodes well for obtaining a project financing package on favourable terms.

Tunisia: Sfax Permit

Development activities on the Ras el Besh structure began during 2006. Also during the year, Eurogas implemented its exploration strategy when the Corporation and its operating partner, APEX, entered into a Farmout Option Agreement with Anadarko Petroleum Corporation ("Anadarko").

Ras el Besh Development

In late 2006, the partners sourced and purchased a mobile offshore production unit for US$2.5 million. After refurbishment, the production unit is to be delivered in early Q2 2007 and towed to Tunisia to await results of the first well. The unit is equipped to handle oil production of up to 5,000 bbls per day, and could be expanded if required. The partners also acquired a wellhead and tubulars for the first new well. A suitable drilling rig, available at an affordable contract price, is currently being sought.

Farmout of Exploration Lands

The Sfax Permit's large size (4,000 square km or more than 1,500 square miles) and extensive prospectivity led Eurogas and its partner to seek additional participation by a company with a strong track record and demonstrated capability to evaluate its exploration acreage. In May 2006, Eurogas announced a farm-out option agreement with Anadarko Petroleum Corporation that includes the acquisition of two large 3-D seismic programs and the drilling of two exploration wells. The farmout excludes the three prior oil discoveries. The first 3-D seismic survey over 420 km2 commenced in March 2007. The four-phase farm-out option agreement enables Anadarko to earn progressively higher working interests over a three-and-a-half-year period.

Julio Poscente

As many Shareholders are aware, 2006 marked the loss to Eurogas of the Corporation's founder and past Chairman and CEO, Julio Poscente. This visionary businessman who touched so many lives over his lengthy career will be greatly missed.

Eurogas Corporation is an independent oil and gas exploration company listed on the TSX Venture Exchange under the symbol EUG. The company is engaged in the development of a major underground storage facility off the east coast of Spain and the exploration and development of oil and gas in Tunisia's Gulf of Gabes. More information is available on the company 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
    Eurogas Corporation
    Andrew Constantinidis
    Vice President & CFO
    (403) 264-4985
    Eurogas Corporation
    250, 435 - 4 Avenue S.W.
    Calgary, Alberta, Canada
    T2P 3A8
    (403) 262-8299 (FAX)