Eurogas International Inc. ("Eurogas International" or the "Corporation")
(CNSX:EI) today announced its financial results for the three and six months
ended June 30, 2011. The Corporation's unaudited interim financial statements,
along with management's discussion and analysis have been filed on the System
for Electronic Document Analysis and Retrieval ("SEDAR") and may be viewed under
the Company's profile at www.sedar.com or the Corporation's website at
www.eurogasinternational.com.
Eurogas International is conducting exploration and evaluation programs for oil
and natural gas in the shallow Mediterranean waters offshore Tunisia, where it
holds a 45% working interest in the Sfax Permit. The Corporation has entered
into a joint operating agreement with Atlas Petroleum Exploration Worldwide Ltd.
("APEX"), a production sharing agreement with the Tunisian state oil company,
and an exploration permit with the Tunisian government. Pursuant to these
arrangements, the Corporation and APEX agreed to undertake exploration,
evaluation and production operations on the Sfax Permit. APEX is the operating
partner in the joint venture arrangement.
DECLARATION OF FORCE MAJEURE
On January 18, 2011, the Corporation announced that, together with APEX, it has
declared a condition of Force Majeure with respect to the Sfax Permit and the
related Ras-El-Besh concession. The joint venture partners believe that the
political uncertainty and civil unrest in Tunisia adversely affects their
ability to continue their exploration and evaluation activities in that region.
Eurogas International believes that the declaration of Force Majeure will allow
the joint venture partners to temporarily suspend activities while the
conditions resulting in the Force Majeure continue. Once the situation is
resolved, the joint venture partners will resume their exploration and
evaluation activities in Tunisia.
BUSINESS DEVELOPMENTS
The Offshore Sfax Exploration Permit
On July 7, 2011, the Corporation announced that the Tunisian government approved
an extension of the term of the Sfax Permit to December 8, 2012, with no
additional obligations imposed on the Corporation.
On behalf of the joint venture, the Corporation has directed the reprocessing of
four 3-dimensional seismic surveys on the Sfax Permit. The reprocessed data has
resulted in the remapping of the main prospects and leads, which will be
utilized to determine a future course of action with respect to the drilling of
an exploration well required to satisfy the outstanding drilling obligation
pursuant to the terms of the Sfax Permit.
Ras-El-Besh Concession
During the fourth quarter of 2010, the joint venture concluded that it was
appropriate to abandon the REB-3 well and pursue other opportunities on the Sfax
Permit. The Corporation is currently evaluating the cost and methodology for the
abandonment, the timing of which will be determined by prevailing industry and
political conditions.
Pursuant to a settlement agreement between the joint venture partners and Delta
Hydrocarbons B.V. ("Delta"), a previous farmout partner in the Sfax Permit,
Delta is committed to fund 50% of any costs associated with abandonment of the
REB-3 well until December 8, 2011.
The Seawolf Litigation
During the first half of 2011, the Corporation received US$900,000 as its share
of proceeds related to the settlement of the litigation against Seawolf Oilfield
(Cyprus) Limited and Seawolf Oilfield Services Limited (collectively, "Seawolf")
pursuant to which, in 2009, the Corporation sought damages for
misrepresentations and breach of contract in respect of the drilling of the
REB-3 well. At June 30, 2011, the Corporation's share of additional amounts
receivable pursuant to the settlement was US$600,000.
2011 EXPENDITURES
During the first half of 2011, the Corporation capitalized $0.7 million to its
exploration and evaluation properties.
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Exploration and
Sfax Exploration Ras-El-Besh Evaluation
Permit Concession Properties
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Carrying value, January 1,
2010 $ 2,638,922 $ - $ 2,638,922
Transactions during the
six months ended June 30,
2010
Investments 899,262 370,509 1,269,771
Changes related to
decommissioning liability - 18,387 18,387
Impairment - (388,896) (388,896)
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Carrying value, June 30,
2010 3,538,184 - 3,538,184
Transactions from July 1,
2010 to December 31, 2010
Investments 1,126,817 124,484 1,251,301
Changes related to
decommissioning liability - (98,088) (98,088)
Impairment - (26,396) (26,396)
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Carrying value, December
31, 2010 4,665,001 - 4,665,001
Transactions during the
six months ended June 30,
2011
Investments 692,989 150,922 843,911
Changes related to
decommissioning liability - (43,833) (43,833)
Impairment - (107,089) (107,089)
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Carrying value, June 30,
2011 $ 5,357,990 $ - $ 5,357,990
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WORK PROGRAM FOR THE REMAINDER OF 2011
The Corporation has temporarily suspended its 2011 work program pending
settlement of the events that resulted in the declaration of Force Majeure. Once
activities resume, the Corporation's ability to undertake its future work
programs is dependent on it securing the necessary financial arrangements.
COMMITMENTS
As part of the Tunisian government's approval of the extension on the Sfax
Permit, the Corporation is committed to its pro rata share of drilling one new
exploration well to a specified geological zone during the extension period. The
actual cost for the exploration well will depend on the selection of the
prospect and location within the Sfax Permit. In the event that work commitments
as outlined in the terms of the extension are not completed, a compensatory
payment of up to US$12 million will be payable by the joint venture partners to
the Tunisian government, less any amounts incurred in respect of the completion
of these obligations. The Corporation is also required to complete its pro rata
share of the abandonment of the REB-3 well. The cost of abandoning the REB-3
well is dependent on the type of rig that will be used and on the costs of
mobilizing and demobilizing the rig. The Corporation estimates that its pro rata
share of the cost to meet these two commitments is US$7.6 million.
At June 30, 2011, the Corporation had cash and cash equivalents of $0.7 million.
The Corporation's current cash resources are insufficient to meet its forecasted
work programs and commitments. The Corporation is actively pursuing alternative
financing options including farmout arrangements, potential debt or equity
issuances and monetization of certain assets. There can be no assurance that the
Corporation will be successful in these initiatives.
FINANCIAL RESULTS
During the three and six months ended June 30, 2011, the Corporation incurred a
net loss of $0.5 million and $1.2 million, respectively, representing a loss of
approximately $0.02 per share and $0.04 per share, respectively. This compares
with a net loss of $0.9 million and $2.0 million for the three and six months
ended June 30, 2010, respectively, representing a loss of $0.03 per share and
$0.06 per share, respectively. The decrease in the net loss results primarily
from a decline in legal costs associated with the settlement of the litigation
with Seawolf.
ABOUT THE CORPORATION
Eurogas International Inc. is an independent oil and gas exploration company
listed on the Canadian National Stock Exchange under the symbol EI. Eurogas
International has filed its unaudited interim financial statements and related
management's discussion and analysis for the three and six month periods ended
June 30, 2011 with the Canadian securities regulatory authorities on SEDAR. All
documentation may be viewed under the Company's profile on SEDAR (www.sedar.com)
under the Corporation's website at www.eurogasinternational.com, or by
contacting the Corporate Secretary of Eurogas International. For more
information about Eurogas International, please visit the Listings Disclosure
Hall at www.cnsx.ca.
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 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 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.
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