Revenues of $64.9 million, up 51% year on year SALT LAKE CITY, Jan. 20 /PRNewswire-FirstCall/ -- Caspian Services, Inc. (OTC:CSSV) (BULLETIN BOARD: CSSV) recently filed its annual report with the Securities and Exchange Commission reporting results of operations for its full year 2007. Full Year 2007 Financial Highlights and Year on Year Comparisons (dollars in thousands except per share data): -- Revenue of $64,893 up 51% compared to fiscal 2006. -- EBITDA(1) of $21,042 giving an EBITDA margin of 32.4%. -- Net income before taxes of $14,897 as compared to $1,645 in 2006. -- 2007 EPS of $0.22 compared to EPS of ($0.04) for 2006. Management Comment: Commenting on the annual results for 2007, John Scott, Chief Operating Officer for Caspian Services, Inc. noted that "We are pleased with the financial results for 2007. We believe the growth in revenue and improved results of operations are directly attributable to investments made to expand both our vessel and seismic product lines and capacity in anticipation of growing demand in the Caspian region for these services." Comparative Financial Results (dollars in thousands except per share data): For the Year Ended September 30, 2007 2006 Revenues Vessel revenues $24,441 $14,444 Geophysical service revenues 38,896 27,350 Product sales 1,556 1,249 Total Revenues 64,893 43,043 Operating Expenses Vessel operating costs 18,509 13,366 Geophysical costs of revenues 17,058 13,982 Cost of product sold 898 647 Depreciation 6,619 3,330 General and administrative 12,127 10,162 Total Operating Expenses 55,211 41,487 Income (Loss) from Operations 9,682 1,556 Other Income (Expense) Interest expense (130) (288) Exchange gain (loss) 32 (111) Interest income 284 14 Income from equity method investees 0 28 Other 5,029 446 Net Other Income (Expenses) 5,215 89 Net Income (Loss) Before Income Tax and Minority Interest 14,897 1,645 Provision for income tax (5,112) (2,533) Minority interest (320) (812) Net Income (Loss) $9,465 $(1,700) Basic Income Per Common Share $0.22 $(0.04) Diluted Income Per Common Share $0.22 $(0.04) Basic Weighted Average Common Share Outstanding 43,480,336 40,298,410 Diluted Weighted Average Common Share Outstanding 43,622,892 40,298,410 Commentary on Financial Results Vessels: 2007 Marine Vessel Revenue of $24,441 as compared to $14,444 in 2006. Vessel revenues are affected by utilization and day rates. We experienced an increase in revenue from vessel operations during the 2007 fiscal year, as compared to 2006. This increase was largely attributable to improved vessel utilization rates, an increased number of vessels in our fleet and improving day rates. We mobilized an additional three vessels to the Caspian Sea during fiscal 2007. In 2008 we expect to mobilize one more vessel. This will bring the total number of vessels in our fleet to fifteen. Vessel operating costs of $18,509 during the fiscal year ended September 30, 2007 were 38% higher than in 2006. This increase is primarily volume related and has risen less quickly than revenues, leading to better margins. We expect the trend of increasing demand to continue in the upcoming year. The Company already has a nearly full order book for 2008. Only one vessel remains to be allocated and we are currently investigating several options for contract during 2008. Based on charters in place, current negotiations and anticipated increased exploration and production activities in the Caspian Sea, we expect revenues and income from vessel operations to increase in fiscal 2008 as compared to fiscal 2007. Geophysical Services: Geophysical Services Revenue of $38,896 as compared to $27,350 in 2006. We also experienced a significant increase in revenue from geophysical services during the 2007 fiscal year, as revenue increased $11,546 or 42% compared to the 2006 fiscal year. As a result of new contracts, TatArka's business grew significantly during fiscal 2007, with revenue increasing from $20,078 to $28,664. To take advantage of this ongoing strong demand for geophysical services, in 2006 we purchased additional equipment to allow us to field extra operational crews thus minimizing the need to subcontract services. We were able to operate with additional crews for the entire 2007 fiscal year. With the anticipated increase in proprietary exploration activities in the Caspian Sea region in 2008 and the rights of Veritas Caspian to conduct non-proprietary surveys, we anticipate revenue from geophysical services will continue to increase in the upcoming 2008 fiscal year. Geophysical operating costs also increased during the 2007 fiscal year from $13,982 to $17,058. Kazmorgeophysica costs increased $5,341 to $8,536 but TatArka's costs decreased $1,805 to $8,696, resulting in an overall increase in geophysical operating costs of $3,076. This is primarily due to higher payroll costs and depreciation as we increased crews and equipment, but there were much higher savings in subcontracting costs as we performed the work in-house during fiscal 2007. The result was higher revenues and improved margins. Infrastructure: Infrastructure Revenues of $1,556 as compared to $1,249 in 2006. During fiscal 2007, revenue from water desalinization increased 25% compared to fiscal 2006. Revenue from water sales, less the cost of water sales increased to $658 in fiscal 2007 compared to $602 in fiscal 2006. This is the result of increased demand for water arising from more activity in the port of Bautino. Increased costs related to production of water were mainly due to higher payroll costs and costs of chemicals and electricity. However, gross margin in percentage decreased from 48% in 2006 to 42% in 2007. This decrease is mainly attributable to increased cost of materials as we switched suppliers of plastic forms for water bottles to ensure timely delivery and increased utility costs, due to higher tariffs in 2007. As much of our water sales are made to exploration and production camps operating in the Caspian Sea region, much like our vessel operations, demand for water is directly affected by oil and gas exploration and production in the region. With the anticipated increases in exploration and production activities in the region, we anticipate increased revenue and income from water desalinization in 2008. As construction on the Atash marine base has begun, we will continue to advise the investment community on progress and provide updates on milestones reached in the construction process General and Administrative Expenses: General and administrative expenses increased $1,965, or 19% during fiscal 2007 compared to the fiscal 2006. A primary contributing factor to this increase in general and administrative expense is improved infrastructure, including the new Aktau office being operational for the full year. Additionally, we hired new key personnel in 2007 which resulted in higher payroll, travel and insurance costs. Our infrastructure is now substantially in place for the expected increase in revenues. While we anticipate general and administrative expenses for the upcoming year will continue to rise as we continue to expand our operations, we do not expect them to increase significantly. Caspian Services is an oilfield service company providing a broad range of services in the Caspian Sea region of western Kazakhstan. We provide geophysical and seismic data acquisition services, maintain a fleet of vessels that we commission to oil and gas exploration companies engaged in exploration and development activities in the north Caspian Sea and are constructing a marine base in Bautino, Kazakhstan. The Company maintains corporate offices in Almaty, Kazakhstan; Aktau, Kazakhstan; and Salt Lake City, Utah. The information contained in this release includes forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Certain statements contained herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied. Forward-looking statements involve risks and uncertainties, including but not limited to, such risks as demand for services during the upcoming fiscal year being lower than expected and the corresponding negative impact that would have on projected revenues and anticipated results of operations presented herein, unanticipated increases in operating costs, contract performance, changes in the regulatory environment, including tax regulations and the enforcement thereof and other risks described in the Company's periodic reports on file with the Securities and Exchange Commission (1) This news release contains the non-GAAP measure Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"). EBITDA represents earnings (or losses) before interest, taxes, depreciation and amortization. EBITDA is used by management, analysts, investors and other interested parties in evaluating our performance compared to that of other companies in our industry, as the calculation of EBITDA eliminates the effect of financing, income taxes, the accounting effects of capital spending, stock-based compensation, merger related expenses and certain other expenses, which items may vary from different companies for reasons unrelated to overall operating performance. EBITDA should not be construed as income from operations or net income as determined by generally accepted accounting principles. Other companies may report EBITDA differently. DATASOURCE: Caspian Services, Inc. CONTACT: Terrance J. Powell, Vice President, Investor Relations of Caspian Services, Inc., +7 3272 508 478, Fax, +7 3272 508 479,

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