CanArgo Announces Convertible Bond Issue.

Business Editors

OSLO, Norway & LONDON--(BUSINESS WIRE)--June 14, 2001

CanArgo Energy Corporation ("CanArgo") (OTCBB:GUSH)(OSE:CNR.) today announced it has resolved to raise between NOK 100 million and 200 million (USD 10.7 million and USD 21.4 million) by way of an offering of convertible bonds (the 'Issue'), subject to all relevant approvals.

Sundal Collier & Co ASA has been engaged by CanArgo as financial adviser and lead manager to the Issue which is expected to close within the next thirty days.

The Issue will be in two tranches, one in USD and one in NOK. The bonds will have a 4-year term and carry an annual coupon of 10.75% for the USD tranche and 12.75% for the NOK tranche. The conversion price attaching to the Issue shall be NOK 8.00, which is approximately 30% above CanArgo's weighted average ordinary share price for the period from 30 May to 12 June 2001. The conversion terms are such that there would be a mandatory conversion if CanArgo's weighted average ordinary share price remains at 100% (NOK 16.00) or more above the conversion price for a period of thirty consecutive trading days. The convertibles are to be issued in minimum lots equivalent to NOK 350,000 and the Issue itself will accordingly not require a filing of a prospectus. CanArgo will apply for admission of the convertible bonds to listing and trading on the Oslo Stock Exchange in due course, subject to any regulations and restrictions imposed by the Oslo Stock Exchange and the Securities and Exchange Commission of the United States of America. The Issue will be organized with Norsk Tillitsmann AS as Trustee (the Trustee). CanArgo reserves the right to amend the aforesaid details of the issue before closing due to requirements from the Trustee, the Oslo Stock Exchange and any other relevant regulatory authorities.

The proceeds of the issue will be used to re-finance CanArgo's recent acquisition of Lateral Vector Resources ("LVR") and fund future capital and operational expenditure principally in Ukraine. Funding of the LVR Ukrainian assets (the Bugruvativske field) should give CanArgo access to its contractual share of production.

The Bugruvativske field is currently producing in excess of 5,000 bopd, and the last reserves report issued by LVR stated that the LVR oil reserves in the field were approximately 10 million barrels net to the company. CanArgo's entitlement production will be in accordance with the Joint Investment Production Activity ("JIPA") agreement with the Ukrainian State oil company Ukrnafta. Under the terms of the JIPA, CanArgo would be entitled to its contractual share of production above an agreed base line production level, which is currently 1,300 bopd and which decreases over time. Access to the contractual production entitlement is subject to CanArgo and Ukrnafta financing their proportional shares of the JIPA, with Ukrnafta's contribution expected to be in the form of existing wells and field installations whereas CanArgo's contribution is planned to be in cash and services.

Commenting on the convertible issue, Dr. David Robson, Chief Executive Officer and Managing Director of CanArgo Energy Corporation said, " I am pleased that we have reached agreement on this structured financing, which is targeted towards the development of our Ukrainian production projects, principally the LVR acquisition and development of the Bugruvativske field. The acquisition of LVR is strategically important, and has secured CanArgo an additional asset with the potential to contribute significantly in the near future, leaving the company less exposed to technical risks in individual assets. We view this as an exciting move for the company with the opportunity to realise early production and cash flow.

Our acquisition of LVR was achieved at a better price, and with lower costs and complications by utilising our cash resources, however, we need to ensure that the company is properly capitalised to progress these opportunities.

The additional capital from these bonds will allow us to develop our Ukrainian operations for which we have not yet raised funds. The Stynawske project is moving ahead with equity production already being realised and a four well work over programme progressing satisfactorily. We should also be able to progress commercial and operational arrangements at the Bugruvativske Field in Eastern Ukraine, which is a proven, producing oilfield. We hope to secure production from the Bugruvativske field by 1st quarter 2002, and we would expect this to make a significant impact on CanArgo's net oil production.

The capital we raised last summer was for our Georgian projects, and is sufficient to progress these. These projects include our production and development programme, our downstream business expansion, and our exploration programme, from which I believe we have potentially very significant upside. This programme is proceeding, with two wells currently drilling, and further drilling planned on our new Norio block. Each of the exploration prospects has the potential for the discovery of large deposits of oil or gas, which would have a significant impact on CanArgo."

CanArgo is an independent oil and gas exploration and production company operating in Eastern Europe. CanArgo's principal oil and gas operations are currently located in the Republic of Georgia.

The matters discussed in this press release include forward looking statements, which are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated in such forward looking statements. Such risks, uncertainties and other factors include the uncertainties inherent in oil and gas development and production activities, the effect of actions by third parties including government officials, fluctuations in world oil prices and other risks detailed in CanArgo's reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission. The forward-looking statements are intended to help shareholders and others assess CanArgo's business prospects and should be considered together with all information available. They are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. CanArgo cannot give assurance that the results anticipated herein will be attained.