CanArgo Energy Corporation: Operational Update.

GUERNSEY, Channel Islands -- CanArgo Energy Corporation ("CanArgo") (OSE:CNR) (AMEX:CNR) today gave an operational update on its activities in Georgia and Kazakhstan.

Georgia

Production and Development

On the Ninotsminda development program, CanArgo announced today that Weatherford International ("Weatherford") has given notice that it is demobilising its equipment and leaving Georgia. Despite conducting operations on three wells over a seven month period, Weatherford has been unable to successfully complete any well. The lack of success is attributable to ongoing equipment failures and the loss of bottom hole assemblies down hole which has meant that in total less than 150 metres (492 feet) of horizontal section has been drilled through the reservoir. The original plan was to drill up to 650 metres (2,132 feet) horizontally per well. CanArgo is currently reviewing its contractual arrangements with Weatherford. In the meantime, CanArgo, who still believes that under balanced coiled tubing drilling (UBCTD) technology is the optimum approach to developing this reservoir, is in negotiations with several other suppliers of UBCTD equipment and expects to announce a new contract in the near future. While negotiations progress, the company plans to drill up to two horizontal wells on the Ninotsminda Field using conventional drilling techniques so as to capitalize on the current high oil price. The first planned horizontal side track, N100H2, will be from the N100 well and should commence within the next six to eight weeks. This is an area of the Field that has shown prolific oil production in the past as demonstrated by the first horizontal well, N100H1, from this well bore.

Appraisal

On the Manavi M11Z sidetrack well to the original oil discovery, 5-inch casing has been run to a depth of 4,007 metres (13,143 feet). The Saipem Ideco E-2100Az drilling rig (equipped with a top-drive drilling system and using a Baker-Hughes oil-based mud system) has successfully drilled through the over-pressured swelling clays that had proven challenging in the past. The Middle Eocene horizon (which came in high to prognosis and is the main reservoir in the Ninotsminda and Samgori Fields) shows evidence of hydrocarbons being present. It is now planned to drill ahead to a total depth of 4,500 metres (14,760 feet) to fully test and evaluate the Middle Eocene and the Cretaceous reservoir intervals using slim-hole drilling technology. As previously reported, the company is on target to test this well in August 2005.

Exploration

Following completion of the acquisition of a 100% interest in the Norio PSA, drilling has now restarted on the Norio exploration well MK72 which is drilling ahead slowly, having previously encountered oil bearing sands in the secondary Oligocene target. Significant oil and gas shows continue to be observed whilst drilling. Seismic data indicates the presence of a reflector less than 300 metres (984 feet) below the current depth of the well which may be the primary target, which is mapped as a significant prospect.

Kazakhstan

In Kazakhstan, CanArgo currently owns interests in the proven Kyzyloy Gas Field, and in large exploration areas in the western part of the country close to the Aral Sea.

Workovers are now underway on the development of the shallow Kyzyloy Field, which will be tied into the main Bukhara-Urals gas trunkline through a 60km pipeline. First gas is expected before the end of 2005 and CanArgo believes that this is one of the first dry gas developments undertaken in Kazakhstan.

CanArgo believes significant exploration potential exists within its acreage in several identified shallow structures which are analogous to and surround the Kyzyloy Field. The company has plans to drill 5 exploration wells this year with a target depth of approximately 600 metres (1,968 feet). The first of these wells has now commenced and is expected to be completed in August 2005.

CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in the Republic of Georgia and the Caspian area.

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 the Company'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 the Company'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. The Company cannot give assurance that the results will be attained.

CanArgo Energy Corporation (AMEX:CNR) (OSLO STOCK EXCHANGE:CNR)