CanArgo Energy Corporation Reports Second Quarter Results.

CALGARY, Alberta and OSLO, Norway--(BUSINESS WIRE)--Aug. 14, 1998--CanArgo Energy Corporation (CDN: CNAR) (NASDAQ: GUSH; OSLO: CNR) today reported a net loss of $1,191,000, or $.11 per share, during the three month period ended June 30, 1998 compared to a net loss of $1,464,000, or $.13 per share, for the three month period ended June 30, 1997.

The Company's net loss for the six months ended June 30, 1998 was $4,009,000, or $.36 per share, compared to a net loss of $3,425,000, or $.31 per share, for the six month period ended June 30, 1997.

These results do not include the results of CanArgo Energy Inc. As previously announced, on July 15, 1998 a business combination was completed between Fountain Oil Incorporated and CanArgo Energy Inc. ("CEI"), pursuant to which CEI became a subsidiary of the Company and each previously outstanding CEI Common Stock was converted into the right to receive 0.8 shares (1.6 shares pre reverse split) of the Company's Common Stock, giving theformer shareholders of CEI the right to receive approximately 47 percent of the Company's Common Stock. In addition, the former management of CEI hold a majority of the Company's senior management positions. On July 15, 1998 the Company filed with the Delaware Secretary of State amendments to its Certificate of Incorporation to effect a one-for-two reverse split of the shares of the Company's Common Stock and to change the Company's name from Fountain Oil Incorporated to CanArgo Energy Corporation. The reverse split has been retroactively recorded in the accompanying financial statements.

The business combination will result in the issuance of 9,970,918 shares of the Company's Common Stock After issuance, the number of shares of the Company's Common Stock outstanding will be 21,194,662. The results of CEI will be included in the Company's third quarter results from the date of acquisition.

The operating loss for the three month period ended June 30, 1998 amounted to $1,203,000, compared with $1,728,000 for the three month period ended June 30, 1997. The improvement relates primarily to the restructuring of the Company's operations and in particular the scaling back of project activities. The loss for the three months ended June 30, 1998 also does not yet reflect the full benefit of an undertaking by management to reduce overhead costs of the combined Company including the closure of the Asker, Norway office and consolidation of staff. The positive impact of these changes will begin to be reflected in the third quarter of 1998.

Project costs increased to $245,000 from $222,000 for the three month period ended June 30, 1997, reflecting activity related to the Stynawske Field in Ukraine and winding down activities related to other oil and gas ventures. The loss from unconsolidated investments decreased to $44,000 during the three month period ended June 30, 1998, as compared to $716,000 for the three month period ended June 30, 1997, as a result of a lower level of activity and the previous write down of three of the Company's investments. During the three month period ended June 30, 1998, the Company wrote down its oil and gas properties in the Sylvan Lake project in Alberta, Canada by an additional $100,000 ($900,000 for the six month period ended June 30, 1998) as a result of a decline of heavy oil prices and the application of the quarterly full cost ceiling test. There was no comparable write down for the same periods in 1997.

Dr. David Robson, Chairman and Chief Executive Officer of the Company, said, "I am pleased with the speed in which Fountain Oil Incorporated and CanArgo Energy Inc. are being integrated. Much of the restructuring is done although a few costs remain to be incurred. With the combination, CanArgo Energy Corporation is now in a strong strategic position to establish itself as a significant player in the energy sector of Eastern Europe and Central Asia." Robson also noted that "the Company is encouraged at the progress of activities in Georgia with the development of a regional oil market, a reduction in certain transportation charges and the commencement of drilling well N98 on August 12, 1998."

CanArgo Energy Corporation is a Calgary based independent energy corporation engaged in the exploitation of oil and gas and other energy opportunities in Eastern Europe and Central Asia.

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 need for additional approvals and the effect of actions of third parties, including co-ventures, contractors and governmental officials, on the timing and occurrence of anticipated events. For