28 June 2006
CanArgo to Spin Off Kazakhstan Assets
June 28, 2006 – Guernsey, Channel Islands – CanArgo Energy Corporation (AMEX:CNR; OSE:CNR) ("CanArgo") today announced its 100% owned subsidiary, Tethys Petroleum Investments Limited ("Tethys"), is planning to seek admission to the AIM market of the London Stock Exchange and raise funds for its development and exploration activities in Kazakhstan ("Tethys Spin Out"). Tethys, through its subsidiaries, currently holds all of CanArgo's assets in Kazakhstan.
It is currently planned that CanArgo will retain a significant, but not controlling, equity interest in Tethys after the admission of Tethys to the AIM market. The intention is that this funding will enable the Kazakh assets to be financed whilst minimising dilution for CanArgo's shareholders and potentially raising additional funds for CanArgo's operations. Tethys has engaged ODL Securities Limited ("ODL") to act as principal broker for this transaction, which is currently planned for the autumn of this year, subject to prevailing market conditions. The ODL Corporate Finance department specialises in the resource and mining sectors. Its principal activities are raising funds in the initial stages of financing through private placements and the IPO market.
Funds raised are intended to be used to advance the development of the Kyzyloi Gas Field and further exploration and development plans for the Akkulka and Greater Akkulka areas, including further shallow gas exploration, tie-in of new discoveries and exploration for potential oil and gas condensate deposits in the deeper Jurassic and Triassic prospects identified on recent seismic re-interpretation as well as potential new acquisitions in Kazakhstan and related areas.
CanArgo's current Senior Subordinated Convertible Guaranteed Note holders currently have an option to convert their Notes into Tethys shares and in anticipation of the AIM Admission have agreed that they will convert any outstanding portion of their $13 million debt in CanArgo into ordinary shares in the capital of Tethys immediately prior to a Tethys Spin Out subject to certain terms and conditions, including the issue of 13 million warrants to purchase CanArgo common stock at a price of $1.00 per share. In a separate transaction, the New York based investment firm, Persistency Capital, acting for the Cayman based investment fund, Persistency, who have recently closed a $10 million Third Lien Convertible Guaranteed Note in CanArgo, have arranged the acquisition of $5 million of the Senior Subordinated Note including its conversion obligations into Tethys.
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