Arsenal Energy Inc.

Arsenal Energy Inc.

October 04, 2005 08:00 ET

Arsenal Announces CDN $10 Million Private Placement

CALGARY, ALBERTA--(CCNMatthews - Oct. 4, 2005) -

Not for distribution to the United States newswire services or for dissemination in the United States.

Arsenal Energy Inc. (TSX:AEI) (FWB:A1E) ("Arsenal") is pleased to announce that it has entered into an agreement to issue, on a private placement basis, 5,714,286 units ("Units") of the Corporation at a subscription price of $1.75 per Unit, for gross proceeds of approximately $10,000,000. Each Unit consists of one (1) common share ("Common Share") in the share capital of the Corporation and one-half of one (0.5) common share purchase warrant ("Warrant"). Every one (1) Warrant is exercisable into one (1) additional Common Share of the Corporation at an exercise price of $2.50 per share on or before eighteen (18) months after the initial date of issuance. The Warrants shall contain a provision that should the Common Shares of Arsenal trade on the TSX Exchange or other recognized exchange at a price of $3.00 or higher for 20 trading days, the holder of such Warrants will have 10 business days in which to exercise such Warrants, and any Warrants not so exercised within such time shall be cancelled and void.

The net proceeds from the sale of the private placement will be used to fund the acceleration of Arsenal's exploration and development drilling, repayment of bank debt and for general corporate purposes.

The Units will be issued through a syndicate of underwriters led by and Wellington West Capital Inc. and Research Capital Corporation including PowerOne Capital Markets Limited. Closing of this financing is expected to occur on or before October 31, 2005 and is subject to normal regulatory approvals.

Arsenal Energy Inc. is an aggressive international junior oil and gas company engaged in the exploration for, and development and production of natural gas and oil reserves primarily in the provinces of Alberta and Saskatchewan, North Dakota, U.S.A. and Egypt. Arsenal's common shares trade on the TSX Exchange under the symbol "AEI" and on the Frankfurt Stock Exchange under the symbol "A1E".

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities in any jurisdiction. The Units and underlying securities will not be and have not been registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements.

The TSX Exchange does not accept responsibility for the adequacy or accuracy of this release.

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