SOURCE: Sky Petroleum, Inc.

August 12, 2005 02:00 ET

Sky Petroleum Announces Completion of $8.0 Million Private Placement

$8.0 Million Private Placement Oversubscribed

AUSTIN, TX -- (MARKET WIRE) -- August 12, 2005 -- Sky Petroleum, Inc. (OTC BB: SKPI), an oil and gas exploration and development company, announced today that it has completed an $8.0 million private placement of shares after receiving qualified subscriptions for over 10,000,000 shares of the company at $0.80 per share. The securities offered by Sky Petroleum have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933.

Preliminary results indicate that the company received subscriptions in excess of the 10,000,000 shares available to be issued pursuant to the private placement. Details of the shares available for the over-subscription will be forthcoming.

"We are very pleased and encouraged to see the amount of investor confidence in Sky Petroleum and the Mubarek development project," said Don Cameron, chief executive officer at Sky Petroleum, Inc. "As a result of this private placement, Sky Petroleum will have access to the resources required to continue to advance the project."

On July 21, 2005 the company announced it had received bridge loans in the aggregate amount of $2.45 million to fund a portion of the financial commitments of Sky Petroleum's wholly owned subsidiary, Sastaro Limited ("Sastaro") pursuant to the Participation Agreement, dated May 18, 2005, between Sastaro and Buttes Gas and Oil Co. International Inc. ("BGOI"), a wholly owned subsidiary of Crescent Petroleum Company International Limited ("Crescent"), through which Sastaro will participate in an off-shore oil and gas project in the United Arab Emirates. In connection with this financing, the Company issued demand promissory notes bearing interest at eight percent (8%) per annum. The bridge loans will be converted to shares as part of the completed $8.0 million private placement.

The alliance with BGOI and Crescent unites Sky Petroleum with one of the United Arab Emirates most established and successful, integrated low-cost operators with over 30 years of extensive experience in the region. As established operators in the Mubarek oil and gas field for over three decades, BGOI and Crescent bring extensive knowledge of the geological formations and reservoir potential of the Mubarek Field.

Mubarek Development Project

The first commercial oil was produced in the mid 1970's in the Mubarek Field, marking the beginning of over three decades of continuous production. The total estimated cumulative recovery to date exceeds 100 million barrels of oil. Sky Petroleum believes that this represents approximately 30% of the estimated original oil in place (STOIIP) of 275 million barrels and that there are significant additional reserves that may be produced by the new infill well program. The Mubarek Field production facilities have the capacity to process 60,000 barrels of oil per day.

The company expects the first phase of a proposed two-phase infill drilling program into the Ilam/Mishrif reservoir situated within the Mubarek Field to commence in early 2006.

About Sky Petroleum

Sky Petroleum (OTC BB: SKPI) is an oil and gas exploration and development company. Sky Petroleum's primary focus is to seek opportunities where discoveries can be appraised rapidly, and developments can be advanced either by accessing existing infrastructure, or by applying the extensive experience of established joint-venture partners. In addition, the company also plans some higher risk, higher reward exploration prospects. For additional information please visit

Safe Harbor

Except for historical information, the matters set forth herein, which are forward-looking statements, involve certain risks and uncertainties that could cause actual results to differ. Potential risks and uncertainties include, but are not limited to, Sky Petroleum's ability to satisfy its obligations under the short-term bridge loans, raise additional capital to fund its commitments under the Participation Agreement, the success of the proposed infill drilling programs, Sky Petroleum's ability to access opportunities, the contemplated continued production at the Mubarek field, the competitive environment within the oil and gas industry, the extent and cost effectiveness with which Sky Petroleum is able to implement exploration and development programs in the oil and gas industry, obtaining drilling equipment on a timely fashion, commodity price risk, and the market acceptance and successful technical and economic implementation of Sky Petroleum's intended plan.

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