August 16, 2007 09:00 ET

Arapahoe Energy Corporation Agrees to Sell Freemont Assets to Serrano Energy Ltd.

CALGARY, ALBERTA--(Marketwire - Aug. 16, 2007) - Serrano Energy Ltd., ("Serrano") a private oil and gas company located in Calgary Alberta, and Arapahoe Energy Corporation, (TSX VENTURE:AAO) ("Arapahoe") jointly announce that they have signed a purchase and sale Agreement ("Agreement") dated August 15, 2007 whereby Serrano will acquire Arapahoe's working interests in certain heavy oil and gas assets located in the Freemont area of Saskatchewan (the "Transaction").

The Transaction will provide Serrano with approximately 300 barrels of heavy oil production per day as well as additional drilling locations to Serrano.

Pursuant to the Agreement, Serrano will purchase Arapahoe's working interest for the sum of $11,190,000, which represents $37,300 per flowing barrel, paid by the issue to Arapahoe of 4,628,000 shares of Serrano at the deemed price of $2.42 per share. The effective date of the Transaction is June 1, 2007 and will closing following receipt of all requisite approvals which are anticipated to be obtained not later than September 30, 2007.

The Transaction is subject to all required regulatory, shareholder and lender approvals. Serrano's and Arapahoe's Board of Directors have approved the Transaction.

Serrano's current production, including the production to be acquired from Arapahoe pursuant to the Transaction, is approximately 500 boe/d. Serrano expects to drill up to 30 wells prior to the end of 2007. Serrano anticipates exiting 2007 with approximately 1,000 boe/d of production.

Serrano also has a 35% working interest in 2,816 contiguous hectares of oil sands lease located south of Fort McMurray, Alberta. DeGolyer and MacNaughton, independent reserves evaluator, prepared a report on these Alberta oil sand leases with an effective date of December 31, 2006. In this report DeGolyer and MacNaughton estimated that Serrano's working interest share of possible oil reserves within these leases was approximately 88,057,200 barrels of possible oil reserves and that the 10% discounted value for these possible reserves is approximately $105,000,000 (net to Serrano) using forecast pricing and before taxes.

Upon completion of the Transaction, Arapahoe will own approximately 32.4% of Serrano's issued and outstanding shares.

Serrano is a private oil and gas company focused on the development of heavy oil assets in Saskatchewan and Alberta.

Arapahoe Energy Corporation is a publicly traded junior oil and gas exploration, development and production company with operations in Western Canada. Arapahoe's shares trade on the TSX Venture Exchange under the symbol "AAO".

Significant Assumptions and Uncertainties

The preceding information presents values that are estimated for possible reserves (as defined in the Canadian Oil and Gas Evaluation Handbook) using costs and prices in C$ obtained from sources considered to be reasonable by the Corporation and the reserves evaluator, DeGolyer and MacNaughton.

The process of estimating reserves is complex requiring significant judgments and decisions based on available geological, geophysical, engineering and seismic data. Although every reasonable effort is made to ensure that reserve estimates are accurate, reserve estimation is an inferential science. As a result, the subjective decisions, new geological or production information and a changing environment may impact these estimates and the impact could be material.

Mr. Rick Bennett of Serrano, a Petroleum Geologist, is the qualified person who has reviewed the technical information contained in this news release.

All references in this release to boe's are based on a 6 to 1 conversion ratio. Boe's may be misleading, particularly if used in isolation. A boe conversion of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Forward-looking statements: This document contains statements about expected or anticipated future events and financial results that are forward-looking in nature and as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events, and the company's capability to execute and implement its future plans. Actual results may differ materially from those projected by management. For such statements, we claim the safe harbour for forward-looking statements within the meaning of the Private Securities Legislation Reform Act of 1995.

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

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