Arsenal Energy Inc.

Arsenal Energy Inc.

October 11, 2006 14:52 ET

Arsenal Announces Private Placement of Flow-Through Shares

CALGARY, ALBERTA--(CCNMatthews - Oct. 11, 2006) -

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 intends to complete a non-brokered private placement of up to 5,454,545 million common shares issued on a "flow-through share" basis, ("Flow-Through Share") at a subscription price of $1.10 per Flow-Through Share, for total gross proceeds of up to (Cdn) $6,000,000 (the "Offering"). The closing of the Offering is expected to occur on or about October 18, 2006 and is subject to the completion of formal documentation and receipt of regulatory approval, including the conditional approval of the TSX Exchange.

The proceeds from the Flow-Through Shares will, where appropriate, be used to incur certain types of Canadian Exploration Expense ("CEE") and/or deemed CEE as defined in the Income Tax Act (Canada) and renounce, for the 2006 taxation year, such CEE in favour of original holders of the Flow Through Shares in an amount equal to the subscription price for each Flow Through Share.

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