SOURCE: Canary Resources Inc.

February 12, 2007 11:47 ET

Canary Resources: Update

HOUSTON, TX -- (MARKET WIRE) -- February 12, 2007 -- Canary Resources Inc. (PINKSHEETS: CYRR) ("Canary") has obtained a bridge loan in the amount of $1,000,000 bearing interest at the rate of 10% per annum secured by a promissory note that matures at the end of 2007. The lender has the option but not the obligation to advance an additional $1,000,000 on the same terms. Canary intends to pursue financing in an amount exceeding $5,000,000 and, if such financing occurs, the lender may demand immediate repayment. The promissory note is secured by the assets of Canary.

The purpose of the loan is to provide funding for completion of Canary's wholly owned pipeline tap on the Southern Star Central Gas Pipeline (see press release of May 10th, 2006: "Canary Resources Secures Natural Gas Pipeline Access For CBM") and for development of Canary's coal-bed methane gas properties in the Eastern Forest City Basin of Kansas and Missouri.

Canary Resources Inc. and its subsidiaries have entered into a Settlement Agreement with Osborn Energy, LLC; Osborn Properties, LLC; and James L. Osborn, Jr., (collectively "Osborn") whereby Canary and Osborn release each other from all litigation. In consideration, Osborn has assigned to Canary a 100% working interest in 11 wells and the leases on which they are located, and Canary has withdrawn all Lis Pendens Notices it had filed on Osborn's properties. One of the 11 wells assigned to Canary is connected to the Riverdale pipeline (formerly Akawa Natural Gas, LLC) and is producing gas. As operator of the pipeline, Osborn will use its best efforts to provide Canary with pipeline access to Riverdale, and will allow Canary free water disposal from two wells. As result of the Settlement Agreement, the farm-out agreement entered into between Canary and Osborn in December 2004 is effectively dissolved.

Since late 2005, Canary's focus has been directed towards its own leases, in which Canary typically has a net revenue interest of 87.5%, and away from Osborn farm-out leases, in which Canary had a net revenue interest of 65.6%. Canary currently has sufficient wholly owned lease acreage for over 1,000 well locations. Operations of Canary will continue to center on its own lease acreage in the vicinity of its 100%-owned pipeline tap on the Southern Star Central Gas Pipeline. Construction of the pipeline tap is presently nearing completion.

Canary Resources Inc. is an independent Oil and Natural Gas Company engaged in the acquisition, exploitation, production and development of oil and natural gas properties in Johnson and Miami Counties, Kansas, and in Bates and Cass Counties, Missouri, for which it is the operator. Canary has offices in Houston, Texas, and Stilwell, Kansas.

Portions of this document include "forward-looking statements," which may be understood as any statement other than a statement of historical fact. Forward-looking statements contained in this document are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. We have tried, whenever possible, to identify these forward-looking statements using words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential" and similar expressions. Actual results may vary materially from management's expectations and projections expressed in this document. Certain factors that can affect the Company's ability to achieve projected results include, among others, production variances from expectations, uncertainties about estimates of reserves, volatility of oil and gas prices, the need to develop and replace reserves, the substantial capital expenditures required to fund operations, environmental risks, drilling and operating risks, risks related to exploratory and development drilling, competition, government regulation and the ability of the Company to implement its business strategy.

Copyright ©2007. All rights reserved Canary Resources Inc.

Contact Information