Candax Energy Inc.

Candax Energy Inc.

October 28, 2005 10:21 ET

Candax Energy Inc.: Mitsubishi Corporation Farms-in on Chaal Permit in Tunisia and Signs Middle East Upstream Joint Project Team Agreement

TORONTO, ONTARIO--(CCNMatthews - Oct. 28, 2005) - Candax Energy Inc. (TSX:CAX) -

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

Candax Energy Inc. (TSX:CAX) is pleased to announce that it has signed an agreement with Mitsubishi Corporation for the farm-out of a 20% working interest in the Chaal Permit located onshore Tunisia. Candax retains a 60% working interest in the Chaal Permit and is the Licence operator. As previously announced, a drilling rig has been contracted and is scheduled to commence drilling on Chaal in December 2005, targeting the highly prospective gas and condensate structure originally discovered and tested in the early 1960s.

The terms of the farm-out are that Mitsubishi Corporation will pay 100% of Candax's net costs for the Chaal-1 well, up to a maximum of $8 million, in return for earning a 20% interest in the Chaal Permit. Mitsubishi Corporation has an option to acquire a further 5% interest from Candax in the Chaal Permit prior to the drilling of a second well on Chaal on certain conditions. In addition, Mitsubishi Corporation has agreed to pay Candax certain other cash bonuses dependent upon receiving government consent to undertake the development of the Chaal project and achieving certain other gas sales-based thresholds.

Candax has mapped a very large prospect on Chaal which could extend over an area of 300 square kilometers. Two wells were drilled on the acreage over 40 years ago and a hydrocarbon column of approximately 150 meters was encountered in the Lower Nara, Jurassic formation. Several zones were successfully tested in the column, at rates of up to 3 MMcf/d of gas and condensate rates ranging from 25-80 barrels per MMcf. The transaction is anticipated to close subject to certain conditions including the receipt of government consents, which will be set out in a fully termed farm-in agreement scheduled to be executed by November 30th, 2005.

In a separate agreement between Candax and Mitsubishi Corporation, both companies have agreed to form a joint project team to undertake the evaluation of a major gas development project elsewhere in the Middle East. The agreement is for a 50:50 partnership that draws on the respective technical and commercial skill sets of both companies to evaluate and undertake full subsurface analysis and project development planning.

Michael Wood, President & CEO said: "We are very pleased to welcome Mitsubishi Corporation as a partner, whose technical team, like Candax, is very enthusiastic about the upside gas potential from the Chaal prospect. Mitsubishi Corporation is one of Japan's major business enterprises with very significant and wide ranging international energy interests, and in particular ranks amongst the world's major suppliers of liquefied natural gas (LNG). Together with Mitsubishi Corporation, we believe that this agreement on Chaal can add substantially to the value of both companies."

Upon completion of the first well in the Chaal Permit (Chaal-1), Candax will hold a 60% working interest in the Chaal Permit with Mitsubishi Corporation holding 20% and the remaining 20% held by SMIP, a Tunisian company.

Mitsubishi Corporation is Japan's largest general trading company, with over 200 bases of operations in approximately 80 countries worldwide. Mitsubishi Corporation, together with its over 500 group companies, employs a multinational workforce of approximately 48,000 people. Mitsubishi Corporation's most recent financial results reported total assets of over US$85 billion, of which over 13% are investments in their various energy businesses.

Candax Energy Inc. is an international energy company with its head office in Toronto, Ontario, Canada and management offices in London, Dubai and Tunis. The Company holds a number of concessions in Tunisia through its subsidiary companies and is involved in the exploration and production of oil, gas and power generation in the country. Candax was formed through the combination of a highly experienced executive management team with successful Canadian founders and financiers, to develop an international upstream oil and gas project portfolio. Candax is initially focusing its growth activities on production and development projects in the Middle East and North Africa, where the group has strong relationships as well as extensive management experience.

Certain statements in this News Release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements.

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