Midnight Oil Exploration Ltd.

Midnight Oil Exploration Ltd.

October 19, 2006 08:05 ET

Midnight Oil Exploration Ltd. Announces $15.25 Million Bought Deal Financing and Operational Update

CALGARY, ALBERTA--(CCNMatthews - Oct. 19, 2006) -


Midnight Oil Exploration Ltd. ("Midnight" or the "Company") (TSX:MOX) is pleased to announce that it has entered into an agreement with a syndicate of underwriters led by Sprott Securities Inc. ("Sprott"), and including GMP Securities L.P., CIBC World Markets Inc., MGI Securities Inc., Canaccord Capital Corporation and Dundee Securities Corporation (collectively, the "Underwriters") pursuant to which the Underwriters have agreed to purchase on a "bought-deal" basis, 5,000,000 Common Shares at a price of $3.05 per Common Share for gross proceeds to Midnight of $15.25 million.

Midnight has also granted the Underwriters an over-allotment option exercisable in whole or in part for a period of 30 days following closing, to purchase up to an additional 500,000 Common Shares at the same offering price for additional gross proceeds of approximately $1.53 million

Closing is expected to occur on or about November 7, 2006 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

Net proceeds from the offering will be used to fund the Company's capital program and for general corporate purposes.

The Common Shares will be offered in certain provinces of Canada by way of a short form prospectus.

Operational Update:

Midnight has an attractive light oil component to its operations which contributed approximately 40% of production and 60% of revenues in the third quarter.

- Midnight drilled seven (3.4 net) wells in the third quarter with a 100% success rate;

- Third quarter production averaged approximately 2,100 boe/d as a result of continued production constraints related to allowable restrictions in our Red Earth light oil area.

- Despite delays experienced to date, 2006 exit production is forecasted to be 3,100 to 3,500 boe/d;

- Currently production averages approximately 2,100 boe/d with expected behind pipe volumes of 1,000 boe/d;

- Production additions in the fourth quarter will come from the completion and tie in of our successful wells in Wapiti and Red Earth along with the removal of certain allowable restrictions at Red Earth;

- During the quarter Midnight spent approximately $14 million and exited the quarter with bank debt of approximately $25 million and net debt of approximately $34 million.

Exploration Update:

Midnight has a large prospect inventory in its high potential light oil area of Red Earth and its natural gas area on the Peace River Arch.

- At Red Earth, Midnight drilled another successful oil well during the third quarter. Since acquiring Red Earth late in 2005 Midnight has successfully drilled 20 gross (12.0 net) wells in this high potential light oil area. Midnight has filed applications for good production practice and with approval and successful completion of existing wells should add an additional 500 boe/d of oil production. Midnight has identified over 50 potential drilling locations on its approximately 75,000 net undeveloped acres and plans to have one rig active in the area commencing in December pursuing this high value light oil drilling program.

- On the Peace River Arch, Midnight drilled three gross (2.2 net) successful multi-zone gas wells during the quarter that will be on-stream early in the fourth quarter and should add approximately 3.0 mmcf/d. Midnight has a multi-well prospect inventory and over 100,000 net undeveloped acres and plans to have one rig operating in the area pursuing its high potential Cretaceous sweet gas targets.

Midnight is a crude oil and natural gas exploration and production company headquartered in Calgary, Alberta, Canada. Its common shares trade on the TSX under the symbol "MOX".

The common shares offered have not and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or applicable exemption from the registration requirements. This press release will not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.


Certain information set forth in this press release, including management's assessment of the future plans and operations, anticipated closing of the financing and the use of the proceeds from the financing, may constitute forward-looking statements under applicable securities laws. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Midnight's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, economic changes, the effects of weather, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The actual results, performance or achievement of Midnight could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Midnight will derive therefrom. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could effect Midnight's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website at www.sedar.com Furthermore, Midnight disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities law.

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