Milagro Energy Inc.
TSX : MIG

Milagro Energy Inc.

January 30, 2008 13:47 ET

Milagro Energy Inc. Provides Financial Update

CALGARY, ALBERTA--(Marketwire - Jan. 30, 2008) - Milagro Energy Inc. ("Milagro" or the "Company") (TSX:MIG) provides an update on its current financial condition and its continuing efforts to secure financing to fund operations, service debt and refinance some or all of the indebtedness described below.

As Milagro has disclosed previously, its bridge credit facility with Brookfield Bridge Lending Fund Inc. ("Brookfield Lending") matured on December 31, 2007, and Milagro did not have the funds available to pay the principal when due. As a result of the default in Milagro's obligations under the bridge credit facility, Milagro is now in default under its outstanding $7,500,000 convertible debentures, which debentures are held by Brookfield Lending. Due to the defaults under the bridge credit facility and the convertible debentures, Milagro is now required to pay higher default interest rates under the bridge credit facility and convertible debentures, and is required to pay interest on the convertible debentures monthly rather than semi-annually. This results in a significant increase in the interest payable by the Company on a monthly basis. Amounts paid by the Company in respect of the increased interest will reduce the amount of cash Milagro has available to fund operations.

Brookfield may now, pursuant to the terms of the bridge credit facility, seek to enforce its security over the Company's assets. To Milagro's knowledge, Brookfield Lending has not taken any specific steps to enforce its security under the bridge credit facility or convertible debentures since Milagro went into default on December 31, 2007. Brookfield Lending has also not yet provided notice to the Company that it is accelerating the requirement to pay the principal amount of the convertible debentures.

As Milagro has disclosed previously, the Toronto Stock Exchange ("TSX") is reviewing the Company's eligibility for continued listing under the TSX's Remedial Review Process, and the Company has been granted until February 4, 2008 to demonstrate compliance with the TSX's requirements. To date, the Company has not regained compliance with the requirements of the TSX as to: (i) the financial condition and/or operating results of the Company, and (ii) the public distribution, price or trading activity of the Company's common shares, and it is unlikely that the Company will be able to demonstrate compliance to the TSX prior to February 4, 2008. The Company is requesting a further 45-day period to meet the TSX's requirements. However, there is no certainty that the TSX will grant any extension, and the TSX may determine that the Company's shares should be delisted.

Management of the Company is continuing its efforts to raise capital and pursue other transactions that would provide the Company with cash to repay the bridge credit facility remedy its defaults under the convertible debentures and fund future operations. To date, the Company has not yet settled definitive terms with respect to such a transaction and there is no certainty that the Company will be in a position to enter into any definitive agreements or complete such a transaction. If the Company is not able to conclude an agreement with respect to such a transaction, it is unlikely that the Company will be able to continue as a going concern or maintain its listing on the TSX.

Milagro will provide further information as material events develop.

ABOUT MILAGRO

Milagro is an exploration and production company engaged in the acquisition, exploration, development and production of oil and natural gas reserves in western Canada.

READER ADVISORY

Statements in this press release may contain forward-looking information including expectations of funds to be raised in a financing, refinancing of the Company's existing credit facilities, the status of the Company's listing on the TSX and future capital expenditures and cash flow. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the company. These risks include, but are not limited to, the risks associated with the oil and gas industry, commodity prices, general economic conditions, conditions in the capital markets in Canada and elsewhere and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated with the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information. See "Risk Factors" in the Company's annual information form for the year ended December 31, 2006 for a further discussion of risks faced by the Company.

Contact Information

  • Milagro Energy Inc.
    Jeffrey Rekunyk
    CEO
    (403) 693-4006
    or
    Milagro Energy Inc.
    Travis Doupe
    CFO
    (403) 693-4007
    Website: www.milagroenergy.com