Cap Energy Ltd

December 23, 2008 09:51 ET

Update Announcement


                                          CAP ENERGY LIMITED
                                          UPDATE ANNOUNCEMENT
   On  1st  October  2008, CAP Energy Ltd ("CAP") announced that its wholly-owned US subsidiary,  CAP
   Energy  USA,  Inc.  ("CAPUSA") had agreed to acquire an interest in the Starks  Dome  oilfield  in
   southern  Louisiana from CSV Holdings, Inc. ("CSV"), subject to contract and final due  diligence.
   The  assets being acquired comprise a 25% working interest in seven producing oil wells and  three
   new  wells shortly to be completed for production, plus the right to participate at base  cost  in
   any new wells to be drilled on CSV's lease.
   Prior  to  contract completion, CAPUSA has completed its programme of due diligence, and with  CSV
   has been involved in negotiation of final terms and preparation of contract documents.
   CAPUSA  has also used this time to reassess the valuations used in the initial heads of  agreement
   in  view  of the recent decrease in the price of oil.  Consequently, while it has been  agreed  to
   keep  to  the  agreed purchase price (US$1 million), two further assets are being included  at  no
   further  cost  to CAPUSA, giving access to substantial further reserves at Starks  Dome  plus  the
   possibility  of  achieving  high  volume oil and gas production in  another  area  already  proven
   productive. These additional assets are as follows:
   1.  The right to participate in the recompletion of up to forty existing wells in the Starks Dome
       Field which are not included in the original agreement but which contain unproduced oil reserves in
       the upper zones of the wells.  CAPUSA will contribute its agreed share of the completion costs and
       existing equipment in exchange for a 25% working interest in the wells.  The wells will be very low
       cost compared with new wells and can deliver very good returns even at current oil prices.  Completely
       new wells will be drilled only when economics justify the expense.
   2.  The right to participate in the recompletion of a productive well drilled on the Iberia
       Dome structure in southern Louisiana.  Wells in this area have been extremely productive, and this
       well tested oil and gas in commercial quantities before it was capped and temporarily abandoned and
       then acquired by CSV.  CSV now plans to test an untested zone above the previous tested zones. If
       commercial production is established from this well as anticipated, further field development is
       planned.  CAPUSA will earn a 10% share of CSV's interest, with much of the cost success- based.
       While  this project has a higher risk profile than the Starks Dome project, there  is  a  real
       possibility  of  achieving rates of production many times higher of both  oil  and  gas.   The
       Iberia  Dome  Field  has  already  produced large quantities  of  oil  and  gas,  so  pipeline
       facilities are already in place.
   Initially  CAP had planned a share placing to finance the final stage of the acquisition  and  the
   short  term field development costs.  As a result of the recent events on world money markets,  it
   is now planned to offer two alternatives, for completion in January, 2009:
   1.       Loan stock carrying a competitive coupon, convertible at a price reflecting the long term
            average for CAP stock.
   2.       Conventional Placing at a heavily discounted share price to the above.
   The Directors of the Issuer accept responsibility for this announcement.

For further information:

Cap Energy Limited
John Killer
Tel: 07979 903673

St Helen's Capital Plc
Duncan Vasey
Tel: 020 7628 5582


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