West Hawk Development Corp.

West Hawk Development Corp.

August 22, 2007 14:49 ET

West Hawk Financing Proposal Signed for Figure Four Project

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 22, 2007) - West Hawk Development Corp. ("West Hawk") (TSX VENTURE:WHD)(FRANKFURT:H5N) (the "Company") has signed a proposal letter pursuant to which Laurus Master Fund, Ltd. and or any of its affiliates has proposed to purchase secured notes from West Hawk Energy (USA) LLC ("WHE"), a subsidiary of West Hawk Development. These funds will be used for continuing operations of the Colorado Figure Four gas project. The company is working diligently to finalize the legal documents for the first tranche of this financing by the end of this week. "The financing is imperative to the financial health of the company," said Roger A. Baer, CFO, West Hawk Development. "We are pleased with the terms of the deal and the project will now have the appropriate funds and backing required to realize future cash flow - We believe this will be a great partnership."

The first tranche is to supply funding for the completion of the first 4 Figure Four wells. As stated in the previous press release, the company has completed the drilling of the four wells and has met the drilling requirements for 2007. WHE has earned in the first four 160 acre parcels. The roads and gathering system and production equipment have been installed for these and several other projected well sites.

However, the company is continuing work to bring these wells into production. Difficulties have been encountered with water, shallow stimulation of the Frac zones and back pressure.

The first tranche of funds will be used to stimulate and complete well 4, stimulate and re-stimulate well 1 and 2 and to isolate the water in well 3. Schlumberger has been commissioned to perform all of this work.

Under the proposal, the investor will provide US$1.5 million pursuant to a bridge note in the face amount of US$1,875,000. The note bears interest at the WSJ prime plus 4%, subject to a minimum rate of 10% and matures in 12 months and one day from the date of advance. There are no monthly amortization payments on the note unless the Company fails to meet production milestones for the four completed wells, and the second tranche does not fund. In that event, the Company will pay principal and interest to the investor through a cash sweep of 80% of net monthly cash flow from the Figure Four project. The investor is also entitled to payment of a 5% overriding royalty interest in the Figure Four project.

The Company has agreed to provide to the investor 625,000 shares in its capital as a break-up fee, which shares will be returned to the Company for cancellation in the event that the investor, in its sole discretion, does proceed with the purchase of the note. In addition, the Company will grant to the investor a share purchase warrant to acquire up to 2,249,967 common shares of the Company at a price of $0.24 (Cdn) per share for two years. The Company will also issue the investor a second share purchase warrant to acquire 2,175,925 shares at $0.24 (Cdn) per share for two years. This second warrant will not be exercisable by the investor unless and until the second tranche of the financing is advanced.

Subject to the four completed wells meeting performance milestones, the investor will advance a further US$9.3 million as a term note. The term note will bear interest at WSJ prime plus 4%, subject to a minimum rate of 10% and will be due 36 months from advance. The proceeds of the note will be used to repay the bridge note, and to pay accounts payable and transaction expenses. The investor will be granted a 20% equity interest in the Figure Four project, through shares in a holding company, and a 40% equity interest in the four wells completed with the bridge note proceeds.

Both notes are secured by general security over all of the Company's present and after acquired property, and a pledge of its shares in West Hawk Energy (USA) LLC, which holds the Figure Four project.

The transactions are subject to customary closing conditions, including the approval of the TSX Venture Exchange, satisfaction of due diligence and the receipt of standstill letters from current creditors of the Company.

The investor will have a right of first refusal to participate in any future funding of the Figure Four project. In addition to and subject to funding the bridge and term notes, the investor proposes to provide additional follow-on financing in an amount to be determined, to assist the Company in funding up to 32 new wells in the Figure Four project.

The initial NI 51-101 report from Gustavson and Associates indicates that these 4 wells should have an estimated prospective resource of 6.8 Billion Cubic Feet (BCF). The actual open-hole logs from Digital Formation, after drilling, reveal a prospective resource of 14.5 BCF, which is over twice the initial estimate. Prospective resources are those quantities of oil and gas estimated on a given date to be potentially recoverable from undiscovered accumulations. If discovered, they would be technically and economically viable to recover.

"We believe that as the wells come on line the second tranche will be used for paying outstanding debts and to continue operations," said Dr. John A. Reeves, Jr., CEO of West Hawk Energy.

Following the closing of the initial tranche of the financing, a new Chairman of the Board will be appointed and a new Independent Director will be appointed to the West Hawk Development Board of Directors. Both of these people have energy backgrounds and very distinguished careers.

Dr. Wm. Mark Hart and Chris Verrico will resign their Co-Chairman positions effective immediately. Dr. Wm. Mark Hart will remain as President and CEO.

On behalf of the Board of Directors,

Dr. Wm. Mark Hart, President and Chief Executive Officer

About the Company: West Hawk Development Corp is focused on providing valuable, high-demand energy products from a variety of sources. Assets include the Figure Four natural gas property located in the Piceance Basin, Colorado, being developed under a drilling and development agreement; the Tulita coal property in the Northwest Territories; the Groundhog coal property located in northwest British Columbia; and the Ellesmere Island, Nunavut Territory coal property.

Cautionary Note: This report contains forward looking statements, particularly those regarding cash flow, capital expenditures and investment plans. Resource estimates, unless specially noted, are considered speculative. The Company has filed a National Instrument 51-101 Report on the Figure Four property. The Company has filed National Instrument 43-101 Reports for each of the Tulita coal property in the Northwest Territories, the Nunavut Coal property and the Groundhog Coal property. Any and all other resource or reserve estimates are historical in nature, and should not be relied upon. By their nature, forward looking statements involve risk and uncertainties because they relate to events and depend on factors that will or may occur in the future. Actual results may vary depending upon exploration activities, industry production, commodity demand and pricing, currency exchange rates, and, but not limited to, general economic factors. Cautionary note to U.S. investors: The U.S. Securities and Exchange Commission specifically prohibits the use of certain terms, such as "reserves" unless such figures are based upon actual production or formation tests and can be shown to be economically and legally producible under existing economic and operating conditions.

The TSX Venture Exchange has not yet reviewed and does not take responsibility for the adequacy or accuracy of the content of this news release.

Contact Information