Mr. Grant Hall reports

CANADA ENERGY PARTNERS ANNOUNCES SIGNING OF PARTICIPATION AGREEMENT WITH WANDOO ENERGY LLC FOR THE DEVELOPMENT OF THE KUESTER-OCHOA PROJECT AND CONCURRENT UNIT FINANCING OF $2M

Canada Energy Partners Inc. has determined that a lower capital cost acquisition opportunity will satisfy the current capital market appetite in the junior energy markets. Accordingly, the corporation has entered into a participation agreement with Wandoo Energy LLC, a Texas-based oil and gas company. The corporation's capital obligations under the participation agreement are approximately $1-million to acquire a 63-per-cent working interest. The capital contribution will be applied to complete a workover program to produce natural gas and condensate initially from an existing Lower Wilcox zone in the Kuester Ochoa No. 1 well. The well is in the Kuester Ochoa gas unit (approximately 555 acres) located in Lavaca county, Texas, and is part of the prolific Wilcox proven production area. The Texas Gulf coast area contains a vast network of substantial pipelines, gas gathering systems and experienced work force.

The Kuester Ochoa No. 1 well previously produced 2.89 bcf (billion cubic feet) of natural gas and 53,000 barrels of condensate from a deeper 19-foot pay zone (Lower Wilcox 4). The workover will isolate the current producing zone, and perforate and stimulate (frac) approximately 101 feet of net pay identified at 11,408 feet to 11,569 feet (Lower Wilcox 0, 1 and 2).

The corporation's capital contributions will be expended as follows:

• Canada Energy's Costs:
  • Borehole fee -- $225,000 (U.S.);
  • Workover cost -- $670,400 (U.S.);
  • Facility refurbishes -- $100,000 (U.S.);
  • Total cost -- $995,400 (U.S.).

The initial production rates for the targeted zone (Lower Wilcox 0, 1 and 2) are in the order of five to seven MMsfc/day (millions of standard cubic feet per day) and 50 to 70 BC/day. These production rates would translate into monthly cash flow for Canada Energy of approximately $175,000 (U.S.) per month, and a payback of the approximately $1-million (U.S.) in invested capital of seven to nine months using conventional production forecast.

Canada Energy's corporate growth plan calls for the acquisition of several more of these low-cost, low-risk development transactions in the southern United States region.

A portfolio of these workovers and development projects will provide the strong cash flow base from which the corporation can begin its next stage of growth for the benefit of all its shareholders.

Private placement -- $2-million

Canada Energy also announces a non-brokered private placement of units to secure up to $2-million. Each unit will consist of one common share at an issuance price of five cents and one-half warrant, with a full warrant entitling the holder to acquire an additional common share at an exercise price of 15 cents per share for a period of 24 months. Canada Energy may complete a closing under the unit financing at any time prior to the closing under the participation agreement. The net proceeds under the unit financing will be used to finance the corporation's obligations under the participation agreement and for general working capital purposes. Subject to applicable securities laws, eligible arm's-length parties will be paid customary finder's fees in connection with the private placement representing an 8 per cent cash commission and 8 per cent finder's units. Insiders will be eligible to participate in the private placement. In light of the unit financing, the previously announced private placement of convertible debentrues has been cancelled.

Completion of the participation agreement with Wandoo Energy LLC as well as the private placement of units are subject to approval of the TSX Venture Exchange.

We seek Safe Harbor.