Infinity Engages Advisor to Explore Options for Nicaragua Concessions

C.K. Cooper will advise the company in exploring various partnering arrangements and other ownership structures for its interests in the concessions. Infinity does not intend to disclose developments with respect to the exploration of strategic alternatives, unless and until its board of directors makes a decision.

Background
Since 1999, Infinity has pursued this oil and gas exploration opportunity in Nicaragua. The company believes that the relationships built during this period with the Instituto Nicaraguense de Energia (INE) and the geological and geophysical research that had been completed allowed Infinity to become one of only six companies qualified to bid on offshore blocks in the first international bidding round held by INE in January 2003.

In May 2003, Infinity was awarded two concessions (Tyra and Perlas) and entered into the negotiation process with INE to finalize the initial exploration and production contracts. In May 2006, the company announced that it had executed the final exploration and production contracts.

Highlights of the fiscal terms of the production contract include: (i) an initial government royalty of 5%, increasing to a maximum of 15%, assuming large-scale production; (ii) graduated income tax rates with a maximum rate of 30%; and (iii) an initial working interest of 100% for Infinity.

The contracts provide for an exploration period of up to 6 years and a production period of up to 30 additional years (with a potential 5-year extension), assuming successful exploration. The initial capital costs during the first 12months are expected to total less than $1 million (already included in Infinity's previously disclosed 2006 capital budget), with a total of less than $2 million during the second 12 months, to cover costs of environmental studies, geological and geophysical analysis, acquisition of seismic data, and other operational expenses.

Exploration offshore Nicaragua would focus on Cretaceous carbonate and Eocene reservoirs. Infinity's management and consultants believe that: (i) numerous analogies can be made between the Infinity concession blocks and multi-billion barrel fields in Mexico and Venezuela and large fields in Guatemala targeting fractured Cretaceous carbonates and (ii) the presence of Cretaceous source rocks onshore Honduras and Nicaragua can be projected into the offshore Caribbean Shelf.

Infinity's management and consultants believe that there are five distinct, large structures that underlie its acreage, each of which could potentially hold substantial oil and gas reservoirs. Prior to the Nicaraguan revolution of 1978, oil and gas exploration and production existed and involved large, well-known operators such as Shell, Texaco, Unocal, Mobil, and Occidental.

Nicaragua
The country of Nicaragua has continued to evolve, politically and economically, in recent years and has attracted multi-national firms to conduct business, such as: Cargill, Chevron, Coca-Cola, El Paso, ExxonMobil, Kraft Foods (Nabisco), Pepsi-Cola, and Royal Dutch Shell. In addition, well-known chains and franchisors are now conducting business in Nicaragua, including: Avis, Best Western, Budget, Burger King, Century 21, Coldwell Banker, Domino's Pizza, Hertz, Hilton, Holiday Inn, McDonald's, Napa Auto Parts, Payless Shoe Source, Pizza Hut, REMAX, Subway, and TGI Friday's.

Nicaragua has experienced a series of successful, democratic elections and smooth transitions of political power, where applicable. Due to this political stability, and a dedication to building a stronger economy by representatives from across the political spectrum, Nicaragua has been able to attract these large, multi-national firms in recent years as well as an increasing share of the tourism and retirement living industries.

“We are pleased to announce the engagement of C.K. Cooper to assist us in pursuing strategic alternatives with respect to our very exciting and potentially significant prospect in Nicaragua,” said Stanton E. Ross, Infinity’s chairman and lead officer for the strategic alternatives process. “The record high crude oil prices and our belief that the market price for Infinity's common stock reflects little to no value for our Nicaraguan prospect, have made the timing optimal, in our view, to explore strategic alternatives for the prospect.”

Infinity Energy Resources, Inc., through its wholly-owned subsidiaries Infinity Oil and Gas of Texas, Inc. and Infinity Oil & Gas of Wyoming, Inc., is an independent energy company engaged in the exploration, development, and production of natural gas and oil and the operation and acquisition of natural gas and oil properties. The operations of Infinity Oil and Gas of Texas are focused on its drilling program in the Fort Worth Basin of Texas. The operations of Infinity Oil & Gas of Wyoming are focused on the Wamsutter Arch Pipeline Field in southwest Wyoming and the Sand Wash Basin in northwest Colorado. The company provides oilfield services through its wholly owned subsidiary, Consolidated Oil Well Services, Inc., with operations principally focused in the Mid-Continent region and the Powder River and Big Horn Basins in northern Wyoming. The company also has a 1.4-million acre oil and gas concession offshore Nicaragua in the Caribbean Sea.