Capco Energy Expands Gulf of Mexico Acreage

Capco Energy has acquired certain OCS producing properties from Tana Exploration LLC at a contracted purchase price of $83 million. Funding for the acquisition was provided by Union Bank of California, third party industry partners, Hoactzin Partners, L.P., production revenue credits and cash provided by the Company's major shareholders. Capco currently retains a 75% interest in the acquired interests; however, such interest may reduce to 25% after giving effect to certain obligations including the Company's election to convert Hoactzin's participation to a working interest in the properties.

As a part of the acquisition, the Company terminated its funding agreement with Domain Development Partners I, LP ("Domain") by a cash payment of $1.3 million. Domain had, over the last one year, provided the capital to develop the Brazos Field.

A reserve report for the Tana properties prepared by an independent engineering firm reported discounted values as of April 1, 2006 for Proved Reserves and Probable Reserves of $98 million and $72 million, respectively.

Commenting on the acquisition, Ilyas Chaudhary, Capco's CEO, said, "This acquisition is a major milestone for Capco; allowing the Company to establish a firm presence in the Gulf Coast region as well as setting up its infrastructure necessary for production, exploitation, and exploration of its properties."

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