Canada Energy Enters Farm-In Agreement to Drill Moosebar Shale Well

Canada Energy has entered into a farm-in agreement with its joint venture partner for Moosebar Shale shallow rights on its Peace River CBM Project. This agreement covers the Moosebar Shale formation on Canada Energy's 50,000 acre (approximately 78 sections) Peace River CBM Project. Under the Agreement Canada Energy will become the Operator of the Moosebar Shale rights.

In addition to its current 50% working interest, Canada Energy has the right to earn an additional 25% to 37.5% working interest in the Moosebar Shale formation by funding 100% of the drilling costs of the earn-in wells. Subject to certain drilling obligations and elections by the JV Partner, Canada Energy will have the right or option to earn an aggregate 75% to 87.5% interest in the Moosebar Shale under the subject acreage. Canada Energy will earn one (1) section for each Moosebar Shale vertical well drilled and two (2) sections for each Moosebar Shale horizontal well drilled. The Company has a 180 day rolling option to drill earning wells until all acreage is earned.

Canada Energy has received a permit for its first Moosebar Shale horizontal well and expects it to be drilled and completed before year-end 2008. The location of the first well has been chosen where an unstimulated natural gas flow occurred from the Moosebar Shale formation while drilling a deeper CBM well.


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