Greka To Restructure and Sell E&P Assets

Greka Energy Corporation announced that it is restructuring its business to focus on the Company's integration of its Central California operations, which assets include an asphalt refinery and interests in heavy oil fields. The Company's proactive and aggressive restructuring plan is designed to provide increased profitability and cash flow stability to be implemented over the next ninety days through an acquisition, divestitures, debt restructure, and reduced G&A.

As part of Greka's unique business strategy in its integrated assets to cost-efficiently boost production rates that enhance the long-term feedstock supply to the refinery, the Company has closed into escrow its acquisition of Vintage Petroleum's oil and gas producing properties and facilities in the Santa Maria Valley of Central California. Subject to customary terms and conditions, a final closing out of escrow is scheduled to occur by May 31, 2002. During this escrow period, Vintage will continue to operate the properties while the crude will be delivered to Greka's asphalt refinery, ramping up from approximately 800 barrels per day to approximately 2,000 barrels per day by April 1st. Greka shall pay a monthly fixed fee to Vintage for managing and operating the properties during this escrow period. This acquisition will increase the current equity throughput of 1,200 barrels per day to 3,200 barrels per day into the refinery.

Pursuant to this substantial restructuring, the Company has determined its traditional E&P assets to be inconsistent with its restructured business strategy going forward. Over the next quarter, these assets, primarily including the Company's interests in the Potash Field (Louisiana), Manila Village Field (Louisiana), Richfield East Dome Unit (California), and PRC 91 (California), are planned to be sold. The Company has engaged CIBC Worlds Markets to market the oil and gas properties, and a data room is scheduled to be open by mid-March in Houston. The Company is further pursuing the sale of its exploration interests in Indonesia and a limestone reserve in Indiana.

The potential aggregate sales value of these assets is expected to be $30-35 million, and with approximately $25 million of related trade and bank debt, these sales could yield up to $10 million in cash to the Company in increased liquidity. Alternatively, the Company will also consider the sale of the entire subsidiary that owns these E&P Americas' assets as a going concern.

In addition to eliminating the trade and bank debt related to the traditional E&P assets that are planned to be sold, the Company is embarking on a complete restructuring by May 31st of its debt. The debt restructuring is intended to payoff all remaining debt including debentures, fund the acquisition of the escrowed Vintage properties, provide availability for targeted acquisitions within the Integrated Operations' business plan, continued development of the Company's interests in China, and working capital.

Due to the divestiture of related assets, the Company has closed its international offices in Bogota and Jakarta, and will be downsizing its E&P Americas business unit in Houston to a satellite office, all of which will reduce the Company's G&A expense.

Mr. Randeep S. Grewal, Chairman, CEO & President, stated, "Embarking on this significant restructuring within the next ninety days will have a material and favorable impact to the Company after which Greka will emerge with a new balance sheet consisting of restructured debt and assets focused in Central California and long-term in China. This proactive and aggressive plan is a continuation of rationalizing the Company's acquired assets during the previous commodity down-cycle in 1998-99. Since inception in mid-1999, we had outlined the Integrated Ops division as the cornerstone to the Company's growth. While continuing to strengthen and confirm our niche within the Integrated Ops division, during mid-1999 into mid-2001 the rapid increase in commodity prices allowed us to create significant value in the traditional oil and gas assets. The current commodity prices provide management a window of opportunity to capitalize on the price cycle and conclude targeted asset acquisitions in Santa Maria to realize significant potential within our Integrated Ops division."

Mr. Grewal also stated, "The incremental equity production of 2,000 barrels per day into our refinery as a result of the acquisition of the Vintage production will increase the profitability of our Integrated Ops division. Capitalizing on the relatively stable asphalt market in California, this acquisition will further strengthen the natural hedge resulting from the consolidation of our refinery and equity crude oil and gas production. It is also anticipated that, by using our equity barrels to supply the refinery, working capital requirements should be lower and cash flow should be enhanced. The relative stability of the price of asphalt, coupled with reduced costs for processing resulting from higher throughput rates, should create substantial value for the Company and its shareholders.

"The profitable E&P subsidiary, whether sold as a going concern or its assets individually, will be accretive to Greka. We are confident of attaining the returns for the values created over the past three years whereby related land litigation was eliminated, operated working interests were increased to 100%, and significant reservoir and geological interpretations were made and proven providing a material enhancement to the reserves. We expect that, following the payment of related debt, Greka will receive significant cash for its ongoing business plan. "The decision to close the international offices in countries other than China where the Company's long-term interests are located was evident in consideration of the divestiture of those non-core assets in Bogota and Jakarta. Downsizing our Houston location to a core group of professionals will be an adjunct to and provide additional support for our Integrated Operations and development interests in China.

"To accomplish these goals, the Company, in addition to already engaging CIBC World Markets, has identified its additional potential advisors in the financial market that will assist the Company in its restructuring."