Arawak Acquires Additional Oil field in Komi Republic

Arawak Energy has signed a binding agreement to purchase a 50% interest in the North Irael field in the Komi Republic in the Russian Federation. Under the terms of the agreement, RF Energy Investments Limited, which is owned 50% by Arawak and 50% by partner Valkyries Petroleum Corp. will acquire all of the shares of LLC NK Recher-Komi ("Recher") which in turn holds 100% interest in the North Irael field. Under the terms of the agreement, RF Energy will pay US $18 million to acquire the shares of Recher. The transaction is subject to various regulatory approvals, including the Russian Anti-Monopoly Agency. Closing is expected before the end of June 2006.

The North Irael field is located on trend and approximately 10 km from the Sotchemyu-Talyu fields owned 100% by RF Energy's wholly owned subsidiary ZAO PechoraNefteGas ("PNG"). The North Irael field is currently producing approximately 400 barrels of oil per day ("bopd") from the same Devonian reef horizon that is productive at Sotchemyu-Talyu. There are six wells in the field that have tested oil and gas with four of these wells currently on natural flow production. The depth of the reservoir is 1,800 to 1,900 meters and the oil quality is 29.7 degrees API. Preliminary estimates of the proved and proved plus probable reserves as of December 31st, 2005 from a report being prepared by independent reserve auditors Ryder Scott Company, L.P. in accordance with NI 51-101 gross to Recher are respectively 1.5 and 4.8 million barrels of oil. Net present value of future revenues for proved and probable reserves before income tax, based on constant prices and costs and discounted at 10% is estimated to be US $36.5 million. The production license for the block, which comprises 76 sq km was awarded in 2000 and expires in January 2021.

The short-term plan for the field is to workover wells and install lift on all six wells which the Company believes will increase production to over 1,200 bopd. The oil will be transported initially by truck over the 35 km route to PNG's existing processing facilities and sold through PNG facilities into the Transneft pipeline system. The Company believes that the Recher operation can be incorporated into PNG's existing Komi operation at minimal incremental cost. Additional development drilling is also planned for the second half of 2006.

Arawak President and CEO Alastair McBain commented "We are delighted to have made this acquisition which is a natural addition to our existing Komi operation, and provides immediate production and growth opportunities. We anticipate this will lead to other opportunities for the Company in Komi and possibly elsewhere, while at the same time allowing us to optimize our existing production and reduce unit operating costs."