Arawak to Acquire Stake in Saigak

Arawak Energy Corp. has entered into an agreement, subject to certain conditions, under which it expects to acquire Saigak Investments BV (SIBV), a company that has a 40% participating interest in the Saigak field in Western Kazakhstan. Arawak signed the deal with Vitol BV, which owns SIBV.

The Saigak field is located approximately 120 km from the Company's existing Akzhar field in the Aktyubinsk region of Western Kazakhstan and is operated by Maersk Oil Kazakhstan GmbH, which owns the remaining 60% interest.

Arawak expects to issue to Vitol BV 8,352,587 common shares in consideration for this transaction at a price of C$2.9517 per share determined by the 10-day volume weighted average price of Arawak shares prior to the date of the agreement. The effective date of the transaction will be January 1, 2007 and the final number of common shares to be issued will be subject to an adjustment based on net working capital.

The Saigak field is currently producing around 3,500 bopd gross and has original recoverable reserves of 14.6 million barrels according to the operator's current development plan. On the same basis, net to Arawak the remaining recoverable reserves are estimated at 2.4 million barrels as at December 31, 2006. If the acquisition had been completed prior to December 31, 2006 (the effective date for the Company's last Report on Reserves Data) Arawak's net proved plus probable reserves would have increased from 70.8 to approximately 73.2 million boe. The cashflow resulting from the 40% interest is estimated at approximately US$9.0 million net to Arawak in 2007, based on a US$65 Brent price.

Saigak, a sweet 33-37 degrees API crude is currently produced from four wells and from multiple zones at around 2,000 meters depth. All crude oil is currently exported.

Saigak is produced under a production sharing contract ("PSC"), originally signed in 1992 and which embodies terms which are more favorable than later Kazakhstan production contracts. The contract holder has 100% export rights and freedom from all forms of taxation apart from a 12.5% royalty and a profit share element of 24%. The contract is valid until 2017 and includes further extension provisions.

This producing field is relatively fully developed and so limited capital expenditure is included in the current plans and production is expected to decline at about 15% per year over the next 5 years without additional capital investments. However, it is felt that there may be opportunities to add value and additional production through later optimizations.

Alastair McBain, Chief Executive Officer of Arawak, said: "We are very excited to announce our first acquisition of 2007. We believe that this strongly cash generative asset will add to the bottom line and provide funds for our ambitious development programs in Kazakhstan and elsewhere. Also, we are hopeful that more aggressive plans will be found to arrest or reverse the natural decline in this field so that production will continue at Saigak for many years to come. Although Saigak is not operated by Arawak, its proximity to our other fields in Kazakhstan may generate opportunities for closer co-operation."

The acquisition is a "related party transaction" as a result of Vitol's 38.15% shareholding in Arawak (through Rosco S.A.) and is subject to approval by an independent committee of Arawak's board of directors, statutory and governmental approvals, including TSX approval, as well as due diligence and execution of a definitive share purchase agreement. The acquisition is exempt from the formal valuation and minority approval requirements of applicable Canadian securities legislation under paragraph 2 of subsection 5.5 and paragraph 2 of subsection 5.7 of Ontario Securities Commission Rule 61-501, as the purchase price represents only approximately 5% of Arawak's market capitalization. Orion Securities Inc. have been retained to provide a fairness opinion to the board. Upon completion of this transaction the indirect voting share ownership of Vitol in Arawak would increase from 38.15% to approximately 41%.

Arawak Energy Corp. is engaged in the exploration, development and production of oil and natural gas in Kazakhstan, Russia and Azerbaijan. Its three producing fields and two exploration blocks in Kazakhstan are held through its 100% wholly owned subsidiary Altius Energy Corp. Altius' main producing field is Akzhar, extended in 2006 from 3.8 to 71.5 sq km, with smaller fields at Besbolek and Karataikyz. The two exploration blocks, Alimbai and East Zharkamys III, are also situated in western Kazakhstan. Arawak's assets in Russia are held through ZAO PechoraNefteGas ("PNG") and LLC NK Recher-Komi in which Arawak has a 50% interest with the remaining interest being held by Lundin Petroleum AB. Also in Russia, Arawak holds a 100% interest in the Kymbozhyuskaya exploration block. In the Azerbaijan Republic, the Company's asset is its interest in the South West Gobustan fields. Commonwealth Gobustan Limited ("CGL"), in which Arawak has a 37.17% interest, holds an 80% interest in the EDPSA with the remaining 20% owned by SOCAR Oil Affiliate.