COSTA Closes Financing

COSTA Energy Inc. has closed the previously announced financing and has issued 990,000 units at $1.00 per unit consisting of $1.00 principal amount of secured, non-convertible subordinated debentures and 0.67 of one common share purchase warrant. The $990,000 principal amount of debentures bears interest at 12% per annum and has a maturity date of December 31, 2008. Each one warrant will entitle the holder thereof to purchase one common share at a price of $0.10 per share until June 30, 2009. Gross proceeds from the sale of the units of $990,000 will be used to repay $883,000 of outstanding debentures (including $93,000 held by a director) and for working capital purposes. Two directors (including the aforementioned) acquired 250,000 units. The debentures and warrants issued pursuant to this private placement will be subject to a four month statutory hold period. Fees of $16,100, being 2.0% of the gross proceeds, were paid to finders that arranged for subscriptions of $805,000.

With this new financing, COSTA now has 43,260,735 common shares, 29,964,909 warrants and 1,489,722 options to acquire an equivalent number of common shares, issued and outstanding. Management and directors, MHI Energy Partners and/or their associates and affiliates now hold 13,692,745 common shares, 10,044,460 warrants and 1,307,222 options; approximately 34% on a fully diluted basis.