Imperial Signs Standby Equity Commitment up to $600M

Imperial Energy, the FTSE 250 energy company, has entered into an agreement with Hoare Govett Limited and Merrill Lynch International for a standby equity underwriting commitment of up to U.S. $600 million. Whilst the Company has held discussions with a number of lending institutions, due to the current state of the credit markets, Imperial has determined that it is in the best interests of shareholders to ensure it is funded through to early 2010 at which point, based on Imperial's current work program, positive cash flow generation should sustain the capital expenditure required to reach the Company's production targets. Consequently Imperial has concluded that it is appropriate to undertake a material equity issue.

Imperial's discussions with a consortium of banks have examined debt financing options to provide for future capital expenditure and to refinance the Company's existing U.S. $200 million loan facility which matures in November 2008. However, the current state of the debt markets and Imperial's relatively short history of production provides a significantly more challenging environment to raise debt finance on terms acceptable to the Company.

Accordingly, Imperial believes that developing the potential of its asset base may be better funded at this stage through equity. The standby commitment and any subsequent equity issuance would give Imperial the financial strength and robustness to fund the business going forward.

Imperial has an extensive 2008 work program which includes major drilling activities, as well as significant infrastructure works and a third pipeline. The cost of such work is estimated at U.S. $350 million, which now also includes the development of South Maiskoye and further exploration work on the recently extended exploration licenses. In 2009, Imperial's heavy work program will continue at an estimated cost of U.S. $250 million including over 50 new wells, spur pipelines from outlying fields and further processing facilities. The proceeds of the equity issue combined with the cash flow generated by the business and Imperial's existing cash resources are expected to fully fund this program which should enable Imperial to achieve production of 25,000 bopd by end of 2008 and 35,000 bopd by end of 2009.

Standby Equity Underwriting Commitment

Under the standby equity underwriting commitment, the Company has the right to require Hoare Govett Limited and Merrill Lynch International to underwrite 50 per cent each of a rights issue by the Company to raise an aggregate amount of up to (but not exceeding) U.S. $600 million. The obligation of Hoare Govett Limited and Merrill Lynch International to provide such underwriting shall expire on 1 July 2008. The issue price of any new shares will be determined at the time of launch of the rights issue in the light of, among other things, the then prevailing market conditions.

The obligations of Hoare Govett Limited and Merrill Lynch International under the standby agreement are subject to Hoare Govett Limited and Merrill Lynch International agreeing the form of the final underwriting agreement with the Company (including the price at which the new shares will be issued pursuant to the rights issue) and other normal conditions, including obtaining all approvals and consents required in connection with the issue of new shares and the consummation of the rights issue; the absence of any material adverse change affecting the Company or the Company's group; and the absence of any force major event. Accordingly, there can be no assurance that the rights issue will be completed.