Canoel to Acquire Tunisian O&G Interests from Cygam

Canoel International Energy Ltd. has entered into a farmout and participation agreement for the acquisition from Cygam Energy Inc., an arm's length party to the Corporation, of oil and gas interests in certain properties in the Bazma, Sud Tozeur and Jorf areas of Tunisia. Canoel is a capital pool company and intends for the Acquisition to constitute the Qualifying Transaction of the Corporation, as such term is defined in the policies of the TSX Venture Exchange. The Acquisition is Arm's Length and is not subject to shareholder approval. Upon completion of the Qualifying Transaction, Canoel will be an oil and gas company focussed on international oil and gas exploration opportunities.

The Cygam Assets

Rigo Oil Company Limited, a corporation incorporated under the laws of Jersey, Channel Islands and a wholly-owned subsidiary of Cygam, holds an exploration permit in each of the Bazma, Sud Tozeur and Jorf areas of Tunisia and has a 100% working interest in each of the permits. The Tunisian national oil company, Enterprise Tunisienne d'Activites Petrolieres, holds an option to back-in to a working interest position of up to 50% in each of the three exploration permits.

The Bazma permit, located onshore south-central Tunisia, is the western extension of the Jorf permit and encompasses an area of 1,616 square kilometers (399,308 acres) and borders the currently producing Baguel and Tarefa fields. The permit was officially granted on July 28, 2006 and carries a drilling commitment over a period of four years.

The Sud Tozeur permit, located near the Algerian border is in close proximity to the currently producing Sabria and El Franig fields, covers an area of 4,380 square kilometers (1,082,283 acres). The permit was officially granted on July 5, 2007 and carries a drilling commitment over a period of four years.

The Jorf permit, located onshore south-central Tunisia, covers an area of 3,768 square kilometers (931,060 acres). The northern boundary of the exploration permit is within 35 kilometers of the Gulf of Gabes. Major oil and gas pipelines from the El Borma and other southern Tunisian oil and gas fields traverse the block and connect to the La Skhira oil terminal in the Gulf of Gabes. The Jorf permit will expire on February 5, 2009 unless extended by Cygam, Canoel and Cygam's other joint venture partners by committing to drill one well.

An independent third party engineering report in respect of the Cygam Assets, in accordance with the requirements of National Instrument 51-101 - Standards of Disclosure For Oil and Gas Activities is currently being prepared in connection with the Qualifying Transaction by Chapman Petroleum Engineering Ltd., and further information will be released by the Corporation upon the completion of such report.

The Participation Agreement

Pursuant to the Participation Agreement, Canoel has the opportunity to earn an undivided 11% working interest share in each of the Bazma, Sud Tozeur and Jorf blocks. To earn its working interest in each of the blocks Canoel will have to pay a promoted percentage of the costs associated with each test well. Canoel's costs are estimated to be $1,186,597 (US) of the seismic and drilling costs for the Bazma block, $1,589,500 (US) of the seismic and drilling costs for the Sud Tozeur block and $221,760 (US) of the seismic costs for the Jorf block.

The Participation Agreement is subject to the satisfaction of the following conditions precedent:

1. Final approval by the TSXV of the Qualifying Transaction for Canoel.

2. Completion of a financing by Canoel in an amount not less than Cdn$4,000,000.

Canoel has paid Cygam a refundable deposit of Cdn$125,000 and a non-refundable deposit of Cdn$25,000. The Participation Agreement will become null and void, and the refundable deposit shall be returned to Canoel, in the event that the two conditions are not satisfied by September 30, 2008.


Concurrent Financing

Concurrent with Qualifying Transaction, Canoel intends to complete a brokered and a non-brokered private placement financing on terms to be determined. The net proceeds of the financing will be used for financing Canoel's obligations under the Participation Agreement, Canoel's general working capital requirements and, provided that the Qualifying Transaction is completed, for pursuing other international oil and gas exploration opportunities.

Canoel currently has 6,580,000 Common Shares outstanding.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.