CALGARY, Aug. 8 /EMWNews/ - Arsenal Energy Inc. (TSX: AEI)

("Arsenal") and GEOCAN Energy Inc. (TSX: GCA) ("GEOCAN") are pleased to

announce that they have entered into an arrangement agreement (the

"Arrangement Agreement") providing for the acquisition by Arsenal of GEOCAN

pursuant to a plan of arrangement under the Business Corporations Act

(Alberta) (the "Arrangement"). Under the Arrangement, Arsenal will acquire

all of the outstanding class "A" common shares of GEOCAN ("GEOCAN Shares")

for consideration of $0.70 per GEOCAN Share, payable, at the election of

each GEOCAN shareholder, in cash or 0.81 of a common share of Arsenal

("Arsenal Shares"). The consideration to be paid by Arsenal under the

Arrangement of $0.70 per GEOCAN Share represents a premium of 29% over the

five day weighted average trading price of the GEOCAN Shares to and

including August 7, 2008 of $0.541. The value of the total consideration to

be paid by Arsenal for the GEOCAN Shares, based upon a share value of

$0.865 for each Arsenal Share and taking into account assumed debt of

approximately $8 million, is approximately $47.2 million.



    A maximum aggregate of $30,000,000 and a minimum aggregate of

$26,000,000 in cash will be payable to the GEOCAN shareholders under the

Arrangement. In the event that the GEOCAN shareholders elect, in the

aggregate, to receive more than $30,000,000 in cash, the amount of cash to

be received by a holder electing to receive cash with respect to a GEOCAN

Share will be reduced proportionately and the balance of the purchase price

for that GEOCAN Share will be paid by a portion of an Arsenal Share at a

deemed price of $0.865 per Arsenal Share. In the event that the GEOCAN

shareholders elect, in the aggregate, to receive less than $26,000,000 in

cash, the number of Arsenal Shares to be received by a holder electing to

receive Arsenal Shares with respect to a GEOCAN Share will be reduced

proportionately and the balance of the purchase price for that GEOCAN Share

will be paid in cash.



    The Arrangement requires the approval of the holders of GEOCAN Shares.

The Arrangement Agreement provides that GEOCAN shall call and hold a

special meeting of the GEOCAN shareholders by no later than October 6, 2008

for the purposes of considering the Arrangement. The Arrangement is subject

to the approval of the Court of Queen's Bench of Alberta, the TSX and all

applicable regulatory authorities. Completion of the Arrangement is also

subject to a number of additional conditions set out in the Arrangement

Agreement.



    Under the Arrangement Agreement, GEOCAN and Arsenal have each agreed

that they will not solicit or initiate any discussions concerning any

business combination or the sale of material assets. The Arrangement

Agreement provides for a mutual non-completion fee of $1.7 million if the

Arrangement is not completed in certain circumstances.



    A copy of the Arrangement Agreement will be filed on SEDAR and will be

available for viewing under the profiles of Arsenal and GEOCAN at

http://www.sedar.com.



    The Board of Directors of GEOCAN has unanimously determined that the

Arrangement and Arrangement Agreement are in the best interests of GEOCAN

and the GEOCAN shareholders. The Board of Directors of GEOCAN unanimously

recommends that the GEOCAN shareholders approve the Arrangement.



    Tristone Capital Inc. is acting as exclusive financial advisor to

GEOCAN with respect to the Arrangement and has provided the Board of

Directors of GEOCAN with a verbal opinion that the consideration to be

received by the GEOCAN shareholders under the Arrangement is fair, from a

financial point of view, to the GEOCAN shareholders and have agreed to

deliver a written opinion to that effect, subject to receipt and review of

final documentation.



    Emerging Equities Inc. is acting as exclusive financial advisor to

Arsenal with respect to the Arrangement.



    All of the directors and officers of GEOCAN, holding a total of

3,775,148 GEOCAN Shares, representing approximately 6.7% of the outstanding

GEOCAN Shares, have entered into agreements with Arsenal pursuant to which

they have agreed to vote their GEOCAN Shares in favour of the Arrangement.



    If all necessary approvals are obtained and the conditions contained in

the Arrangement Agreement are met, Arsenal and GEOCAN anticipate that the

Arrangement will become effective on or about October 7, 2008.



    The key metrics of the Arrangement with respect to Arsenal are as

follows:






    -   Estimated Purchase Price (millions)                   $ 47.2

    -   Price Per Flowing Boe/d (850 Boe/d)                   $ 55,412

    -   Price Per Proven Producing Boe                        $ 25.50

    -   Estimated GEOCAN Q2 2008 Operating Margin (per Boe)   $ 46.41

    -   Proven Producing Recycle Ratio                            1.8



    Arsenal and GEOCAN believe that the combination of the two corporations

pursuant to the Arrangement would have the following benefits:



    -   The increased size of the combined corporation will contribute to

        lower average operating expenses and cost of capital, overhead

        synergies and higher financial leverage;



    -   The combined corporation will have a complimentary fit of assets as

        approximately 40% of GEOCAN's current production is in Arsenal's core

        east central Alberta area; and



    -   The addition of GEOCAN's core Northeast British Columbia property,

        where approximately 40% of GEOCAN's current production is located, to

        the combined corporation will provide a further core property for

        development. Arsenal will also acquire new exploration plays in Ochre

        and Tomahawk as well as 82,000 net acres of undeveloped land,

        providing additional potential upside to the combined corporation's

        shareholders.



    Key attributes of the combined corporation (assuming the maximum aggregate

of cash of $30.0 million is paid by Arsenal to GEOCAN shareholders) include:



    -   Pro Forma Estimated Production at Closing (Boe/d)     2,830

    -   Pro Forma Diluted Shares Outstanding (millions)       106.9

    -   Pro Forma Run Rate Cash Flow (millions)             $    48

    -   Pro Forma Run Rate Cash Flow per Diluted Share      $  0.45

    -   Pro Forma Net Debt to Run Rate Cash Flow                1.1

    -   Pro Forma Proven Producing Reserves (million Boe)       5.3

    Reader Advisory



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    This press release does not constitute an offer to sell or the

solicitation of an offer to buy any securities of Arsenal within the United

States. The securities of Arsenal have not been and will not be registered

under the United States Securities Act of 1933, as amended (the "1933

Act"), or any state securities laws. Accordingly, the Arsenal Shares may

not be offered or sold in the United States or to U.S. persons (as such

terms are defined in Regulation S under the 1933 Act) unless registered

under the 1933 Act and applicable state securities laws or an exemption

from such registration is available.



    Forward Looking Statements



    --------------------------



    This press release contains forward-looking statements. More

particularly, this press release contains statements concerning the

anticipated dates for the holding of the GEOCAN shareholder meeting and the

anticipated date for the completion of the Arrangement. Arsenal and GEOCAN

have provided these anticipated dates in reliance on certain assumptions

that they believe are reasonable at this time, including assumptions as to

the time required to prepare meeting materials for mailing, the timing of

receipt of the necessary regulatory and court approvals and the time

necessary to satisfy the conditions set out in the Arrangement Agreement.

These dates may change for a number of reasons, including unforeseen delays

in preparing meeting materials, inability to secure necessary regulatory or

court approvals in the time assumed or the need for additional time to

satisfy the conditions to the completion of the Arrangement. The

Arrangement may not be completed on the timelines indicated or at all.

Accordingly, readers should not place undue reliance on the forward-looking

statements contained in this press release.



    This press release also contains forward-looking statements concerning

estimated production, cash flow and net debt. These forward-looking

statements are based on certain key expectations and assumptions made by

Arsenal and GEOCAN, including expectations and assumptions concerning

prevailing commodity prices and exchange rates, availability and cost of

labour and services, the timing of receipt of regulatory approvals, the

performance of existing wells, the success obtained in drilling new wells,

the performance of new wells and the sufficiency of budgeted capital

expenditures in carrying out planned activities. Although Arsenal and

GEOCAN believe that the expectations and assumptions on which these

forward-looking statements are based are reasonable, undue reliance should

not be placed on these forward-looking statements because Arsenal and

GEOCAN can give no assurance that they will prove to be correct. Actual

results could differ materially from those currently anticipated due to a

number of factors and risks. These include, but are not limited to, risks

associated with the oil and gas industry in general (e.g., operational

risks in development, exploration and production; delays or changes in

plans with respect to exploration or development projects or capital

expenditures; the uncertainty of reserve estimates; the uncertainty of

estimates and projections relating to production, costs and expenses, and

health, safety and environmental risks), commodity price and exchange rate

fluctuations and uncertainties resulting from potential delays or changes

in plans with respect to exploration or development projects or capital

expenditures. Certain of these risks are set out in more detail in the

Annual Information Forms of Arsenal and GEOCAN which have been filed on

SEDAR and can be accessed at http://www.sedar.com.



    Barrel of Oil Equivalent



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    In this press release, a "Boe" refers to a barrel of oil equivalent on

the basis of 1 Boe to 6 thousand cubic feet of natural gas. Boe's may be

misleading, particularly if used in isolation. A Boe conversion ratio of 1

Boe for 6 thousand cubic feet of natual gas is based on an energy

equivalency conversion method primarily applicable at the burner tip and

does not represent a value equivalency at the wellhead.