Foothills Resources, Inc. Reports on Credit Facility

    BAKERSFIELD, Calif., Aug. 15 /EMWNews/ -- Foothills

Resources, Inc. (OTC Bulletin Board: FTRS) (the "Company") today announced

that it has entered into a Forbearance Agreement with its lenders in

connection with defaults on financial covenants contained in its Credit

Agreement with various lenders and Wells Fargo Foothill, LLC, as agent (the

"Credit Facility").



    The Forbearance Agreement requires the Company to retain an independent

investment adviser for the purpose of assisting the Company in developing

and facilitating a plan of restructuring and to deliver to the lenders on

or before September 15, 2008 a definitive, written plan of restructuring.

The plan of restructuring will provide for specific courses of action by

the Company, as well as a specific timeline, to either cure the default or

restructure the Credit Facility. The restructuring plan is expected to

consider a range of strategic alternatives, which may include a sale of a

portion of the Company's assets, a merger or other business combination, or

the issuance of equity or other securities, in connection with the

repayment of all or a portion of the Company's obligations under the Credit

Facility.



    The Credit Facility provides for a $50 million term loan facility and a

$50 million revolving credit facility, with an initial borrowing base of

$25 million available under the revolving credit facility. The Credit

Facility is secured by liens and security interests on substantially all of

the Company's assets, including 100% of its oil and gas reserves. Amounts

outstanding under the Credit Facility currently consist of $50 million

under the term loan facility and approximately $21.9 million under the

revolving loan facility.



    The Credit Facility contains financial covenants pertaining to asset

coverage, interest coverage and leverage ratios. A violation of any of

these financial covenants, unless waived by the Company's lenders,

constitutes an event of default under the Credit Facility, giving the

Company's lenders the right to terminate their obligations to make

additional loans under the Credit Facility, demand immediate payment in

full of all amounts outstanding, foreclose on collateral and exercise other

rights and remedies granted under the Credit Facility and as may be

available pursuant to applicable law. Principally because of higher than

expected drilling costs and poorer than anticipated results from the

Company's activities in the Eel River Basin of California, the Company was

not in compliance with the asset coverage and leverage ratio covenants and

was in default under the Credit Facility as of June 30, 2008. The lenders

have agreed to forbear the exercise of their remedies under the Credit

Facility until September 15, 2008.



    The Company expects to generate cash flow from operations sufficient to

service the debt under the Credit Facility prior to its stated maturity and

to fund its liquidity requirements, provided that there is not otherwise an

event of default and acceleration of the maturity of the debt. In the event

that the Company's lenders decline to permanently waive the non-compliance

and the Company is unable to cure the default, the lenders can exercise

their right to demand immediate payment of the Company's obligations under

the Credit Facility on September 15, 2008 (or earlier in the event of a

termination event under the Forbearance Agreement). The Company does not

currently have sufficient liquidity to satisfy its obligations under the

Credit Facility in the event that the lenders demand immediate repayment of

such obligations.



    The forbearance expires on September 15, 2008, and the Company expects

to require similar forbearance agreements in future periods. There can be

no assurance that the Company will be able to negotiate an amendment to the

Credit Facility or additional forbearances, that such amendment or

forbearances will be on terms acceptable to the Company, or that the

Company will be able to complete any of the strategic alternatives on

satisfactory terms, or at all. The restructuring plan may impair the

Company's operations and future prospects.

    About Foothills Resources, Inc.



    Foothills Resources, Inc. is a growth-oriented independent energy

company engaged in the acquisition, exploration, exploitation and

production of oil and natural gas opportunities in California, Texas and

Oklahoma. Additional information on Foothills Resources is available at

http://www.foothills-resources.com.



    SEC Filings and Forward-Looking Statements



    This press release contains forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933, as amended, and

Section 21E of the Securities Exchange Act of 1934, as amended. All

statements, other than statements of historical facts, included in this

press release that address activities, events or developments that we

expect or anticipate will or may occur in the future are forward-looking

statements. The words "will," "should," "believe," "intend," "expect,"

"anticipate," "project," "estimate," "predict," "plan" and similar

expressions are also intended to identify forward-looking statements. These

forward-looking statements include, but are not limited to, statements

regarding business strategy and expansion and growth of our business and

operations. Such forward-looking statements involve assumptions and are

subject to known and unknown risks and uncertainties that could cause

actual results or performance to differ materially from those expressed or

implied by such forward-looking statements. Although we believe that the

assumptions reflected in such forward-looking statements are reasonable, we

can give no assurance that such assumptions will prove to have been

correct. You should also know that such statements are not guaranties of

future performance and are subject to risks, uncertainties and assumptions,

including, but not limited to, our ability to negotiate additional

forbearances, our ability to maintain compliance with covenants of our

Credit Facility or Forbearance Agreement, our compliance with the terms of

the Credit Facility, our ability to consummate any strategic alternatives,

our ability to discover reserves that may be extracted on a commercially

viable basis, our ability to accurately estimate oil and gas reserves,

intense competition, environmental risks and general economic conditions

including the price of oil and gas. Readers are urged not to place undue

reliance on these forward- looking statements, which speak only as of the

date of this release. Should any of these risks or uncertainties

materialize, or should any of our assumptions prove incorrect, actual

results may differ materially from those included within these

forward-looking statements. We undertake no obligation to publicly release

the result of any revision to these forward-looking statements to reflect

events or circumstances occurring after the date of this release or to

reflect the occurrence of unanticipated events. Readers are urged to

carefully review and consider the various disclosures made by us in our

reports filed with the Securities and Exchange Commission, including the

Company's Report on Form 10-Q for the quarter ended June 30, 2008, which

attempt to advise interested parties of the risks and factors that may

affect our business, financial condition, results of operations and cash

flows.