Arawak announces first quarter results

    TSX TRADING SYMBOL: ABG

    TORONTO, May 15 /CNW/ - Arawak Energy Limited the independent oil and gas
company with exploration, development and production in Kazakhstan, Russia and
Azerbaijan, today announces its results for the quarter ended March 31, 2008.

    HIGHLIGHTS: (In US dollars unless otherwise stated)

    -  Net income in the first quarter of 2008 increased to $8.5 million from
       $1.3 million in the first quarter of 2007
    -  Earnings per share (basic and diluted) increased to 4.9 cents from
       0.7 cents
    -  Funds from operations were $16.1 million in the first quarter of 2008,
       up 83% from the first quarter of 2007 with capital expenditure of
       $10.6 million excluding acquisitions.
    -  Average production was 11,948 boepd, up 31% from 9,088 bopd in the
       first quarter of 2007
    -  Further drilling successes in the Akzhar block in Kazakhstan and North
       Irael in Russia which extend the boundaries of the oil producing areas
    -  Evaluation work is continuing with 359 sq km of 3D and 407 km of 2D
       seismic from Russia and Azerbaijan being processed and interpreted,
       and a further 1,000 km of 2D and 50 sq km 3D seismic is planned to be
       acquired in 2008 in Russia and Kazakhstan to further delineate
       prospectivity of the Company's exploration potential.


    FINANCIAL HIGHLIGHTS
    (In thousands, except per share amounts)
    For the three months ended March 31       2008       2007(2)      2006(2)
    -------------------------------------------------------------------------
    Crude oil sales                        $66,580      $35,804      $27,719
    Net income                              $8,473       $1,268       $5,292
      Per share - basic                     $0.049       $0.007       $0.031
      Per share - diluted                   $0.049       $0.007       $0.030
    Funds from operations(1)               $16,068       $8,760      $10,590
      Per share - basic                     $0.092       $0.051       $0.061
      Per share - diluted                   $0.092       $0.051       $0.062

    Capital expenditure                    $10,563       $7,700       $9,627
    Shareholders' equity                  $174,586     $130,042     $115,543
    Weighted average shares - basic        173,892      173,392      173,039
    Weighted average shares - diluted      174,276      174,476      174,486
    -------------------------------------------------------------------------

    (1) Funds from operations is a non-GAAP measure that represents cash
        generated from operating activities before changes in non-cash
        working capital.
    (2) Certain comparative figures have been restated to conform to the
        current financial statement presentation.


    OPERATIONAL HIGHLIGHTS

    For the three months ended March 31                 2008            2007
    -------------------------------------------------------------------------
    Production - boe                               1,087,237         817,983
    Average daily production - boe                    11,948           9,088
    Sales - boe                                    1,003,587         826,973

    Revenue and expenses per boe sold
    ---------------------------------
    Crude oil and gas sales                           $66.34          $43.30
    Interest and other income                          $0.69           $0.36
    Royalties and taxes                              ($14.45)        ($10.29)
    Production costs                                  ($9.01)         ($4.87)
    Transportation and selling expenses               ($5.44)         ($4.98)
    Net operating income                              $38.13          $23.52
    -------------------------------------------------------------------------

    REVIEW OF Q1 2008

    Arawak Energy Limited ("Arawak" or the "Company") enjoyed an excellent
first quarter of 2008 with production from Kazakhstan, Russia and Azerbaijan
averaging 11,948 barrels of oil equivalent per day ("boepd"), up 31% from
9,088 barrels of oil per day ("bopd") in the first quarter of 2007 and up 1%
from 11,775 boepd in the fourth quarter of 2007.
    In Kazakhstan, where the Company has a 100% interest in six blocks, the
aggressive 2007 drilling programme has wound down over the first quarter of
2008. A further eight wells were drilled at Akzhar, the largest of the
Company's fields. Seven of these wells were exploration or appraisal wells and
of these, five have been completed as commercial producers, including well 92,
which has proved up oil in multiple horizons 1.7 km from the nearest producing
well. Work will now focus on the preparation of the Technical Scheme of
Development ("TSD"), needed to facilitate the envisaged transition from the
contractual exploration phase to the production phase. On completion of the
TSD, intensive development drilling can commence. Similarly, no further
drilling took place in the Company's Besbolek field as the Company is in the
advanced stage of preparation of the TSD, which is needed to facilitate the
transition to the contractual production phase. The Company is now producing
at less than capacity at both Akzhar and Besbolek fields due to the regulatory
restraints inherent in the exploration phase, which will be lifted in the
production phase. The new oil processing facility for Besbolek is now complete
and the Company's own transfer station is in the process of being
commissioned, allowing direct injection of Besbolek crude to the main
KazTransOil pipeline.
    At Alimbai, the last of five exploration wells will be drilled in the
second quarter, and so far oil productive sands have been encountered in three
of the four exploration wells drilled. The successful exploration wells are
being progressively tested, zone by zone. Test production from Alimbai is
currently around 300 bopd, although none of the thickest and most prospective
Baremian intervals have yet been tested. Once the testing programme has been
completed, the wells will be shut-in in accordance with regulations until the
start of the production phase. The next phase of development will be a $4.0
million seismic survey, comprising approximately 200 line km 2D and 27 sq km
3D, which will be shot later this year. A seismic survey will also be acquired
at the Company's large East Zharkamys III exploration block and at Tamdykol,
the new exploration block that was acquired in May 2008. Survey work on the
Akzhar-Kenkiyak pipeline has commenced, and construction is expected to
commence in the third quarter.
    In Russia, the Company successfully drilled into a new pool in the North
Irael block, proving up additional reserves. The Company has a 50% interest in
this block and is the operator. The successful well 64 is now flowing
approximately 270 bopd from a deeper horizon than previously encountered on
the block. The Company will shortly move uphole and test the main productive
horizon. An application to drill an additional well in the new pool is
currently in process with the regulatory authorities. 81 sq km of 3D seismic
data is now being processed prior to interpretation later in the second
quarter and further drilling will follow later in the year. A 33 sq km 3D
seismic shoot has been completed on the Company's newly acquired 100% owned
South Sotchemyu block, with interpreted maps expected by mid year. Additional
2D seismic will be shot in the winter of 2008/09. At Sotchemyu-Talyu, where
the Company also has a 50% interest and is the operator, side-track wells were
drilled for the first time using our own drilling rig. The first such side
track well is flowing 375 bopd. 120 km of 2D seismic is expected to be
acquired later in the year over the Company's 100% owned Kymbozhyuskaya
exploration block.
    In Azerbaijan, Southwest Gobustan, the small quantities of oil and gas
production are being progressively shut down due to water handling problems.
These issues will be addressed in conjunction with a new field development
plan, which will be produced after completion of interpretation of the 2D and
3D seismic survey over the 3 blocks.
    Sales volumes rose 21% to 1,003,587 barrels from 826,973 barrels in the
first quarter of 2007 and declined 13% from 1,156,232 barrels in the last
quarter of 2007 due to a reduction in inventory in the fourth quarter of 2007.
The average realised selling price in the first quarter of 2008 was $66.34,
compared with $43.30 in the first quarter of 2007.
    Oil and gas sales revenues were $66.6 million in the first quarter of
2008 compared with $35.8 million in the first quarter of 2007 and $79.6
million in the last quarter of 2007. The net income in the first quarter of
2008 was $8.5 million compared with $1.3 million in the first quarter of 2007
and $21.9 million in the last quarter of 2007. However, the net income for the
fourth quarter of 2007 included certain one-off reductions in the tax charge
for the year following a review of the group's tax position, whilst operating
costs in the first quarter of 2008 include $3.0 million incurred in relation
to the re-domiciliation and potential London listing. Also in the first
quarter of 2008, both of our major producing fields in Kazakhstan moved to the
Excess Profit Tax environment, following increases in production and profit.
Current income tax in the first quarter of 2008 was $14.1 million compared to
$5.9 million in the first quarter of 2007 with $13.0 million accounted for in
Kazakhstan. Funds from operations were $16.1 million in the first quarter of
2008, an increase of 83% over the first quarter of 2007 and capital
expenditure was $10.6 million excluding acquisitions.
    In the first quarter of 2008, the Azerbaijani operations contributed a
loss of $0.2 million to the consolidated results of Arawak. Prior to
commencement of commercial operations in the second quarter of 2007, Arawak
reflected the result of its Azerbaijani operations through their carrying
value in Arawak's consolidated balance sheet.
    Arawak's unaudited consolidated financial statements and related
Management's Discussion and Analysis for the three months ended March 31,
2008, have also been filed. Copies of these documents may be accessed
electronically on the website for the System for Electronic Document Analysis
and Retrieval ("SEDAR") at www.sedar.com and Arawak's website at
www.arawakenergy.com.

    Arawak's common shares are listed for trading on the TSX under the symbol
"ABG". The Company is engaged in the exploration, development and production
of oil and natural gas in Kazakhstan, Russia and Azerbaijan. The Company's
four producing fields and two exploration blocks in Kazakhstan are held
through its 100% wholly-owned subsidiary Altius Energy Corporation ("Altius").
Altius' main producing field is Akzhar, extended in 2006 from 3.8 to 71.5
square km, with smaller fields at Besbolek, Karataikyz and Alimbai. The two
exploration blocks East Zharkamys III and Tamdykol are also situated in
western Kazakhstan. Arawak's assets in Russia are held through ZAO
PechoraNefteGas ("PNG") and LLC NK Recher-Komi ("Recher-Komi") in which Arawak
has a 50% interest with the remaining interest being held by Lundin Petroleum
AB. Also in Russia, Arawak holds a 100% interest in the Kymbozhyuskaya
exploration block and in the South Sotchemyu appraisal block. In the
Azerbaijan Republic, the Company's asset is its interest in the South West
Gobustan Exploration Development and Production Sharing Agreement (the
"EDPSA"). Commonwealth Gobustan Limited ("CGL"), in which Arawak has a 37.17%
interest, holds an 80% interest in the EDPSA with the remaining 20% owned by
SOCAR Oil Affiliate.

    This press release includes "forward-looking statements", which are based
on the opinions and estimates of management at the date the statements are
made, and are subject to a variety of risks and uncertainties and other
factors that could cause actual events or results to differ materially from
those projected in the forward-looking statements. These risks and
uncertainties include, but are not limited to, risks associated with the oil
and gas industry (including 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 in relation to
production, costs and expenses and health, safety and environmental risks),
the risk of commodity price and foreign exchange rate fluctuations, the
uncertainty associated with commercial negotiations and negotiating with
foreign governments and risks associated with international activity. Although
Arawak believes that its expectations represented by these forward-looking
statements are reasonable, there can be no assurance that such expectations
will prove to be correct. Additionally, the estimates of reserves and future
net revenue for individual properties may not reflect the same confidence
level as estimates of reserves and future net revenue for all properties, due
to the effects of aggregation. A barrel of oil equivalent (boe), derived by
converting gas to oil in the ratio of six thousand cubic feet of gas to one
barrel of oil, may be misleading, particularly if used in isolation. A boe
conversion is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Due to the risks, uncertainties and assumptions inherent in
forward-looking statements, prospective investors in the Company's securities
should not place undue reliance on these forward-looking statements. For a
detailed description of the risks and uncertainties facing Arawak, readers
should refer to Arawak's Annual Information Form as filed at www.sedar.com.

For further information: Arawak Energy Limited: Alastair D. McBain,
President & Chief Executive Officer, Phone: +44 (0)20 7973 4285, Fax: +44 (0)
20 7824 8466; Charles R. A. Carter, Chief Financial Officer, Phone: +44 (0)20
7973 4285, Fax: +44 (0) 20 7824 8466; E-mail: info@arawakenergy.com,
www.arawakenergy.com; Brunswick Group LLP: Patrick Handley, Mark Antelme,
Phone: +44 (0) 20 7404 5959