Flagship announces $33 million financing



    CALGARY, Sept. 21 /CNW/ - Flagship Energy Inc. ("Flagship" or the
"Company") (TSXV - FG.A and FG.B) is pleased to announce that it has entered
into a secured development bridge facility ("Bridge Facility") with Tricap
Partners Ltd. or its designate ("Tricap"), and has also entered into a
revolving operating loan facility with ATB Financial ("Operating Facility"),
which replaces its previous credit facility with ATB Financial. The lending
value of the Bridge Facility is $33 million, and is reduced by the Operating
Facility, currently established at $8 million. The proceeds from the
Facilities will be used primarily to fund the Company's ongoing capital
program.
    The Bridge Facility, which is currently drawn at $17 million and provides
for additional drawings of $8 million as capital activity is conducted, bears
interest at prime plus 3 percent, is secured by a second ranking security
interest and floating charge on Flagship's assets and matures on March 31,
2008. In addition, the Company has issued 4 million Class A share purchase
warrants to Tricap, each of which entitles the holder to acquire one class A
share of Flagship at an exercise price of $0.32 per share, expiring on
March 21, 2009. The warrants and any shares issued upon exercise thereof are
subject to a four month hold period expiring January 22, 2008. Mandatory
prepayment provisions in respect of any outstanding principal exist if
Flagship conducts additional financings, carries out property dispositions or
if certain minimum values are not generated from the Company's ongoing capital
program.
    The $8 million Operating Facility bears interest at the bank's prime
lending rate plus 0.25 percent. Borrowings under the Operating Facility are
secured by a General Security Agreement providing a first ranking security
interest over Flagship's assets. The Company is currently fully drawn on the
Operating Facility which is subject to review on or before March 31, 2008.
    This financing positions Flagship to expend the remainder of its
flow-through commitment for 2007. Drilling projects have been secured that
will expose the Company to a series of potential impact opportunities. Wells
are expected to be drilled in the Knopcik, Windfall, Calmar, Buck Lake (two
wells), Harmatton and Provost (two wells) areas of Alberta. The first of these
drills is expected to spud immediately with all drilling expected to be
completed by late in the fourth quarter of 2007.
    The third quarter Pembina 3D seismic acquisition has been interpreted and
Flagship purchased one additional section of drilling rights in the area at a
Crown land sale held earlier this month. The Company has identified several
additional Nisku drilling opportunities on controlled lands and expects the
first of the new opportunities to commence drilling in 2008.
    With the recently-announced sale of the Company's Southeast Saskatchewan
producing properties and the current marketing of the Retlaw property, the
Company continues to focus its producing and exploration efforts in the
central Alberta corridor.

    NOTE: Natural gas and liquids reserves and volumes are converted to a
common unit of measure on a basis of six thousand cubic feet ("Mcf") of gas to
one barrel (bbl) of oil. Disclosure provided herein in respect of barrels of
oil equivalent ("BOE") may be misleading, particularly if used in isolation. A
BOE conversion ratio of 6 mcf:1 bbl is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.

    ADVISORY: Certain information regarding Flagship Energy Inc. in this news
release including management's assessment of future plans and operations,
drilling inventory and wells to be drilled, timing of drilling and tie in of
wells, productive capacity of new wells, capital expenditures and timing
thereof, may constitute forward-looking statements under applicable securities
laws and necessarily involve risks including, without limitation, risks
associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets, volatility of
commodity prices, currency fluctuations, imprecision of reserve estimates,
environmental risks, competition from other producers, inability to retain
drilling rigs and other services, incorrect assessment of the value of
acquisitions, failure to realize the anticipated benefits of acquisitions,
delays resulting from or inability to obtain required regulatory approvals and
ability to access sufficient capital from internal and external sources. As a
consequence, actual results may differ materially from those anticipated in
the forward-looking statements. Readers are cautioned that the foregoing list
of factors is not exhaustive. Additional information on these and other
factors that could affect Flagship's operations and financial results are
included in reports on file with Canadian securities regulatory authorities
and may be accessed through the SEDAR website (www.sedar.com), or Flagship's
website (www.flagshipenergy.ca). Furthermore, the forward looking statements
contained in this news release are made as at the date of this news release
and Flagship does not undertake any obligation to update publicly or to revise
any of the included forward looking statements, whether as a result of new
information, future events or otherwise, except as may be required by
applicable securities laws.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.

    %SEDAR: 00003847E




For further information:

For further information: Glenn R. Carley, Executive Chairman, (403)
513-8300, gcarley@flagshipenergy.ca; Bradley Maynes, President and Chief
Operating Officer, (403) 513-8301, bmaynes@flagshipenergy.ca; Stuart Jaggard,
Vice President Finance and Chief Financial Officer, (403) 513-8302,
sjaggard@flagshipenergy.ca

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FLAGSHIP ENERGY INC.

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