Arakis reports first quarter 1997 results.

CALGARY, Alberta--(BUSINESS WIRE)--May 29, 1997--Arakis Energy Corporation (NASDAQ:AKSEF) today reported a net loss of $0.8 million, or $0.01 per share, for the three months ended March 31, 1997, compared with a net loss of $3.6 million, or $0.11 per share, in the first three months of 1996. (All amounts are in U.S. dollars).

The major factor contributing to the reduced net loss was lower depreciation and depletion expense compared with the previous year, when depreciation and depletion included $1.6 million for the cost of an unsuccessful exploration well in Papua New Guinea. Other factors contributing to the improved performance were increased interest income, mainly resulting from the Company's large cash balance, and reduced general and administrative expenses.

Funds applied to operations in the first quarter of 1997 totaled $0.5 million compared with $3.4 million applied to operations in the first quarter of 1996. The Company's working capital at March 31, 1997 was $52.7 million versus $55.3 million at December 31, 1996.

Capital expenditures in the first quarter of 1997 totaled $1.0 million, compared with $11.4 million in the same period of 1996. The reduced spending reflects the major cutback in Arakis' capital requirements for the Sudan Petroleum Project as the result of agreements reached with its new Consortium partners, China National Petroleum Corporation ("CNPC"), holding a 40 percent interest in the Project, Petronas Carigali Overseas SDN BHD ("Petronas"), with 30 percent, and Sudapet Limited with five percent. Since November 29, 1996, the Consortium's effective date, CNPC and Petronas have borne substantially all Consortium expenses (excluding bonuses and rentals payable) and will continue to do so until the partners have matched Arakis' investment and value-added credits, totaling $175 million (U.S.) (subject to audit), on a pro rata basis.

To match the Arakis credits, the other Consortium partners have to expend $300 million (U.S.) on exploration and development and $225 million (U.S.) towards the construction of the pipeline, effectively three times the value of the Arakis credits. Sudapet Limited's share of expenditures is being funded by way of a loan from the other Consortium partners, including Arakis.

Activity on the Sudan Concession in the first quarter included significant discoveries at El Nar 72a, at El Toor 50a, at Toma South 88c, located 12 miles southeast of the Heglig field, and at Umm Sagura 10d. Apart from the Umm Sagura location, these wells found oil in the primary target, the Bentiu formation. At Umm Sagura, oil was found in a secondary objective, the Zarqa formation. Additional drilling will be necessary to fully evaluate the reserve and production potential of all these discoveries.

Plans for the 1500 kilometer export pipeline, which will stretch from the Concession to Port Sudan on the Red Sea coast, continue to move firmly ahead and on schedule. Specifications of the pipeline, which will have a throughput design capacity of 250,000 barrels of oil per day are currently being finalized. The pre-qualifying of bidders for the construction contracts has been completed and bid packages will be delivered to a short list of selected world-scale engineering firms early in June 1997. The target date for pipeline completion and production startup is the fourth quarter of 1999.

Subsequent to quarter end, Arakis began drilling the Wadi Saylah No.1 exploration well on Block 15 in Oman. After giving effect to a farmout of a portion of its working interest, Arakis retains approximately 48 percent in the project and is responsible for 25 percent of the well costs. Arakis' net well cost is estimated at $1.25 million. -0-

Selected First Quarter 1997 Data
(in thousands of U.S. dollars, except
per share items)                   Three months ended March 31
                                       1997               1996

Total revenues                     $    907            $   118

Net loss                           $    759            $ 3,581

 - per share                       $   0.01            $  0.11

Working capital                    $ 52,729            $ 8,213

Long-term debt, including current
   portion                         $  2,982            $14,042

Shareholders' equity               $184,089            $74,922

Common shares outstanding, at
    quarter end (in thousands)       87,989             35,203

CONTACT: Arakis Energy Corp., Calgary

Kristine Dow, 403/213-6714

403/263-2471 (FAX)

Ron Burrows, 403/213-6715

403/263-2471 (FAX)