Arcapita Acquires Falcon Gas Storage Company.

HOUSTON -- Falcon Gas Storage Company, Inc. today announced that GAStorage Investment LLC, a company organized by Arcapita, a global investment group, has acquired the majority equity interest in Falcon and has injected additional capital to complete the expansion of the company's existing gas storage facilities and advance the development of its gas storage projects.

Current Falcon management will remain in place and continue to retain a material equity ownership in the company. The total value of the initial transaction is approximately $100 million. Dresdner Kleinwort Wasserstein Securities LLC advised Arcapita on the transaction. Simmons & Company International advised Falcon on the transaction.

"Our new partners will provide Falcon with the capital necessary to complete the Phase II and III expansions of our Hill-Lake Gas Storage Facility, as well as the Phase I and II expansions of our Worsham-Steed Gas Storage Facility," said John M. Hopper, Falcon's president and CEO. "In addition, we have earmarked part of our new investment capital for the development of our MoBay Storage Hub in southwestern Alabama, which will serve markets in Florida and the southeast.

"Arcapita brings to Falcon not only substantial capital investment capacity, but also a wealth of experience in both domestic and international private equity investments," he added. "We are very grateful to our original equity partner, Energy Spectrum, for their investment in Falcon over the last five years, and we are excited and fortunate to have Arcapita on board as our new partner."

Together, the Hill-Lake and Worsham-Steed facilities have more than 20 Bcf of high-deliverability, multi-cycle (HDMC) working gas storage capacity and, with the new expansions, will have up to 1 Bcfd of aggregate maximum injection and withdrawal capacity to serve the Dallas-Ft. Worth and north Texas markets, including the rapidly expanding Barnett Shale gas play.

"We are delighted to make our first investment in the growing US gas sector with a solid management team," an Arcapita representative commented.

About Arcapita

Founded in 1996, Arcapita (www.arcapita.com) is headquartered in Bahrain with US and UK offices in Atlanta and London, respectively, and has completed transactions with a total value in excess of US$8 billion, including more than US$4 billion in the United States. Its main lines of business are corporate investment, real estate investment and asset-based investment. Until March 15, 2005, Arcapita's U.S. operations were conducted as Crescent Capital Investments Inc. Arcapita's corporate investment objective is to build a diversified portfolio of significant equity interests across a range of sectors. Arcapita invests in companies with strong management teams in businesses with a sustainable value proposition.

About Falcon Gas Storage Company, Inc.

Houston-based Falcon Gas Storage Company is the largest independently owned developer and operator of high-deliverability, multi-cycle (HDMC) natural gas storage capacity in the United States. The largest privately owned gas storage provider in Texas, Falcon has more than 20 Bcf of working gas storage capacity at its Hill-Lake and Worsham-Steed gas storage facilities. Falcon also is developing the MoBay Storage Hub, an HDMC gas storage project in Alabama, and has HDMC gas storage prospects in various stages of development in New Mexico and along the Texas, Louisiana and Mississippi Gulf Coast. Visit Falcon at www.falcongasstorage.com.