August Energy Corp. and U.S. Oil and Gas Resources Inc. Announce Joint Venture in Iowa Field.

PUCKETT, Miss. -- August Energy Corp, (PINK SHEETS:AENC) announced today that the company has entered into an agreement with U.S. Oil & Gas Resources Inc. (TSX VENTURE:USR) to participate in the drilling of an infield twin offset well to a producing well in Iowa Field, Jefferson County, LA.

Details: U.S. Oil & Gas has agreed to jointly drill the Fred Dennison #2 well in Iowa Field 50%-50% with August Energy Corp. As referenced in August Energy's press release of Sept 8, 2004, the well is a direct offset to the Fred Dennison #1 well which is presently producing approximately 600,000 cubic feet of gas per day, together with 20 barrels of condensate per day in a zone at 8150 ft. This well has other "behind pipe reserves" shallower, all of which U.S. Oil & August will earn 45% of, including the producing zone, by drilling the twin offset well. The twin offset well is targeting another deeper zone at approximately 10,000 feet, which is a high-pressure zone that was encountered while drilling the Fred Dennison #1 well. Unable to control the extreme high-pressures due to lack of preparation for such an event, the operator plugged back from the high-pressure zone and completed in the present zone shallower.

Drilling experts have been consulted and procedures designed to allow USR and AENC to drill and complete the new well in the high pressure zone where geological evidence, including seismic, indicates that the company could encounter up to 200 feet of productive formation with a potential for up to 15 billion cubic feet of gas reserves. A successful completion is expected to yield initial and sustained production rates from 6 to 12 million cubic feet of gas per day together with 200 barrels of condensate per day according to historical records of similar completions in the field. Additionally, five other productive zones should be encountered in the new well, all of which could ultimately yield a cumulative 20 billion cubic feet of gas together with 500,000 barrels of oil and/or condensate according to the geological studies of the prospect.

Located about 20 miles east of Lake Charles, LA, Iowa Field was discovered in the 1930's and developed by major companies such as Shell and Amoco. To date the field has produced over 465 billion cubic ft of gas and over 10,000,000 barrels of condensate and/or oil. Under terms of the agreement with the operator, shared 50-50% by USR and AENC, the two companies will pay 100% of drilling cost (estimated at $1,200,000) to earn 45% working interest in the new drilled well, together with 45% interest in the existing producing well and all of the leased acreage, pipeline, production, and other facilities.

Drilling permit has been acquired and a drilling contractor engaged. Drilling is set to commence once the drilling contractor completes the current job.

Certain information included in this communication (as well as information included in oral statements or other written statements made or to be made by August Energy Corp. or US Oil and Gas Resources Inc.) contain statements that are forward looking, such as statements related to the future anticipated direction of the oil and gas industry, plans for future expansion, various property development activities, planned capital expenditures, future funding resources, anticipated production and reserve growth. These forward-looking statements are subject to a number of known and unknown risks and uncertainties that could cause actual operations or results to differ materially from those anticipated.