Canadian 88 Energy Corp. Reports Strong First Six Months of 1999 and Announces a Major Corporate Initiative -- ''Target 2000'' -- to Further Improve Results.

CALGARY, Alberta--(BUSINESS WIRE)--Aug. 26, 1999--

Canadian 88 Energy Corp. (TSE:EEE.) (ASE:EEE.) (AMEX:EEE) of Calgary, Alberta, Canada announced today that it achieved record levels of production, and cash flow for the first six months of 1999 compared to 1998 and that the Company embarked on a major corporate initiative designed to further improve corporate performance. The first half of 1999 was both a very exciting and trying time for Canadian 88 with the Company's exploration activity reaching record levels while market pressures related to delays in bringing onstream production from some of the Company's high impact foothills natural gas plays caused the stock price to underperform the overall market. "We are confident that the market will reward our strategy of developing high quality foothills natural gas prospects combined with a major initiative designed to further improve performance, reduce costs and establish clear corporate and individual targets for the operating centers within the Company as we continued to work toward our goal of building one of North America's premier natural gas exploration company," Company President Greg Noval said in Calgary today.

HIGHLIGHTS OF THE FIRST HALF OF 1999

Operations

The first half of 1999 was an exciting period for the Company as Canadian 88 began to enjoy the benefits of bringing new production onstream from our Waterton project. During the period the Company achieved record production and cash flow increases. Production from Waterton was ramped up during the half, in spite of production downtime resulting from plant turnarounds and other operational problems beyond Canadian 88's control at Shell Canada's Waterton gas plant. To the credit of Canadian 88's technical and engineering staff these longlife foothills reserves, which are some of the most challenging to drill and operate in North America, were placed on production with a cycle time of less than three years. Our past exploration success was recognized by the recent Peter's & Co. F&D study dated July 1999 which placed Canadian 88 2nd and 5th overall in Canada in terms of 5 and 3 year Proven F&D rankings based on our 10 to 1 mcfe F&D cost of $0.51 and $0.50 (versus the industry average of $0.77 and $0.75 respectively). This study included Canadian 88's rather high 1998 F&D cost which was the result of our strategy in 1998 of expanding facilities, land and seismic activity to record levels at the bottom of the energy cycle. In addition, the underlying value of Canadian 88's assets was recognized by an independent evaluation by JS Herold dated July 8, 1999 which determined our net asset value to be $6.25 Cdn per share. On a go forward basis several exciting new exploration prospects are being developed alongside existing reserves which we propose to discuss in this report to shareholders.

Waterton

At Waterton we have developed an excellent producing asset for the Company in spite of the fact that initial production may not have met market expectations. In addition, our strategically located 100 percent owned Waterton natural gas pipeline has opened up a whole new exploration corridor in southwest Alberta which will undoubtedly provide further returns to our shareholders. As of January 1, 1999 McDaniel & Associates assigned 352 Bcf of proved reserves to the Waterton property of which 88 Bcf were proved undeveloped. The proved plus probable reserves assigned to the Waterton property are 398 Bcf of gas. Raw gas production averaged 42 mmcf/d and sales of natural gas averaged 35 mmcf/d from the field in the first six months even though the Company suffered numerous production cutbacks due to operational issues and a month long turnaround at the Shell Waterton gas plant. The Company has recently received approval to co-mingle production from three of the seven wells in the field and is evaluating alternatives to increase production at the horizontal well, which was completed in the second quarter. This well, our seventh, appears to have been incorrectly placed in the formation resulting in lower than expected production rates. The Company is also considering the drilling of additional vertical wells into the Mississippian and Wabamun formations to increase production. The deepening of the horizontal well combined with the co-mingling of production at the three wells and the drilling of additional vertical wells should accelerate production and significantly reduce the reserve life index of this property.

In addition, the Company has commenced the drilling of the first of several new exploration prospects identified in the area targeting significant new reserves and production by beginning operations to deepen one of the existing Burmis wells to test a new large deeper thrust sheet identified by the Company on new 3-D seismic over the area. Two other exciting new prospects will be drilled in this area in late 1999 or early 2000. All of these prospects can be immediately tied into our Waterton pipeline.

Chedderville

In the Chedderville area, the Company averaged 20 mmcf/d of natural gas sales in the first half. Production from this multi-pool area has been restricted and declined somewhat during 1999 due to a lack of capacity to handle increased water production and the need for compression to debottle-neck pipeline capacity. The gas production rate is expected to increase as improved water handling and compression facilities are completed in the fourth quarter of 1999. Proved and proved plus probable reserves associated with this area (as evaluated by McDaniel & Associates) were 65 Bcf and 86 Bcf respectively at January 1, 1999. We are currently drilling a 3780 meter Leduc test in this area and operations are underway to complete production testing and tie-in of a gas well successfully drilled during the second quarter. In addition, several further locations have been identified and will be drilled in the near term to further enhance production from this important area.

Olds/Crossfield

Our Olds/Crossfield property continues to be the cornerstone of the Company. The property is the largest 100 percent owned property in West Central Alberta. Production from Olds/Crossfield continued at record levels during the first half of 1999 through our 100 percent owned natural gas processing plant which has an excellent operating and safety record. Sales net to the Company averaged 37 mmcf/d of natural gas and 1102 bbls/d of ngl's in the first six months of 1999 even though minimal drilling occurred as a result of potential regulatory issues associated with further expansion of our plant. Like other operators of significant sour gas plants, we are debating the need for and the timing of enhanced sulphur recovery requirements with the regulatory authorities. We expect to resolve these issues in the near term which will enable us to ramp up our exploration and development activity in the area which we expect will result in additional Canadian 88 production from the area of approximately 20 mmcf/d. The Company has increased production from the field by more than 6 fold since acquiring it from Amerada Hess in 1995. Excellent production can be expected from this property for years to come. McDaniel & Associates have assigned total proved reserves of 249 Bcf of natural gas and 10 million barrels of liquids at January 1, 1999 to the property and identified 39 drilling locations at Olds that can be drilled to significantly increase production from this long life reservoir.

Caroline

In the Caroline area, Canadian 88 has been involved with Newport Petroleum Ltd. in developing a potentially very large Swan Hills natural gas play. To date 5 wells have been drilled on our 50/50 joint venture holdings with a sixth well currently drilling.

McDaniel & Associates has assigned proved undeveloped reserves of 43 Bcf of natural gas and 12.5 million barrels of liquids to this prospect net to Canadian 88. During the second quarter, Canadian 88 as operator together with Newport tied in our 10-2-35-6 W5M well into the Shell Caroline Gas Plant on a temporary basis to test the well's capability. Unfortunately, due to the failure of pressure recorders in this well, test results from the well were inconclusive. Our plan is to retest this well in order to assist our respective companies in developing our plans for production and field development.

Wildcat Hills

During the second quarter we completed the successful drilling of two wells targeting two separate new large structures located at Benjamin Creek and Salter in the highly competitive Wildcat Hills exploration play where we are fortunate to have significant landholdings. Follow-up activities including the drilling of a second well (where drilling results should be available shortly) and pipeline construction are currently underway at West Benjamin. We expect to commence production of approximately 10 to 20 mmcf/d of natural gas from this new field by mid October 1999. A 200 square mile high resolution 3-D seismic program has just been completed to the north of the West Benjamin discovery where we expect to drill a newly identified structure by year end.

Other Areas

Our focused strategy of exploring for high quality natural gas reserves within the Foothills Corridor was clearly demonstrated our drilling activity in the first half of 1999. We continued to develop our "Canadian 88 Advantage" in several new areas where we have expertise. Several new exploration initiatives were launched including the drilling of a new foothills prospect in southwest Wyoming where our first exploration well encountered approximately 600 feet of structurally high Mississippian structure in the Mission Canyon formation and approximately 240 feet of pay. Excellent reservoir pressure has been encountered and gas has been tested at up to 6 mmcf/d with the well's initial production rate estimated at 10 mmcf/d. However unexpected water has been encountered in the wellbore during extended testing and we are now attempting to determine the source of this water. Analysis of the logs does not indicate the presence of water and we feel it may be coming from a fault or may be attributed to a poor cement bond. Upon completion of our technical review a remedial workover program will be performed on the well. The test well earned a large block of acreage and a large 3-D seismic program is being proposed for the area with follow-up locations planned on this exciting play.

In addition to Mississippian thrust sheet activity, a major focus was directed toward Swan Hills Exploration with Tcf potential in Western Alberta where five Swan Hills Devonian exploration plays are in various stages of development. New plays are being developed in the Ram River, Stolberg, Cordel and Blackstone areas where Canadian 88 has over 150,000 acres complimented by 230 square miles of new high resolution 3-D seismic being shot. The shooting of the seismic and related interpretations will be completed by the end of October and we plan to commence drilling on at least one of these prospects by year end.

Furthermore, Canadian 88 as operator and our partner Canadian Occidental Petroleum Ltd. propose to spud our Lochend/Cremona Swan Hills test well early in the new year. To the credit of our land, drilling and engineering staff we received approval on July 12, 1999 to drill this high impact well after successfully completing one of the most extensive public sour gas well licensing public hearings ever held in the Province of Alberta. Both our Company and Canadian Occidental are of the opinion that this prospect may contain significant reserves located northwest of the City of Calgary.

In addition to working toward expanding our holdings in Western Canada during the first half of 1999 to over 850,000 acres (with an average working interest of 81 percent), a tremendous opportunity presented itself in offshore Eastern Canada early in the second quarter of 1999 during the low oil price environment. Large parcels of land were posted for sale off the deep water Scotia Shelf southwest of Sable Island where 510 mmcf/d of new production is being placed onstream over the upcoming months. Going into the April 1999 Nova Scotia Offshore Sale, Canadian 88 guided by the experience of Alan Clark, our Manager of Frontier Exploration and Curtis Booth, our Senior Staff Geophysicist who collectively have over 40 man years of Canadian East Coast experience, being formerly employed by Chevron Canada and Murphy Oil, our staff evaluated 5400 miles of new high quality 2-D seismic data. The results of which allowed Canadian 88 to be successful at the sale in acquiring two large blocks of acreage totalling 950,000 acres based on five year work commitments totalling $29.9 million. The prospects under our land represent world class large scale turbidite fans analogous to structures containing major discoveries offshore Angola where the success rate on exploration wells yielding 250,000,000 barrel plus discoveries has averaged 60 percent. This play was the highlight of corporate presentations of Shell Canada, Murphy Oil and Imperial Oil at the recent CAPP Symposium in Calgary during June of this year and Canadian 88 is the only public Canadian independent in this extremely exciting high impact play which we predict will be one of the most followed plays in North America within the next 12 months.

A $24 million seismic program is currently underway at no cost to Canadian 88 which will evaluate our acreage and lands posted for sale in late October offsetting our holdings. We expect to see a $40 million well drilled next year at no cost to the Company targetting at least one of the large structures identified on our land.

Target 2000

The Company has recently embarked on a major corporate initiative, referred to as Target 2000, focused on further improved performance, cost control, short term growth opportunities and production optimization. As part of this initiative, Soheil Asgarpour, who has extensive experience in this area, has been appointed Senior Vice-President in charge of operations. A more streamlined operating structure has been implemented and clear targets have been set for each area of activity within the organization both in terms of cost per Boe and production volumes expected to be delivered by year-end. G&A cost cutting measures have been implemented which will deliver saving of nearly $2 million per year and as a result administration costs on a Boe basis will decrease significantly as we approach year-end. Field operations have identified several steps to reduce costs by October of 1999 that should result in cost saving of over $5 million per year. Operating groups have agreed to their volume targets and have established detailed, well specific, plans and timetables to achieve those goals. The anticipated capital associated with these plans is within the Company's current capital budget and within the available credit facilities of the Company.

Financial -0-

-    Average daily production increased 32 percent during the first
     half of 1999 to 140.1 mmcfe/d compared to 106.4 mmcfe/d in 1998.
     Average natural gas production is up 47 percent over 1998 to a
     record level of 111.5 mmcf/d from 75.7 mmcf/d in the prior year.
     An unexpected shutdown and maintenance work at Shell's Waterton
     Gas Plant adversely affected production during the second
     quarter.

-    Average natural gas prices increased 21 percent to $2.20 per mcf
     from $1.82 during the first half of 1998. However, average prices
     for oil and ngl's were down marginally (4 percent) to $16.00 from
     $16.66 in 1998. This decline was a result of lower commodity
     prices experienced in the industry during the first quarter.
     Liquids prices have now rebounded to substantially higher levels.

-    Record cash flow of $19.3 million for the first six months was up
     39 percent over $13.9 million at the same time in 1998. Cash flow
     for the second quarter was up 59 percent to $8.6 million.
     Six-month revenue of $53.2 million was up 47 percent over
     revenues of $36.3 million for the same period in 1998 and EBITDA
     was up 50 percent over 1998 at 27.0 million versus 17.9 million.
     Net income after tax for the first six months remained flat when
     compared to 1998 although a significant improvement of
     approximately $1.0 million was experienced in the second quarter
     of 1999 verses second quarter 1998.

-    Capital expenditures during the first half of 1999 were $61.5
     million, down from the record high of $114.8 million at the same
     time in 1998 primarily due to reduced capital spending on
     facilities and infrastructure and significantly lower land costs.
     Expenditures on exploration and development for the six months
     ended June 30 slightly exceeded those for the first six months of
     1998 as we endeavored to concentrate a larger proportion of our
     capital budget toward exploiting our significant land base.
     Capital expenditures incurred were as follows: $45.9 million for
     exploration and development activities (1998 - $45.4 million);
     $12.2 million for plants, facilities and pipelines (1998 - $30.2
     million); and $3.4 million toward strategic land acquisitions
     (1998 - $39.1 million). Capital spending by Canadian 88 is
     augmented in many projects with funds from our joint venture
     partner RMX Exploration who has $20 million in available funds to
     spend alongside Canadian 88 into year end.

-    In June, Canadian 88 expanded its production loan facility from
     $205 million to $280.5 million. With a borrowing base attributed
     to its reserves of $300 million under the loan agreement,
     Canadian 88 has the flexibility to accomplish its capital
     spending objectives and undertake many attractive opportunities
     available to the Company.

OUTLOOK

We are confident that our strategy of developing long-life high quality natural gas reserves will reward shareholders given a very strong Canadian and North American natural gas market and our extensive inventory of natural gas exploration and development opportunities. During the second half of 1999, we will concentrate on meeting our exit target volume of 19,000 Boe/d and creating shareholder value by primarily focusing our activity on shorter-term opportunities. We believe that we have established a clear program to achieve significant improvement in the Company's operations, including achievable production targets and real operating and administrative cost savings. These targets are being monitored by our senior management team and were developed in conjunction with our employees who are committed to their individual and group targets and who's compensation is now directly tied to such targets.

By focusing on these targets and capitalizing on the exciting opportunities available to us we are confident we will continue to demonstrate superior growth for our Shareholders. -0-

                       CANADIAN 88 ENERGY CORP.

       SECOND QUARTER 1999 FINANCIAL AND OPERATING STATISTICS

                                 Six Months Ended      Percent
                                     June 30            Change
                                 ----------------      -------
                                 1999        1998
                                 ----        ----
Financial:
(000's except per share amount)

Production Revenues              $53,243   $36,253       47
Cash Flow from Operations        $19,326   $13,922       39
EBITDA                           $26,982   $17,938       50
Net Earnings                      $2,425    $2,486       -2

Per Common Share:
  Cash Flow from Operations        $0.18     $0.15       20
  Net Earnings                     $0.02     $0.03      -33

Average Common Shares (000's)    105,429    95,481       10

Operations:

Production Volumes:
  Total (mmcfe/d)                  140.1     106.4       32
  Natural gas (mmcf/d)             111.5      75.7       47
  Oil & NGL's (bbls/d)             2,857     3,074       -7

Sales Prices:
  Natural Gas ($/mcf)              $2.20     $1.82       21
  Oil & NGL's ($/bbl)             $16.00    $16.66       -4

Capital Expenditures (000's):
  Exploration & Development      $45,902   $45,428        1
  Plants, Facilities and
   Pipelines                      12,227    30,211      -60
  Land, Lease & Acquisitions       3,352    39,121      -91
                                 -------  --------
                                 $61,481  $114,760      -46
                                 -------  --------
                                 -------  --------

                                Three Months Ended     Percent
                                      June 30           Change
                                ------------------     -------
                                1999          1998
                                ----          ----
Financial:
(000's except per share amount)

Production Revenues              $25,242   $17,256       46
Cash Flow from Operations         $8,635    $5,444       59
EBITDA                           $12,619    $8,006       58
Net Earnings                      $1,128      $159      609

Per Common Share:
  Cash Flow from Operations        $0.08     $0.06       33
  Net Earnings                     $0.01     $0.01        -

Average Common Shares (000's)    105,429    95,481       10

Operations:

Production Volumes:
  Total (mmcfe/d)                  131.1     107.4       22
  Natural gas (mmcf/d)             103.5      77.7       33
  Oil & NGL's (bbls/d)             2,765     2,967       -7

Sales Prices:
  Natural Gas ($/mcf)              $2.14     $1.80       19
  Oil & NGL's ($/bbl)             $18.77    $15.42       22

Capital Expenditures (000's):
  Exploration & Development      $17,308   $19,511      -11
  Plants, Facilities and Pipelines 6,556    18,182      -64
  Land, Lease & Acquisitions       1,439    27,657      -95
                                 -------   -------
                                 $25,303   $65,350      -61
                                 -------   -------
                                 -------   -------

Canadian 88 Energy Corp. (EEE) is an independent public oil and gas company with its head office in Calgary, Alberta, Canada. The shares of Canadian 88 Energy Corp. are traded on the Toronto, Alberta and American Stock Exchanges.

Disclosure Regarding Forward-Looking Statements

Certain statements in this release contain forward-looking statements including outlook on prices, expectations of future production, business plans for drilling and exploration and expectations of capital expenditures. Information concerning reserves contained in this report may also be deemed to be forward-looking statements as such estimates involve the implied assessment that the resources described can be profitably produced in future. These statements are based on current expectations that involve a number of risks and uncertainties which could cause actual results to differ from those anticipated by the Company. These risks include, but are not limited to: the background risks of the oil and gas industry (e.g., operational risks in development, exploration and production; potential 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 relating to production, costs and expenses, and health, safety and environmental risks), and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures. Additional information on these and other factors which could affect the Company's operation or financial results are including in the Company's Annual Report under the headings "Management's Discussion and Analysis - Business Risk and Uncertainties" and in the Company's other reports on file with Canadian securities regulatory authorities and the U.S. Securities and Exchange Commission.

The information contained herein has neither been approved nor disapproved by the Toronto, Alberta or American Stock Exchanges.