Cano Petroleum Announces Asset Development Plan and the Debut of Its New Website.

FORT WORTH, Texas -- Cano Petroleum, Inc. (AMEX:CFW) announced today its plans to substantially increase production and proved reserves through a variety of projects and improvements at its existing assets. The company expects capital expenditures totaling approximately $13.6 million over the next 12 months, to be allocated to the five fields it currently owns in Oklahoma and Texas. Cano anticipates its investment, to be made from funds recently raised in two private placements, will result in an incremental increase in production of more than 600 barrels of oil equivalent per day and will provide up to approximately 11 million barrels of additional proved reserves with an estimated PV10 value of $247 million, based upon the June 30, 2005, SEC price of $56.54/bbl. These approximately 11 million barrels of additional proved reserves are currently classified as probable reserves.

The asset development plan is comprised of various projects, including recompletion work at the company's Davenport, Rich Valley, Nowata and Desdemona fields. Additionally, the company plans to drill seven infill wells and complete a waterflood evaluation at Rich Valley. The company also intends to expand current waterflood operations at Desdemona, a field with approximately 100 million barrels of original oil in place that has never been waterflooded. Surfactant and polymer (SP) evaluations will be performed on several of the fields, along with the previously announced SP pilot that will be implemented at Nowata. Approximately $1.2 million of the capital expenditure budget has been designated for the acquisition of additional leases and royalty interests. The planned asset development capital expenditure levels and allocations may be subject to adjustment depending upon specific field results.

Jeff Johnson, Cano's Chairman and CEO, stated: "We are very excited at the prospect of significantly increasing our production and reserves with a relatively modest investment and substantially less risk compared to exploration. More importantly, our field development plan underscores the benefits of our focus on secondary and enhanced oil recovery of mature fields and demonstrates the potential upside value that is inherent in our business model: converting our probable reserves to proved."

Cano launched its redesigned and updated website today. The site can be viewed at www.canopetro.com.

About Cano Petroleum

Cano Petroleum, Inc. is an independent Texas-based energy producer with properties in the mid-continent region of the United States. Led by an experienced management team, Cano's primary focus is on increasing domestic production from proven onshore fields using secondary and enhanced recovery methods. Cano trades on the American Stock Exchange under the ticker symbol CFW. Additional information is available at www.canopetro.com.

Information Regarding Forward-Looking Statements: Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, volatility of natural resource prices, product demand, market competition, and risks inherent in our operations. These and other risks are described in our Annual Report on Form 10-KSB and other filings with the Securities and Exchange Commission.

Cautionary Notes to Investors - The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Cano uses "non-proved reserves" in this news release, which the SEC's guidelines strictly prohibit it from including in filings with the SEC. Investors are urged to also consider closely the disclosure in Cano's Form 10-KSB for the fiscal year ended June 30, 2005, available from Cano by calling 800-769-7205. This form also can be obtained from the SEC at www.sec.gov.