Cano Petroleum Announces New CFO, Vice President of Business Development and Directors.

FORT WORTH, Texas -- Cano Petroleum, Inc. (AMEX:CFW), an oil and gas producer specializing in secondary and enhanced oil recovery, announced today that it has named Morris B. "Sam" Smith, Cano's previous Audit Committee Chairman, as the Company's new Senior Vice President and Chief Financial Officer. Mike Ricketts, the Company's former CFO, will remain with the Company as Vice President and Principal Accounting Officer. Cano also appointed Pat McKinney to the position of Vice President - Business Development. Additionally, Cano elected Patrick W. Tolbert and Dennis McCuistion to the Company's Board of Directors. Mr. Tolbert will assume the position of Chairman of the Audit Committee that was vacated by Mr. Smith.

Chief Financial Officer: Sam Smith brings to Cano a substantial background in oil and gas-related accounting, finance and corporate development. Most recently, Mr. Smith was the interim CFO for Stroud Oil Properties, a privately-held E&P company and was a financial consultant for RBI International, Ltd. He serves as Chairman of the Board of Trustees for McMurry University.

From 2000 to 2003, Mr. Smith served as Executive Vice President, Chief Financial Officer and Treasurer of Encore Acquisition Company (NYSE:EAC). He was instrumental in the execution of Encore's IPO, which went effective on the NYSE in 2001, as well as the company's secondary offering in 2003. Mr. Smith oversaw the company's debt offerings, borrowing base credit line, accounting and tax issues, investor relations, information technology and helped establish corporate governance policies in preparation for compliance with Sarbanes-Oxley regulations.

From 1996 to 2000, Mr. Smith held the positions of Vice President of Finance and Chief Financial Officer for Union Pacific Resources (UPR). At UPR, he led the transition from a subsidiary of Union Pacific Corp. through the successful spin-off and recapitalization of the stand-alone S&P 500 company. As a member of the senior management team responsible for corporate strategy and policy, Mr. Smith was instrumental in financing $4.6 billion in debt through the public markets. He was responsible for maintaining relationships with Wall Street buy and sell side analysts, portfolio managers of debt and equity investors and managed acquisitions and divestitures. From 1990 through 1996, Mr. Smith held several senior management-level positions with Union Pacific Corp. Mr. Smith received his Bachelor of Business from McMurry University and is a graduate of the Advanced Management Program and International Studies - Harvard School of Business.

Vice President - Business Development: Pat McKinney brings to the company more than 24 years of progressive oil and gas industry experience in engineering, operations, finance and strategic planning. Most recently, he was the Worldwide Strategic Portfolio Manager for Pioneer Natural Resources, located in Irving, Texas. Prior to that, Mr. McKinney was the co-founder and CFO of a successful transportation start-up and subsequently, President of a transportation subsidiary of Corrections Corporation of America. Mr. McKinney spent more than 17 years with Union Pacific Corp. where he worked closely with Sam Smith, both in its corporate headquarters and its oil & gas, transportation and logistics subsidiaries. He gained extensive experience in secondary and enhanced oil recovery at UPR's Wilmington Oilfield in California. Mr. McKinney received his B.S. in Petroleum Engineering from University of Wyoming and his MBA from Pepperdine University.

Board Member, Audit Committee Chairman: Patrick Tolbert is a senior finance and operations leader with a track record of substantial performance and revenue improvements. Mr. Tolbert maintains extensive experience in financing (public and private), operational restructuring and cost reduction, and integrating acquisitions and business development on a global scale.

From 2001 to 2004 Mr. Tolbert held the positions of Executive Vice President and Chief Financial and Administrative Officer for LSG Lufthansa Service Holding, AG (wholly-owned subsidiary of Lufthansa Airlines). He was a member of the Executive Management Board and LSG's Supervisory Board and was responsible for leadership in the integration of LSG with U.S.-based Onex Food Services, Inc., resulting in the global leader in airline catering with annual sales of $3.5 billion and 36,000 employees. His duties also included oversight of finance, business development and information technology.

From 1992 to 2001, Mr. Tolbert was the Executive Vice President and Chief Financial and Administrative Officer for Onex Food Services, Inc., a global airline catering and U.S. food manufacturer with annual sales of $2.5 billion. He played a principal role in building OFSI's airline catering operations through a series of domestic and international acquisitions into the largest, most profitable company in its industry. His responsibilities included finance, including approximately $1.7 billion in bank and public debt financings, strategic and operational planning, business development, legal, human resources and information technology and served on the Board of Directors for nine years. During his tenure, OFSI achieved annual compounded growth in shareholder value of approximately 40% to $2.3 billion.

In the ten years prior to 1992, Mr. Tolbert held various senior management-level positions with a variety of companies. From 1971 to 1981, he was a senior audit manager with Price Waterhouse & Co., responsible for financial audits in a variety of manufacturing and service industries. He participated in approximately 12 public offerings of equity and debt securities and several acquisitions. Mr. Tolbert received his B.S. in Economics and his MBA from Auburn University.

Board Member: Dennis McCuistion is a widely-published author, guest speaker and Executive Producer and host of the nationally-syndicated, award-winning PBS program, McCuistion. As an advisor to boards and top management, a speaker and a facilitator of strategic planning sessions, Mr. McCuistion brings diverse experience and a unique perspective to Cano's Board of Directors. He currently serves on the board of Affiliated Computer Services, Inc. (NYSE:ACS), a Fortune 500 company with over 50,000 employees in 58 countries.

Before forming his own company in 1977, Mr. McCuistion began his career in banking where he became the CEO of a small community bank by the age of 29. He continues as a consultant to the banking industry in areas such as director and regulator relations, management of "problem" banks, analysis of bank assets and strategic planning. He is a well-respected and widely-published author on a variety of banking topics. His recent speaking and consulting engagements in the banking industry include the keynote address to the Indiana Bank Directors on the implications of Sarbanes-Oxley on corporate governance and the evaluation of the board and management of a $300 million Oklahoma bank required by the Federal Reserve Board under a cease and desist order.

Mr. McCuistion is also a speaker, author and consultant in business management unrelated to the banking industry. His business consulting expertise includes strategic planning, director relations, advising management on banking relationships, financial analysis and mergers and acquisitions. He is the recipient of numerous awards for his radio and television work and has spoken on a variety of leadership subjects. Mr. McCuistion is very active in political and civic issues, both at the national and local levels. He received his B.A. in Finance and his Master of Liberal Arts from Southern Methodist University.

Jeff Johnson, Cano's Chairman and CEO, stated, "We are very pleased with the recent additions to our management team and Board of Directors. The quality of the people we have added is a testament to the confidence they have placed both in our business model and our ability to execute it."

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.