Cano Petroleum Executes Term Sheet on $100,000,000 Senior Secured Credit Facility.

FORT WORTH, Texas -- Cano Petroleum, Inc. (AMEX: CFW) announced today that on October 19, 2005, it entered into a proposal letter and corresponding term sheet with Union Bank of California, N.A. for a $100,000,000 Senior Secured Credit Facility ("Term Sheet") and that it has ended discussions with other potential lenders regarding a senior credit facility. The Term Sheet contemplates initial borrowing availability of $30,000,000 and has a term of four years. The Term Sheet is non-binding, and is subject to due diligence and the negotiation of a credit agreement. Initial proceeds from the Senior Secured Credit Facility have been earmarked to support a previously announced and potential future acquisitions. There can be no guarantee that the financing covered by the Term Sheet will take place or that if it does take place, that it will take place on the terms set forth above or in the Term Sheet.

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 fields using enhanced recovery methods. Cano trades on the American Stock Exchange under the ticker symbol CFW. Additional information is available at www.canopetro.com.

Safe-Harbor Statement -- Except for the historical information contained herein, the matters set forth in this news release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The company intends that all such statements be subject to the "safe-harbor" provisions of those Acts. Many important risks, factors and conditions may cause the company's actual results to differ materially from those discussed in any such forward-looking statement. These risks include, but are not limited to, estimates or forecasts of reserves, estimates or forecasts of production, future commodity prices, exchange rates, interest rates, geological and political risks, drilling risks, product demand, transportation restrictions, the ability of Cano Petroleum, Inc. to obtain additional capital, and other risks and uncertainties described in the company's filings with the Securities and Exchange Commission. The historical results achieved by the company are not necessarily indicative of its future prospects. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.