Correcting...CORRECTION FROM SOURCE: Arakis Energy Corporation - Open Letter to Shareholders.

CALGARY, ALBERTA--(BUSINESS WIRE)--May 9, 1997-- Arakis Energy (NASDAQ AKSEF )

OPEN LETTER TO SHAREHOLDERS

In the news release transmitted earlier today, May 9, 1997, for Arakis Energy Corporation, there was an error in the text. In the paragraph following the sub title "Issuer Bid Program - Why hasn't Arakis been more active in buying back its shares?" the first paragraph should have read "representing 0.55 percent of its outstanding common shares", and the second paragraph should have read "With US $55 million ....". The complete and corrected text is as follows:

Dear Shareholder/Investor:

A few days ago, I participated in a conference call information session with a group of Arakis shareholders and investors. Due to the significance of a number of the questions raised at that session, it seemed appropriate that I should expand upon the answers I gave and, at the same time disseminate that information to a wider audience. The more important questions included:

What is the Company doing to enhance share value?

As you know, share value is closely aligned to net asset value and, for an oil and gas company, the two key elements that determine net asset value are reserves and cash flow. Our program over the past year has seen substantial reserve enhancements with significant discoveries at Toma South, El Toor and El Nar. The recent formation of the Sudan Consortium has resulted in an exploration and development program, which has been expanded fourfold from the 1996 level of activity. There are now four drilling rigs in the concession either drilling or being rigged up to drill. There are also three seismic crews actively acquiring data. This activity forms the backbone of our efforts to increase the rate at which reserves are added.

With respect to cash flow, our primary objective is timely completion of the oil pipeline to Port Sudan. The Consortium is rapidly preparing for the start of construction of the pipeline. Bid qualification documents are being collected and assessed and engineering design specifications are being reviewed for finalization. Current plans target a Q4 1999 pipeline startup.

Of critical importance to Arakis is the fact that it is primarily Consortium partners' funds which are being spent at this time. Arakis has a world class project that has attracted international partners who have committed to spend approximately US$525 million on the exploration and development program and the pipeline before Arakis has to expend any further capital.

Looking at immediate cash flow, the Oman exploratory test presently drilling has the potential to generate immediate revenues. Again, to preserve the Company's existing working capital, a portion of the prospect and related well costs have been farmed out to highly regarded industry partners.

Issuer Bid Program - Why hasn't Arakis been more active in buying back its shares?

Under the Issuer Bid Program, Arakis has the ability to acquire up to 10 percent of its outstanding common shares. To date, the Company has acquired 487,000 shares, representing 0.55 percent of its outstanding common shares, at a total cost of US$1,752,912.

With US $55 million in working capital at December 31, 1996 the Company is capable of being more active in the buy back program. At current prices, the Board and Management believe that Arakis' net asset value per share would be increased through the buy-back of additional shares. So, why hasn't Arakis been more active in buying back its shares?

There are a number of overriding considerations that suggest the Company should guard its working capital very jealously until it has developed a sustainable cash flow to ensure future capital spending opportunities and obligations are not missed.

Firstly, it should be understood that any shares acquired through this issuer bid program must be cancelled, under Arakis' governing corporate laws, and returned to the Company's treasury. These acquired shares are not available for resale by the Company. Accordingly, any funds used to buy back shares are not recoverable at a later date.

Secondly, as the Sudan project moves forward, Arakis will have to eventually commence funding its 25 percent share of ongoing expenditures. Although there will not be a need for significant capital for Sudan for a considerable period of time, and although our preference is to access debt funding to meet the balance of our capital commitments, we do not want to reduce our working capital to a level that imperils either the possible expansion of the Sudan project vision or our ability to pursue other interesting leads for establishing grass roots concession positions which will require capital to obtain.

What changes in Board composition are anticipated?

During the past months, I have focused a lot of attention on increasing the depth and independence of Arakis' Board of Directors. The addition of Mr. James Taylor, formerly Executive Vice-President, Worldwide Exploration & New Ventures of Occidental Oil and Gas Corp., and Dr. Asif Syed, an independent oil financier and one of the founding shareholders of State Petroleum Corporation, represent important appointments to Arakis' Board. Arakis' strengthened Board is capable of properly pursuing investment opportunities in Sudan and in other promising geographic areas in a manner that reflects the predominant interest of all shareholders in increasing the aggregate and per share value of Arakis' equity.

Further additions to the Arakis Board are expected during 1997. Ideally I would like to add additional independent directors who can contribute to the further development of Arakis as a meaningful and profitable participant in international energy projects.

Due to the significance of the Sudan Project to the Company, it is vital that the Board maintains an excellent relationship with our host country. I am pleased to confirm current relations between our Board and the Government of Sudan are extremely strong and cooperative and we are committed to ensuring this strategic relationship remains intact.

As you may all be aware, Sands Petroleum AB has acquired an 8.6 percent interest in Arakis and has made a formal request to provide its nominee, Mr. Lukas Lundin, with a seat on Arakis' board. This request will be honored.

Has Arakis granted an excessive number of options?

This is not the case at all. The shareholders of Arakis approved a Stock Option Plan dated effective January 1, 1996 at the March 11, 1996 Special Meeting of shareholders which contemplated the granting of 10 percent of the total number of issued and outstanding shares to officers, directors, employees and special consultants of the Company. 6,175,000 options representing 7.6 percent of the issued and outstanding shares have been granted in three tranches dated January 1, July 17 and September 26, 1996. No other options have been approved or granted by the Company. Arakis' Stock Option program is fairly unique. Almost every permanent employee and many of the consultants of the Company have been granted stock options which has meant that the Company has been able to attract quality individuals who are extremely motivated to see the Company, and the Sudan Project in particular, succeed.

Will the conflict between the Government of Sudan and a warring rebel group have serious implications for the future of Arakis?

While our policy is to avoid involvement in the internal politics of sovereign nations, we do believe that the conflict in Sudan can best be resolved through negotiation, rather than force. In part, this is already proving to be true, as evidenced by the April 1997 signing of peace accords between the government and a number of previously warring factions. These peace accords were achieved with the help of former U.S. president, Jimmy Carter. We understand that he is currently pursuing further peace efforts with the SPLA, the remaining rebel group. We wish him every success.

In the meantime, regardless of the internal political problems, we help where we can, particularly in such areas as the provision of fresh water wells, medical facilities and jobs. We also believe that the substantial cash flows that will accrue to the Sudanese when production from our concession comes on stream late in 1999, will mark the beginning of a significant improvement in their economic well-being. For these reasons, we remain confident as to our future operations in Sudan.

Investor Relations

This letter is the first in a planned series of regular information briefs to our shareholders and interested investors and marks the beginning of a more proactive investor relations effort. Other initiatives being pursued include a wide-ranging program of meetings my executive colleagues and I will be conducting with major U.S. and Canadian institutional investors. Our message will focus on the accelerating development of our project in Sudan, the potential of our drilling program in Oman and an outline of other international ventures we are currently pursuing. I firmly believe that once the Arakis story becomes more fully understood, the Arakis share price will rise to its true value.

If you would like to discuss any of these matters further or have any other questions or concerns, please do not hesitate to contact me personally at my office in Calgary at [phone].

Yours truly,

ARAKIS ENERGY CORPORATION
Signed by
Lutfur Rahman Khan
Chairman of the Board and Chief Executive Officer

CONTACT: Arakis Energy Corporation

Lutfur Rahman Khan, 403/ 263-2471

403/263-8069 (FAX)

www.arakis.com