Fountain Oil announces third quarter results and progress report.

HOUSTON--(BUSINESS WIRE)--July 15, 1996--Fountain Oil Inc. (NASDAQ NMS:GUSH) announced today the results of operations for the third quarter of fiscal 1996, which ended on May 31, 1996.

Revenue for the quarter and nine month periods ended May 31, 1996, amounted to $49,703 and $129,961, respectively, compared to $77,835 and $610,309 for the comparable periods a year ago. The 1996 revenue relates to a modest amount of oil and gas production, primarily attributable to Fountain Oil's interest in the Inverness Field in Alberta, Canada, while revenue in the 1995 periods arose out of sales of goods and services related to the company's proprietary electrically enhanced oil recovery ("EEOR") technology. The company recently made a strategic decision to emphasize use of the EEOR technology over outside sales, so significant revenues from the EEOR technology are not expected in the foreseeable future.

The net loss for the quarter ended May 31, 1996, was $1,023,794, or $0.09 per share, as compared to $1,299,542, or $0.13 per share, for the comparable 1995 quarter. The net loss for the nine months ended May 31, 1996 was $3,691,889, or $0.34 per share, as compared to $3,353,661, or $0.44 per share, for the nine months ended May 31, 1995. In all of the reported periods, general and administrative expenses were very substantial in relation to revenue, since Fountain Oil has been creating an organization and infrastructure to identify, negotiate participations in and manage substantial oil and gas projects and those projects have not yet contributed to revenue.

At May 31, 1996, Fountain Oil had net current assets, or working capital, in excess of $21,000,000, reflecting the May 29, 1996, subscription for 5,000,000 shares of common stock by institutional and other qualified investors in Norway and other European countries. The subscription, which closed on June 5, 1996, produced $22,500,000 in gross proceeds and approximately $21,000,000 in net proceeds to the company after providing for commissions and other expenses.

According to Oistein Nyberg, Fountain Oil's president and chief executive officer, "The recent, successful completion of a large private placement at market price has provided Fountain Oil with the resources to proceed with the development of three significant projects we have been nurturing over the past year. This occurs just as these projects are reaching the development stage.

"Fountain Oil recently increased its effective interest in the Maykop Field in the Republic of Adygea, Russian Federation, from 31% to 37%, and we expect to ship drilling rigs and related equipment from the United States to Adygea shortly, in anticipation of the commencement of Maykop Field operations. Initial development activities will include the drilling of two new wells to assess the flow of primary gas production.

"The company's joint venture with Albpetrol, the Albanian national oil company, to develop the Gorischt-Kocul Field and the production license for that field were approved by the Council of Ministers of Albania in June. We will be proceeding with the experimental phase of that project, including the drilling of one or more horizontal wells, test production, reservoir evaluation and detailed field development planning.

"In May, Fountain Oil completed its acquisition of a 90% interest in UK-RAN Oil Corporation which, in turn, holds a 45% interest in a joint venture with Ukrnafta, the Ukrainian national oil company, to develop the Lelyaki Field in the Pryluki region of Central Ukraine. The Ukrainian joint venture received its production license in May. The initial development plan for the Lelyaki Field involves recompletion of existing wells using Western completion techniques.

"At Fountain Oil, we are viewing the present period, as we shift our focus and energy from identifying and securing participation in promising projects to actually developing these projects, as a pivotal phase in the company's evolution. Within the next twelve months, we should have at least an initial assessment of the validity of the company's strategy, focusing on the rehabilitation of existing oil and gas fields that, as a result of such factors as inadequate resources or outdated technology, have not previously been exploited effectively."

In addition to its projects involving the Maykop, Lelyaki and Gorisht-Kocul Fields, Fountain Oil is continuing negotiations regarding its participation in the Stynawske (Boryslaw) Field in Western Ukraine.

Fountain Oil is actively acquiring and developing a portfolio of oil and gas properties. The company has also developed a patented, electrically enhanced oil recovery technology which the company intends to employ to increase production of paraffinic and heavy oil. -0-

            FOUNTAIN OIL INCORPORATED AND SUBSIDIARIES

Financial Statements
Consolidated Condensed Balance Sheet

                                                      Unaudited
                                                     May 31, 1996

                              ASSETS
Cash and cash equivalents                           $  4,993,818
Stock subscription receivable                         22,500,000
Accounts receivable - affiliated entities              1,919,661
Other current assets                                     495,504
                            Total current assets      29,908,983

Property and equipment, net                            4,175,357
Oil and gas properties, net, full cost method
  (including $235,221 unevaluated)                       535,869
Investment in and advances to oil and gas ventures     5,054,401
Other assets                                             269,257
                                    Total Assets    $ 39,943,867

               LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable                                    $  1,407,485
Account payable - related party                          242,927
Accrued liabilities                                    2,310,009
Note payable - bank                                    4,734,733
Notes payable                                             76,806
                       Total current liabilities       8,771,960

Minority interest in subsidiaries                        223,350
8% Convertible subordinated debentures                 1,550,000
Commitments and contingencies (Notes 2 and 10)               ---

Stockholders' Equity:
  Preferred stock, par value $0.10 per share,
    5,000,000 shares authorized: no shares
    issued or outstanding                                    ---
  Common stock, par value $0.10 per share,
    50,000,000 shares authorized: 11,697,994
      shares issued and outstanding; 5,000,000
        shares subscribed                              1,669,800
  Capital in excess of par value                      52,145,337
  Accumulated deficit since October 31, 1988
    when a deficit of $39,952,292 was eliminated     (24,416,580)
                      Total stockholders' equity      29,398,557
      Total Liabilities and Stockholders' Equity    $ 39,943,867

            FOUNTAIN OIL INCORPORATED AND SUBSIDIARIES

Financial Statements
Consolidated Condensed Statements of Operations

                         Unaudited              Unaudited
                    Three Months Ended      Nine Months Ended
                    May 31     May 31       May 31       May 31
                     1996       1995         1996         1995

Operating Revenues:
  Power unit
    rentals     $      ---  $    21,151  $     1,913  $   35,861
  Equipment sales      ---       49,476          ---     463,555
  Consulting income    ---        7,208        2,943     110,893
  Oil and gas
    production      49,703          ---      125,105         ---
                    49,703       77,835      129,961     610,309

Operating Expenses:
  Cost of sales        ---       31,342          ---     359,294
  Lease operating
    expense         40,178          ---       95,699         ---
  Other direct
    project cost       ---       36,569          ---      79,086
  General and
    administrative 805,560    1,211,658    3,114,732   2,733,802
  Depreciation,
   depletion and
    amortization   100,717      234,684      256,400     865,290
  Impairment of
   oil and
    gas properties  35,790          ---      268,790         ---
  Research and
    development        ---          ---          ---      63,279
                   982,245    1,514,253    3,735,621   4,100,751

Operating Loss     932,542    1,436,418    3,605,660   3,490,442

Other Income (Expense):
  Interest, net   (109,816)      95,800     (119,803)     90,407
  Other             18,564       41,076       33,574      46,374
Total other
  income (expense) (91,252)     136,876      (86,229)    136,781

Net Loss       $ 1,023,794  $ 1,299,542  $ 3,691,889 $ 3,353,661

Weighted average
 number of common
  shares
   outstanding  11,185,164   10,146,189   10,953,177   7,544,666

Net Loss Per
  Common Share  $    (0.09) $     (0.13) $     (0.34) $    (0.44)

CONTACT: Fountain Oil Inc.

(U.S.) Susan E. Palmer, 713/492-6992

or

(EUROPE) Nils N. Trulsvik, 1(47) 66 90 3144