Northway Announces Signing of Letter of Intent to Merge with Capsian Energy Ltd.

TORONTO -- Northway Explorations Ltd. (TSX:NOW) announced today that it has entered into a letter of intent with Caspian Energy Ltd. ("Caspian"), a private Ontario company, pursuant to which a wholly-owned subsidiary of Northway will amalgamate with Caspian (the "Merger"), and Northway will issue one common share of Northway for each common share of Caspian held by Caspian shareholders (other than Northway).

As described in Northway's news release of April 28, 2004, Northway has invested US $2.5 million in Caspian as part of a US $9.75 million private placement completed by Caspian. Caspian has agreed to acquire 50% of Closed Joint Stock Company Aral Petroleum Capital JV ("Aral") in exchange for US $9 million and 16,545,454 common shares of Caspian. Aral holds an exploration contract issued by the government of Kazakhstan which entitles it to explore and develop the oil and gas property known as the "North Block" located in the Aktobe region of Kazakhstan. The North Block comprises 2,348 square km and lies immediately adjacent to the Alivekmola field, a joint venture owned as to 50% by Nelson Resources Limited (TSX-NLG). After completing the acquisition of Aral, Caspian will have 39,590,909 issued and outstanding shares and an additional 992,727 options.

Caspian has also agreed to fund the first stage of the exploration program on the North Block and to pay certain outstanding debts of Aral and its ongoing operating costs.

In order to fund Caspian's obligations to Aral, Canaccord Capital (Europe) Limited has been engaged to complete an equity private placement to raise minimum gross proceeds of US $30 million prior to the completion of the Merger. Prior to the private placement closing, Northway intends to lend Caspian the required money to fund Caspian's ongoing obligations to Aral.

The Merger will be conditional upon, among other things, receipt of the approval of the Toronto Stock Exchange and any other required regulatory approvals, the approval of the shareholders of Northway and of Caspian, Caspian having completed the acquisition of 50% of Aral and the completion of the private placement on terms (including price) acceptable to Northway.

Upon completion of the Merger, but prior to accounting for any additional shares that may be issued as a result of the completion of the private placement, Northway will have issued and outstanding 50,897,164 common shares and the current shareholders of Northway will hold approximately 33.8% of the issued and outstanding shares of Northway.

The letter of intent provides that Northway and Caspian will complete due diligence investigations of the other and negotiate in good faith and use their best efforts to execute a definitive agreement prior to 5:00 p.m. (Toronto time) on August 31, 2004.

Shares Outstanding: 17,215,346