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Oilexco Financing Update: Subsidiary Faces Insolvency

02:00 EST Wednesday, December 31, 2008

CALGARY, ALBERTA--(Marketwire - Dec. 31, 2008) - Oilexco Incorporated ("Oilexco" or "the Company") (TSX:OIL)(LSE:OIL) announced today that its wholly-owned subsidiary, Oilexco North Sea Limited ("ONSL"), intends to file petitions for administration ("Administration") in the High Court in the United Kingdom as soon as reasonably practicable but likely as early as next week. Oilexco Incorporated is considering its options in light of this development but at this time remains solvent and committed to the strategic review process that was previously announced.

As the Company previously announced on December 17, 2008, incremental funding was necessary in addition to the bridge funding announced that day, although no assurances were given that such funding would become available. Today, the Company was advised by The Royal Bank of Scotland plc on behalf of the syndicate of lenders that they are not prepared to advance any further funding to ONSL. Oilexco does not have any other source of funding at this time and has therefore concluded that an Administration must be pursued. Oilexco has been advised that funding for an Administration is in the process of being arranged by its senior secured lenders, subject to settlement of terms with the prospective administrators and counsel. Accordingly, all parties expect that safe and orderly operations will continue throughout this period.

As also announced on December 17, 2008, Morgan Stanley & Co. Limited and Merrill Lynch International have been retained by Oilexco in a strategic review process to seek alternative funding or the sale of the Company or some of its assets. Several parties have indicated significant interest in acquiring ONSL or all or substantially all of its assets. Oilexco understands that it is the intention of the proposed administrators to continue this process, with the intention of selling ONSL or all or substantially all of its assets in such a way as to maximize the value of the assets for all stakeholders, and maintain the business, its employees and systems as a going concern. However, there can be no certainty that any binding offers will be received or accepted or that any transaction will be completed or, if it is completed, that there will be any equity value for Oilexco shareholders. The shares of ONSL comprise substantially all of the assets of the Company.

About the Company

Oilexco is an oil and gas exploration and production company active in the United Kingdom. Oilexco's producing properties, exploration and development activities are located in the UK Central North Sea, specifically in the Outer Moray Firth and Central Graben areas. Oilexco operates in the United Kingdom through its wholly owned subsidiary, Oilexco North Sea Limited, a company registered under the laws of England and Wales. Oilexco shares are listed for trading on the London Stock Exchange (LSE) and the Toronto Stock Exchange (TSX) under the symbol "OIL".

Forward Looking Statements

This disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond Oilexco's control, including: the impact of general economic conditions in the areas in which Oilexco operates, civil unrest, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in commodity prices, foreign exchange or interest rates, stock market volatility and obtaining required approvals of regulatory authorities. In addition there are risks and uncertainties associated with oil and gas operations, therefore Oilexco's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amounts of proceeds, which Oilexco will derive therefrom. All statements included in this press release that address activities, events or developments that Oilexco expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, completion and production timetables and costs to complete wells, and production facilities. These statements are based on assumptions made by Oilexco based on its experience perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.

Please note that Morgan Stanley & Co. Limited is acting exclusively for the Company and Oilexco North Sea Limited and no one else in relation to this matter and will not be responsible to any person other than the Company and Oilexco North Sea Limited for providing the protections afforded to clients of Morgan Stanley & Co. Limited in relation to this matter nor for providing advice in relation to the contents of this announcement or any other matters referred to herein.

Please note that Merrill Lynch International is acting exclusively for the Company and Oilexco North Sea Limited and no one else in relation to this matter and will not be responsible to any person other than the Company and Oilexco North Sea Limited for providing the protections afforded to clients of Merrill Lynch International in relation to this matter nor for providing advice in relation to the contents of this announcement or any other matters referred to herein.

FOR FURTHER INFORMATION PLEASE CONTACT:

Oilexco Incorporated
Arthur S. Millholland
President
(403) 262-5441



or
Oilexco Incorporated
Brian L. Ward
Chief Financial Officer
(403) 262-5441



or
Oilexco Incorporated
Rob Elgie
Manager Investor Relations
(403) 262-5441



or
Pelham PR
James Henderson
Managing Director
44 (20) 7743 6673



or
Pelham PR
Mark Antelme

44 (0)20 3178 6242






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