Petroflow Energy Ltd. Announces Net Litigation Award of $16.4 Million

TULSA, Okla., March 9, 2011 /PRNewswire/ -- On March 4, 2011, Judge Christopher S. Sontchi of the United States Bankruptcy Court for the District of Delaware entered an order resolving certain litigation between subsidiaries of Petroflow Energy Ltd. (collectively, "Petroflow"), currently in chapter 11 reorganization proceedings, and Equal Energy Ltd. ("Equal"). In the order, the Court reaffirmed its Preliminary Findings dated January 24, 2011 and its Final Findings dated February 18, 2011. Among other things, the Court ordered Equal to repay to Petroflow approximately $16.4 million of capital expense payments (made by Petroflow to Equal prior to Petroflow's chapter 11 filing) for salt water disposal infrastructure in connection with the operation of oil and gas properties in Oklahoma in which Petroflow holds majority working interests.  The Court's order also effectively eliminated Equal's right to collect an additional approximately $10.1 million from Petroflow of capital expense claims.  Further, the Court ruled that Petroflow should pay Equal $.08 per barrel for all salt water disposed of by Equal in connection with Petroflow's drilling operations, as opposed to the $.50 per barrel sought by Equal.

"The Court's ruling is a major milestone for the company and its stakeholders because it will significantly increase the company's cash position, significantly lower claims asserted against the company, and clarifies the company's rights and obligations regarding its working interest in the wells drilled in the Hunton Resource Play in Oklahoma.  The ruling helps us unlock the company's value and enables the company to start exploring strategic restructuring alternatives during the next phase of its chapter 11 reorganization. In light of this ruling, the company is also well-positioned to challenge Equal's status as operator of our Hunton Resource Play oil and gas properties before the Oklahoma Corporation Commission should it choose to do so," said Petroflow CEO, Richard Menchaca.

Also on March 4, 2011, Equal filed with the Court a motion to reconsider the Court's ruling. In response, Petroflow's CEO stated, "We plan to oppose Equal's motion. The Court's reasoning in the order was clear and sound and we are confident in the outcome."

Judge Sontchi's order and his Final Findings of Fact and Conclusions of Law can be found at http://dm.epiq11.com/napcus.

SOURCE Petroflow Energy Ltd.