Oilexco Provides Financing Update

Oilexco Incorporated ("Oilexco" or "the Company") (TSX:OIL) (LSE:OIL) announced that the Company, The Royal Bank of Scotland PLC ("RBS") and the Company's banking syndicate (together, the "Banks") have agreed the lending of up to $47.5 million to Oilexco repayable on demand with a maturity date of January 31, 2009.

Further to the Company's announcement on November 20, 2008, Oilexco, alongside Morgan Stanley & Co Limited ("Morgan Stanley") and Merrill Lynch International ("Merrill Lynch"), continues to progress the evaluation of a variety of additional financing options and strategic alternatives, and discussions are ongoing with a number of parties concerning a potential investment in the Company or an acquisition of the Company and/or some or all of its assets (the "Potential Transaction"). However, there can be no certainty that any binding offers will be received or accepted or that any Potential Transaction will be completed.

In connection with the $47.5 million bridge financing, Oilexco has agreed to certain cash fees, and margin increases. The cash fees payable will range from approximately $5 million to approximately $37.5 million if all specified events occur such as the repayment of all indebtedness owed by the Company to the Banks being approximately $700 million assuming drawdown of the entire bridge facility. In addition, in recognition of the continued support of the Company by the Banks, the Company has agreed to pay them an equity success fee upon the occurrence of certain events. In each case the specified events require a successful conclusion of the sale or recapitalization of the Company such that the Banks can participate in such a transaction pari passu with all common shareholders of Oilexco. The equity success fee will be payable in the form of common shares of Oilexco provided that certain legal and regulatory considerations can be satisfied. The maximum number of shares that could be issued to the Banks is equal to 24.9% of Oilexco's total issued and outstanding common shares from time to time (being, on today's date 55,527,000 common shares).

While there is no assurance that further advances will be forthcoming as incremental funding is likely to be required in the short term, the Banks have agreed that if any further advances are made prior to January 31, 2009, no additional success, equity-based or waiver fee will be required.

At this stage, as outlined at the time of the Company's Q3 results on November 12, 2008, Oilexco's cash flow from operating activities and the bridge facility announced today will not be sufficient to satisfy both its current obligations and the requirements of capital investment programs. The continued ability of the Company to undertake its capital investment and business plans in the short term is dependent on its ability to obtain additional financing and the continued support of its creditors.

Arthur Millholland, President and Chief Executive Officer, commented, "We would like to thank our syndicate of banks, led by RBS, and our trade creditors for their continued support in these difficult times. While there can be no assurances, we believe that the strength of our asset base combined with the corporate and financial interest that has been received to date, the Board remains focused on achieving a satisfactory outcome to our strategic and financing initiatives in the near future."

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 is acting exclusively for the Company and Oilexco North Sea Limited and no one else in relation to the Potential Transaction 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 nor for providing advice in connection with the Potential Transaction or 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 the Potential Transaction 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 or for providing advice in connection with the Potential Transaction or in relation to the contents of this announcement or any other matters referred to herein.

SOURCE: OILEXCO INCORPORATED

Oilexco Incorporated
Arthur S. Millholland
President
(403) 262-5441
Oilexco Incorporated
Brian L. Ward
Chief Financial Officer
(403) 262-5441
Oilexco Incorporated
Rob Elgie
Manager Investor Relations
(403) 262-5441
Website: www.oilexco.com
Pelham PR
James Henderson
Managing Director
44 (20) 7743 6673
Pelham PR
Alisdair Haythornthwaite
Director
44 (20) 7743 6676