LONDON, UNITED KINGDOM and CALGARY, ALBERTA--(Marketwire - May 28, 2012) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Ithaca Energy Inc. ("the Company") (AIM:IAE)(TSX:IAE) announces that it has ceased discussions with all parties regarding the potential acquisition of all of the outstanding shares of the Company. As previously announced, the Company received, initially, a confidential, non-binding proposal to acquire all of the outstanding shares of the Company and, subsequently, a number of unsolicited approaches from third parties.

The Board has concluded that continuing the current process at this time was unlikely to produce a transaction with financial terms that properly reflect the value of the Company, particularly in light of the current volatility in global markets and the short term softening in Brent crude prices. In reaching this decision the Board of Directors has fully considered the Company's current value, its growth potential, the future value that can be delivered to shareholders and the responses of the third parties with whom discussions have been held.

Ithaca is firmly positioned to continue building upon its track record for delivering long term shareholder value through creatively growing the Company and maximising the value of its UK North Sea oil and gas assets. This capability is underpinned by the following key factors:

• Fully funded for continued growth: the Company has a clean, strong balance sheet and the funds to deliver continued long term growth from existing cash and debt resources and the anticipated cashflows that the Company's portfolio is set to generate; the Company forecasts cashflow from operations to increase from approximately US$150 million in 2012 to approximately US$575 million in 2014 in a US$100 barrel Brent crude price scenario. The Company has also today announced a threefold increase in its debt facility through the mandate awarded to BNP Paribas for a US$400 million fully underwritten and credit approved facility, plus US$30 million cost overrun tranche. The facility is available to fund the Company's ongoing development activities and future acquisitions.
  
  
• Positioned to take advantage of North Sea opportunities: the maturing nature of the UK Continental Shelf, characterised by active portfolio rationalisation by many of the major oil and gas companies and a wealth of existing infrastructure and fiscal incentives for new field developments, offers substantial opportunities for dynamic independent operators with a demonstrable ability to create and deliver innovative commercial and operational solutions. The Company intends to continue to pursue attractive acquisitions and has the financial resources to invest up to US$250 million on suitable targets.
  
  
• Strong long term industry fundamentals: commodity prices over the long term, and particularly oil prices, continue to remain robust and the Company has locked in a portion of 2012/13 oil production (over 1.1 million barrels) at a weighted average price of ~US$118 per barrel, thereby securing approximately US$136 million of revenue. The gas price outlook in Europe is underpinned by favourable supply / demand tensions, with the UK price for gas delivery in 2013/14 currently standing at ~70 pence per therm (approximately US$11.2/mmbtu).
  
  
• Experienced operator of assets spanning the development life-cycle: the Company has established the resources and track record for creating significant value by acquiring, appraising, developing and operating assets. The Company operates its key assets, supported by strong joint venture partners, therefore positioning it to control the pace of its activities and ensure the capture of all potential upsides.
  
  
• Delivery of growth from sanctioned projects: the Company is in the process of delivering the material value that lies within its existing portfolio of assets that have been built up over recent years, with the path to full monetisation of the key Athena and Greater Stella Area (GSA) developments firmly in place. Management estimates that these developments are forecast to drive the Company's production from an average of approximately 7,000-8,000 barrels of oil equivalent per day ("boe/d") in the second half of 2012 to over 20,000 boe/d in 2014, following the anticipated start-up of production from the Greater Stella Area hub, with production over these years being predominantly oil.
  
  
• No tax payable in the medium term: the Company's existing tax allowances pool and projected capital investment programme means that zero tax will be levied on anticipated cashflows from operations in the medium term. Additionally, recent changes to the UK oil and gas taxation regime have returned considerable longer term value to the Company through material increases in the Supplementary Charge tax shelter applicable to all future developments within the current asset portfolio.

Jack Lee, Non-Executive Chairman, commented:

"The responsibility of the Board is very clear; to consider the best possible way to maximise shareholder value. Following the discussions that have been held with all parties that have expressed an interest in the Company, the Board has unanimously concluded that this would not currently be achieved through continuation of such discussions. To this end, the decision has been made to end the process and allow the Company to focus on delivery of its long term growth plans.

Since January, the Company has delivered first oil from the Athena field, obtained UK Government approval for the joint Stella and Harrier Field Development Plan and secured a significantly increased debt facility. These represent key value milestones for the Company and establish a springboard for continued growth. The Company now looks forward to fully delivering upon its growth objectives, efficiently utilising its enhanced financial resources and further establishing its position as a dynamic North Sea operator".

An updated corporate presentation is available on the Company's website, [ www.ithacaenergy.com ]. The presentation includes updated 2012-15 production and cashflow guidance from the Company. Cashflow from operations includes impact of executed hedges and does not include non-cash items such as DD&A, revaluation of financial instruments, impairments of fixed assets and movements in goodwill, which may have a significant impact on the Company's profit.

A conference call for analysts in the UK and North America will be held at 15.00 GMT (10.00 EST) on May 29, 2012, to provide further information on the details presented in this press release. Dial-in details for the call can be obtained by contacting Lily Hartley at Pelham Bell Pottinger: [ lhartley@pelhambellpottinger.co.uk ] / +44 (0) 207 861 3840.

About Ithaca Energy:

Ithaca Energy Inc. and its wholly owned subsidiary Ithaca Energy (UK) Limited ("Ithaca" or "the Company"), is an oil and gas exploration, development and production company active in the United Kingdom's Continental Shelf ("UKCS"). The goal of Ithaca, in the near term, is to maximise production and achieve early production from the development of existing discoveries on properties held by Ithaca, to originate and participate in exploration and appraisal on properties held by Ithaca when capital permits, and to consider other opportunities for growth as they are identified from time to time by Ithaca.

Not for Distribution to U.S. Newswire Services or for Dissemination in the United States

Notes to oil and gas disclosure

The term "boe" may be misleading, particularly if used in isolation. A boe conversion ratio of 6Mcf:1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead

Forward-looking statements

Some of the statements in this announcement are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of Ithaca Energy Inc. or its officers with respect to various matters including drilling plans, production and operating cashflow forecasts, acquisition plans and the credit facility with BNP Paribas and have been provided in order to demonstrate the economic viability of the Company's projects. When used in this announcement, the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "plan", "should", "believe", "could", "target", "scheduled" and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to known and unknown risks and uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements or information. In the view of the Company's management, this information was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management's knowledge and belief, the expected course of action and the expected future financial performance of the Corporation. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers are cautioned not to place undue reliance on the forward-looking statements. These forward-looking statements speak only as of the date of this announcement. Ithaca Energy Inc. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based except as required by applicable securities laws. Readers are cautioned that the forward-looking statements contained in this press release should not be used for purposes other than for which it is disclosed herein. These statements may not be appropriate for other purposes.

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