Aurora Oil & Gas Corporation Provides Company Update

TRAVERSE CITY, Mich., Oct. 9 /PRNewswire-FirstCall/ -- Aurora Oil & Gas Corporation (Amex: AOG) today provided an update of its recent activities and interactions with its current lending relationships.

Sale of Oklahoma Project Area

Effective September 15, 2008, Aurora Oil & Gas Corporation ("Aurora") completed the sale of approximately 33,000 net acres, representing its entire Woodford shale position, for cash and other consideration valued in excess of $15 million. The transaction was completed with a private operator, Presidium Energy, LC ("Presidium"), which had been working to purchase the project from Aurora for several months. During that time period, Presidium made a $2 million non-refundable payment for the acreage and paid over $1 million of obligations to Aurora's operating partner inOklahoma. At closing, Presidium made an additional $1 million cash payment and provided a promissory note in the amount of $12 million. In addition, Presidium assisted in negotiating a resolution to the lawsuit between Aurora and its operating partner, which led to a dismissal of the litigation, with prejudice.

The promissory note is due in 2 years and requires monthly interest payments at a rate of 9% annually. Nearly 32,000 acres that were sold remain encumbered by the note as security for the $12 million payment. As Presidium requests release of additional acreage to pursue further drilling activities, it must make pro rata principal payments for the net acres included in each new drilling unit. In addition, Aurora receives a 3% overriding royalty interest (ORRI) in the acreage conveyed by this transaction, as well as certain other acreage owned by Presidium in the same development location. In aggregate, the acreage position on which the ORRI is effective totals approximately 67,000 net acres.

William W. Deneau, Chief Executive Officer, commented, "Completing this transaction creates a winning solution for all parties involved. It generates greater proceeds for the property than were originally anticipated and extinguishes the litigation associated with our joint venture partner in that project area. This is an ideal resolution to a risky and unproductive asset in our portfolio. Going forward, our 3% overriding royalty interest will allow us to participate in what could be a tremendous upside while eliminating downside risk to our enterprise."

Remaining Assets for Development

The Company's remaining assets include its producing natural gas properties and undeveloped acreage in theAntrim shale, producing oil properties and undeveloped acreage in northernTexas, approximately 440,000 net acres in the New Albany shale, and various interests in prospective development areas, such as the ORRI in the subject properties sold in the transactions described in this press release.

Receipt of Default Notices

On October 3, 2008, Aurora received a Notice of Default from BNP Paribas ("BNP") with respect to its Senior Secured Credit Facility. Also, on October 6, 2008, Aurora received a Notice of Default from Laminar Direct Capital, L.L.C. with respect to its Second Lien Term Loan. The Company had previously received waivers and a forbearance and standstill agreement which ended in August. In the Notices, the banks informed Aurora that it is now subject to a default interest rate equal to a 2% increase over its existing rates, in accordance with the credit agreements.

Though it is the Senior Secured lender's right to immediately accelerate collection under the credit agreement, these notices do not indicate any such intention. Our banks have verbally indicated their desire to informally standstill as Aurora pursues strategic asset divestitures. The Company cannot provide any assurance that this arrangement will continue in the future.

Mr. Deneau commented, "No one better understands the implications of the existing economic and credit conditions than those in our bank groups. We continue to keep our banks informed of our efforts and believe they are willing to work with our company to find an equitable solution to our financial situation."

Receipt of Notice of Early Termination

On August 20, 2007, Aurora established an ISDA master trading agreement ("ISDA") with BNP, which allowed the Company to hedge certain natural gas and interest rate exposures, but not be subject to cash margining if the exposures were detrimental to Aurora. The ISDA agreement provided that upon an event of default, BNP could terminate the agreement and unwind all derivatives held under the agreement. On September 30, 2008, BNP provided Aurora with a Notice of Early Termination.

Under this Notice, all hedges - natural gas and interest rate - were terminated. The settlement amount of the termination amounted to a loss of $2.2 million ($600 thousand for natural gas derivatives and $1.6 million for interest rate derivatives). At present, the Company does not intend to hedge its natural gas or interest rate exposures. This is subject to change at any time.

Additional detail on the Notices discussed in this press release can be found in the Company's Form 8-K filed October 9, 2008. This form can be retrieved from the Securities and Exchange Commission or via the Company website at http://www.auroraogc.com/SEC_Filings.htm .

About Aurora Oil & Gas Corporation

Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its primary operations in theAntrim shale ofMichigan and the New Albany shale ofIndiana andKentucky.

Cautionary Note on Forward-Looking Statements

Statements regarding future events, occurrences, circumstances, activities, performance, outcomes, beliefs and results, including production, reserves, revenues, cost controls, asset transactions, negotiations for new credit arrangements, relationship with existing lenders, economic viability of development opportunities, and the condition of the economic environment or improvement thereof are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, drilling and operating risks, the availability of drilling rigs, changes in laws or government regulations, unforeseen engineering and mechanical or technological difficulties in drilling the wells, operating hazards, weather-related delays, the loss of existing credit facilities, availability of capital, and other risks more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release, including any forecasts and estimates, are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.

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    Contact:
    Aurora Oil & Gas Corporation
    Jeffrey W. Deneau, Investor Relations
    (231) 941-0073

SOURCE Aurora Oil & Gas Corporation

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