Cano Petroleum, Inc. Announces Fiscal Year-End Reserves Increase of 47%

Cano Petroleum, Inc. today announced that estimated proved oil and natural gas reserves increased to 66.7 million barrels of oil equivalent (BOE) as of June 30, 2007, which is 47% higher as compared to 45.4 million as of June 30, 2006. Oil reserves accounted for 64% of total reserves. Proved developed reserves represented 13% of total reserves. Based upon the ending June price of $70.47 for oil per barrel and natural gas of $6.40 per mcf, the pre-tax PV-10 is $1.14 Billion. To reflect sensitivity to prices, based on $60.00 per barrel of oil and $6.00 per mcf, the calculation of PV-10 would result in the same volume of reserves with a value of $925 million.

During Fiscal Year 2007 Cano's expected capital expenditures were $51.4 million including acquisitions which results in an all-in finding and development cost for the year of approximately $2.30 per BOE. The acquisition of Cato resulted in a $1.04 per barrel of proved reserves while the internal additions and revisions were $3.15 per barrel.

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