Cano Petroleum Begins Desdemona Field Study

FORT WORTH, Texas, April 27 /PRNewswire-FirstCall/ -- Cano Petroleum Inc. (BULLETIN BOARD: CAOP) is investing a portion of its recent $5.1 million in equity financing to fund improvements in its Desdemona field operations and production at the newly acquired Square One Energy property in central Texas.

As part of these efforts, Cano has engaged Forrest A. Garb and Associates, a Dallas-based geological and petroleum engineering consulting firm, to conduct an independent geological study of the Desdemona Field prior to launching pilot waterflooding.

"We have developed an aggressive strategy to leverage our resources and technology capabilities to maximize shareholder value," said Jeff Johnson, chairman and chief executive officer of Cano. "We anticipate commencing the initial pilot waterflood at the Desdemona Field within the next 30 days."

As previously reported, Cano's third party engineers, using year-end 2004 SEC price decks, have concluded that there are 1,065,000 barrels of proved oil reserves. Cano estimates the field contains more than 40 million barrels of probable oil reserves.

As disclosed in a recent 8K filing from Cano, the $5.1 million in equity financing came from two accredited institutional investors. New Orleans-based Pritchard Capital advised Cano on the transaction.

Cano acquired Square One Energy on March 31, 2005, for approximately $8 million.

ABOUT CANO PETROLEUM:

Cano Petroleum Inc. is an independent Texas-based energy producer with properties in the mid-continent region of the United States. Led by an experienced management team, Cano's primary focus is on increasing domestic production from proven fields using enhanced recovery methods. Cano is traded under the ticker symbol CAOP on the NASD Bulletin Board. Additional information is available at http://www.canopetro.com/ .

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, the statements in this Press Release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, volatility of natural resource prices, product demand, market competition, and risks inherent in our operations. These and other risks are described in our Annual Report on Form 10-K and other filings with the Securities and Exchange Commission.

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