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Press Release Source: OILEXCO INCORPORATED Oilexco Announces New Rig Contact and Updates UK North Sea Operations Thursday December 21, 4:30 pm ET CALGARY, ALBERTA--(CCNMatthews - Dec. 21, 2006) - Oilexco Incorporated ("Oilexco") (TSX:OIL - News; AIM:OIL) announces that its wholly owned subsidiary Oilexco North Sea Limited has entered into a contract with a subsidiary of Diamond Offshore Drilling, Inc. (NYSE: DO - News) for the semi-submersible Ocean Guardian. Oilexco has contracted the Ocean Guardian for one year period commencing in April 2007 with an option to extend the contract for an additional year ending in April 2009. The contracted rig rate for the initial and option period is $350,000 US per day. Total value of the contract if the option is exercised is $255,500,000 US. ADVERTISEMENT "This new long term drilling contract will allow Oilexco to continue its aggressive program of exploration, appraisal and development drilling in the UK North Sea well into the future" said Arthur Millholland, CEO of Oilexco. "We presently have exploration, appraisal, and development drilling scheduled through 2007 and into 2008. Having this additional rig will allow Oilexco to continue to create significant shareholder value going forward by allowing the company to continue to maintain a flexible drilling schedule which now can include full HPHT (high pressure high temperature) operations, as well as the ability to accelerate future development drilling programs. With the Ocean Guardian and the Sedco 712 under long term contract, Oilexco will be able to complete the drilling portion of the company's $410 million US 2007 capital budget, which contemplates an extensive exploration and appraisal drilling program in addition to two new field development projects. Oilexco is also looking forward to welcoming the personnel aboard the Ocean Guardian to its Team approach to rig operations" added Mr. Millholland. "The Oilexco Team philosophy focuses on an Oilexco-contractor team approach for safe and efficient rig operations". Operations at Oilexco's Brenda/Nicol Field development were severely curtailed in November and early December due to a prolonged period of severe weather in the North Sea following the settlement of the labour strike by unionized UK divers on November 10th. "The labour action caused final completion the Brenda/Nicol development to be pushed into the harsh weather seasonal period" commented Mr. Millholland. "We planned this project extremely well, the labour action as well as the resulting weather delay was unforeseen. We have a good estimate of the additional cost resulting from this labour action" added Mr. Millholland. "Half of this increase in cost, which is not insignificant, will be ultimately be borne by the UK taxpayer". Subsea operations recommenced a week ago and are continuing. Weather permitting, first oil from the project which was anticipated to occur by mid December is now anticipated to occur in mid to late January. Appraisal drilling operations at Oilexco's 100% owned Shelley project located in Block 22/2b in the UK Central North Sea are nearing completion. Eight appraisal well bores (first main hole and seven sidetracks) have been drilled to appraise the 1984 22/2-2 oil discovery which flow tested 2,416 barrels of oil per day from the Paleocene "Forties" sand. The eighth Oilexco appraisal well 22/2b-13t, an extended reach well bore in excess of 13,850 feet in length, is currently being readied for testing. Testing operations are expected be completed in seven to ten days. Forward Looking Statements This disclosure contains certain forward-looking estimates 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 the Company 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 estimates 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. 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. In accordance with the guidelines of the AIM market of the London Stock Exchange, Arthur Millholland P.Geol, President and CEO of Oilexco Incorporated, is the qualified person that has reviewed the technical information contained in this press release. Oilexco is listed on the Alternative Investment Market of the London Stock Exchange plc ("LSE-AIM") and the Toronto Stock Exchange ("TSX"), trading under the symbol OIL. Contact: Arthur S. Millholland Oilexco Incorporated President [phone] Brian L. Ward Oilexco Incorporated Chief Financial Officer [phone] Gerry L. Roe Oilexco Incorporated Chief Operating Officer [phone] Rob Elgie Oilexco Incorporated Manager Investor Relations [phone] Website: www.oilexco.com -------------------------------------------------------------------------------- Source: OILEXCO INCORPORATED Crackiedog