Milagro Oil & Gas, Inc. announced financial results for the second quarter ended June 30, 2012.

Highlights

• Increased oil and natural gas liquids production to 3.1 MBopd for the quarter, an 11% volume increase over the prior year quarter

• Successfully drilled three development wells in the Magnet Withers Field and completed 30 capital workovers for a net production increase of 543 Boepd

• Revenue of $47.2 million and net income of $8.9 million for the quarter

• EBITDA of $20.5 million for the quarter, an 8% increase over second quarter 2011

Summary Financial Results

The Company reported net income of approximately $8.9 million for the second quarter of 2012 compared to net income of $2.7 million for the second quarter of 2011. This $6.2 million increase relates primarily to higher realized derivative revenues of approximately $7.6 million and unrealized revenues of approximately $0.7 million, lower expenses of approximately $3.0 million, and a lack of interest rate derivatives in 2012 compared to a loss in 2011 of approximately $0.8 million for the three months ended June 30, 2011. This increase in net income was offset by lower oil, NGL, and natural gas revenues of approximately $5.9 million primarily due to lower prices.

Revenues for the second quarter of 2012 were approximately $47.2 million, which is a 5% increase from revenues of approximately $44.8 million reported for the same period of 2011. This increase is the result of a higher hedge revenue of approximately $8.3 million which consisted of approximately $7.6 million of realized hedge revenues and $0.7 million of unrealized hedge revenues, which was offset by a decrease of approximately $5.9 million in oil and gas revenues due to lower prices for all three of our commodities and lower overall production.

Production for the second quarter of 2012 was 671 MBoe or 7.4 MBoepd, as compared to 723 MBoe or 7.9 MBoepd, for the second quarter of 2011. This 7% decline is mainly attributable to a natural decline in production and the delay of scheduled gas drilling projects due to marginal natural gas prices.

The weighted average sales price (prior to realized hedge commodities settlements) for the first quarter of 2012 was $43.62 per Boe as compared to $48.58 per Boe during the same period of the prior year. The realized weighted average price (after realized hedge commodity settlements) for the first quarter of 2012 was $53.41 per Boe compared to $47.08 per Boe for the first quarter of 2011. The price differences are mainly attributable to higher crude prices offset by lower natural gas prices year over year.

Production costs for the second quarter of 2012 were approximately $11.9 million, or $17.80 per Boe, compared to $12.2 million, or $16.92 per Boe, for the same period of the prior year. The majority of the decrease relates to lower workover expenses that were partially offset by higher taxes other than income.

Depreciation, depletion and amortization expense was approximately $13.0 million for the three months ended June 30, 2012, as compared to approximately $12.3 million for the same period in 2011. The majority of this expense relates to the depletion of our oil and gas assets, which increased due to a higher rate of depletion but was offset due to lower production.

General and administrative expenses for the second quarter of 2012 decreased by approximately $0.5 million, or 12%, to $3.6 million compared to $4.0 million for the second quarter of 2011. The decrease is primarily a result of lower compensation, bonus, and professional services related to our indebtedness.

During the three months ended June 30, 2012, we spent approximately a net $6.0 million in capital expenditures to support our business plan. Of this amount, we spent approximately $2.2 million on drilling and completion activities. We spent approximately $4.7 million on workover and recompletion activities. We spent approximately $0.3 million to continue lease acquisitions primarily in Oklahoma to support the future development of conventional reserves and in Louisiana to acquire prospective acreage. We also spent approximately $0.1 million of capital expenditures related primarily to facilities and vehicles. We had zero plug and abandonment costs but we received approximately $1.3 million in insurance proceeds related to plug and abandonment.

Borrowing Base and Liquidity

As of June 30, 2012, there was approximately $118.8 million outstanding, with availability of approximately $46.3 million, under the 2011 Credit Facility. The borrowing base under the 2011 Credit Facility, which is subject to semi-annual redeterminations, was $165 million as of June 30, 2012.

Drilling Update

To date Milagro has drilled or participated in eight wells in 2012. The key results include three wells drilled at the Magnet Withers Field (Wharton and Matagorda County, TX) and three high yield gas wells in the Barnett Shale (Wise County, TX).

The three wells drilled at Magnet Withers added 150% of the AFE estimated reserves and they were drilled for 13% under AFE cost estimates. The incremental daily production from these wells was approximately 440 Boepd.

Milagro participated with Devon in the drilling of a Barnett Shale high yield gas well in Wise County, TX, and the completion of one 2011 carryover well. The well drilled in the first half of 2012 is currently waiting to be fracked. The 2011 carryover well had an initial production rate of 3.2 MMcfpd. Since the end of the second quarter of 2012, a third well has been drilled and is currently being completed.

We are currently drilling a fourth Magnet Withers well and a well in Ellis County, OK which will test the Cottage Grove formation.