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Re:   News Release - Monday, August 31, 2009
      MegaWest Announces Strategic Agreement with Iroquois Capital
      Opportunity Fund
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MegaWest Energy Corp.

OTC Bulletin Board: MGWSF
 
Aug 31, 2009 11:59 ET

MegaWest Announces Strategic Agreement with Iroquois Capital
Opportunity Fund

CALGARY, ALBERTA--(Marketwire - Aug. 31, 2009) - MegaWest Energy Corp.
(OTCBB:MGWSF) (the "Company" or "MegaWest"), an independent oil and gas
company, specializing in non-conventional oil and gas projects with a
focus on North American heavy oil, announced today that it has signed
agreements with investors (the "Investors") led Iroquois Capital
Opportunity Fund, L.P., ("ICO Fund") as the lead investor and with Mega
Partners 1, LLC ("MP1") of which ICO Fund is a member for a
multi-faceted plan to recapitalize the Company and enable the restart
of oil production at its Missouri enhanced recovery projects.

The Investors will become significant shareholders in the Company
through the purchase of US$2.2 million of Series A Convertible
Preferred Shares and MP1 will become a 10% working interest partner in
the two existing Missouri projects which have a combined design
capacity of 1,000 barrels of oil per day, and up to a 20% working
interest partner in future development on 15,313 acres of the Company's
oil and gas leases located in Missouri and Kansas (the "Deerfield
Area"). The proceeds from the initial funding and working interest sale
will be used to restart both projects and restore production. This is a
strategic, long-term relationship between the Investors, MP1 and the
Company involving options for future financing, options for future
working interest participation, and cooperation with Iromad LLC
("Iromad"), a world-class technology company. It is expected that this
technical cooperation will lead to process and technical improvements
that will result in higher economic return and increased recovery of
oil from these leases. Restoration of production at the existing
plants, continued high oil prices, and access to additional capital
will lead to the construction of additional plants in the area.

The Company signed agreements with the Investors and MP1, the
significant terms of which are as follows:

- The Company sold a 10% working interest in the Deerfield Area for
US$2,000,000 to MP1.

- MP1 has the option to acquire up to an additional 10% interest in
future projects within the Deerfield Area.

- The Company issued to the Investors 22,000 Series A convertible
preferred shares, with a stated value of $100 each (the "Series A
Preferred Shares"), for gross proceeds of US$2,200,000. Based on their
stated value, the Series A Preferred Shares are convertible into common
shares at US$0.07 per common share. A quarterly cumulative dividend
based upon the stated value of the Series A Preferred Shares is
payable, at the Company's election, as to either 5% cash or 7.5% in
additional Series A Preferred Shares. The Series A Preferred Shares
also have a provision whereby upon liquidation, dissolution, winding up
or sale of the Company any outstanding Series A Preferred Shares will
be paid out ahead of the common shares at a rate of two times the
stated value of the Series A Preferred Shares. After 12 months from the
date of issue, the Company may force the conversion of the Series A
Preferred Shares provided: i) production from the Deerfield Area is
15,000 barrels of oil in a 30 day period; ii) the common shares have
traded at or above US$0.25 per share for the preceding 20 consecutive
trading days; and iii) the daily average dollar trading volume has been
in excess of US$75,000 per day for the same 20 day period.

- In conjunction with the Series A Preferred Share issuance, the
Company has also issued to the Investors 15,400,000 warrants. Each
warrant allows the holder to purchase a common share at US$0.25 per
share until August 28, 2014. After May 28, 2010 a cashless conversion
option is provided only with respect to warrant shares not included for
unrestricted public resale in an effective registration statement on
the date notice of exercise is given to the Company.

- Until twelve months following the first occasion upon which the
Company produces 3,000 barrels over a 30 day period (100 barrels per
day average) from the Deerfield Area, the Investors have the option to
purchase up to 20,000 Series B convertible preferred shares with a
stated value of $100 each (the "Series B Preferred Shares"), for up to
US$2,000,000 on similar terms to the Series A Preferred Shares except
the conversion price is US$0.10 per common share. After 12 months from
the date of issue, the Company may force the conversion of the Series B
Preferred Shares provided: i) production from the Deerfield Area is
30,000 barrels of oil in a 30 day period; ii) the common shares have
traded at or above US$0.35 per share for the preceding 20 consecutive
trading days; and iii) the daily average dollar trading volume has been
in excess of US$150,000 per day for the same 20 day period. In
conjunction with the Series B Preferred Share issuance, the Company
will issue to the Investors up to 10,000,000 warrants. Each warrant
allows the holder to purchase a common share at US$0.35 per share for a
period of five years from issuance. After nine months from the date of
issuance, a cashless conversion option is provided only with respect to
warrant shares not included for unrestricted public resale in an
effective registration statement on the date notice of exercise is
given to the Company.

"ICO Fund brings a great deal to the table, including a strong
technical team in Iromad, who will be providing consulting services to
MegaWest. Iromad's team is well known for its expertise in the delivery
of technologies for the enhanced development of mature assets and
non-conventional oil and gas projects, providing cutting edge solutions
to issues faced by national oil companies and independent petroleum
producers such as MegaWest. We are pleased to have arrived at a
refinancing solution which is significantly less dilutive to our
shareholders than a pure equity raise, and are excited about getting
back to the business of producing oil," said MegaWest President Bill
Thornton.

ICO Fund Managing Partner Scot Cohen said, "We are excited at the
potential from restarting and ramping production at the Marmaton River
and Grassy Creek projects in Missouri and building additional
production plants throughout the Deerfield Area leases in the future."

About Iroquois Capital Opportunity Fund, L.P.

Iroquois Capital Opportunity Fund, L.P. ("ICO Fund") is a private
equity fund focused on investments in the oil and gas industry. ICO
Fund invests in low risk oil and gas assets and in technologies that
increase production, improve recovery factor and reduce costs to apply
these technologies to change the economics of the targeted assets. The
fund is managed by a seasoned team that includes former senior national
oil company executives, former senior oil service executives, oilfield
technology venture capitalists and financiers experienced at
structuring investments in the oil and gas industry.

About Iromad LLC

Iromad was formed through the convergence of veteran oil and gas
professionals, innovative technologists, leading entrepreneurs, and
experienced investment professionals. Iromad's vision is to facilitate
the delivery of technologies for the enhanced development of mature
assets and unconventional hydrocarbons, providing cutting-edge
solutions to issues faced by national oil companies and independent
petroleum producers. Iromad focuses on solutions that will increase
recoverable reserves, enhance production, and reduce lifting costs.
This demands a long-term perspective, breadth and depth of expertise,
and solid project management in order to outlast the cyclic nature of
oil and gas commodity markets.

R. William Thornton, President & CEO

Forward-Looking Statements

This press release contains forward-looking information and statements
including opinions, assumptions, estimates and expectations of future
employee retention. Forward-looking statements include information that
does not relate strictly to historical or current facts. When used in
this document, the words "anticipate", "believe", estimate", "expect",
"forecast", "intent", "may", "project", "plan", "potential", "should"
and similar expressions are intended to be among the statements that
identify forward-looking statements. Forward-looking statements are not
guarantees of future performance and are subject to a wide range of
known and unknown risks and uncertainties, and although the Company
believes that the expectations represented by such forward-looking
statements are reasonable, there can be no assurance that such
expectations will be realized. We have attempted to identify important
factors that could cause actual results, performance or achievements to
vary from those current expectations or estimates expressed or implied
by the forward-looking information. The risks and uncertainties that
could affect future events or the Company's future financial
performance are more fully described in the Company's quarterly reports
(on Form 6-K filed in the US and the financial statements and Form
51-102F1 filed in Canada), the Company's annual reports (on Form 20-F
filed in the US and the financial statements and Form 51-102F1 filed in
Canada) and the other recent filings in the US and Canada. These
filings are available at www.sec.gov in the US and www.sedar.com in
Canada. For all such forward-looking statements, we claim the safe
harbour for forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.

Cusip: #585168 107

For more information, please contact
MegaWest Energy Corp.
George T. Stapleton, II
Chairman of the Board
281.499.7498
or

MegaWest Energy Corp.
R. William (Bill) Thornton
President and CEO
403.984.6342
investor.relations@megawestenergy.com
www.megawestenergy.com
or

Iroquois Capital Opportunity Fund, L.P.
641 Lexington Avenue, 26th Floor
New York, NY 10022
212.974.3070
 
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