Hallwood Energy Bankruptcy Update

Hallwood Energy Granted Interim Use of Cash Collateral

DALLAS, March 5 /PRNewswire/ -- Hallwood Energy, L.P. ("Hallwood Energy"), which filed its petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Northern District of Texas on March 1, 2009, announced today that it had been granted authority, on an interim basis, to use cash collateral. A final hearing on the use of cash collateral will be held on April 1, 2009. The ability to use cash collateral will allow Hallwood Energy to continue to operate for at least the next thirty days.

In addition to being granted use of cash collateral, several other of the company's first day motions were granted, including its ability to continue to pay its employees and their benefits.

The Board of Directors of Hallwood Energy Management, LLC ("HEM"), the general partner of Hallwood Energy, authorized the filing of Chapter 11 in order to protect its assets and maximize value for the benefit of creditors. Hallwood Energy intends to emerge from the Chapter 11 process stronger and more financially viable in the current environment. In addition, Hallwood Energy has selected James R. Latimer, III of Blackhill Partners, LLC, as its Chief Restructuring Officer.

Hallwood Energy intends to continue its relationship with FEI Shale, L.P., a subsidiary of Talisman Energy, under the agreement entered into by the companies in June, 2008.

The Hallwood Energy bankruptcy cases are jointly administered under Case No. 09-31253, in the United States Bankruptcy Court for the Northern District of Texas.

SOURCE Hallwood Energy, L.P.