Grey Wolf Exploration Inc.
TSX : GWE

Grey Wolf Exploration Inc.

May 06, 2008 16:53 ET

Grey Wolf Announces Summary First Quarter 2008 Results

CALGARY, ALBERTA--(Marketwire - May 6, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Grey Wolf Exploration Inc. ("Grey Wolf") (TSX:GWE) today reported summary financial and operating results for the quarter ended March 31, 2008. The complete financial statements and management's discussion and analysis for the related periods are available at www.sedar.com or the corporate website at www.greywolf.ca.



The first quarter of 2008 resulted in:

Three months ended
$000's except per share March 31, March 31, Percent
and boe amounts 2008 2007 Change

Oil and natural gas revenue $ 11,065 7,030 57
Funds flow from operations 5,075 2,934 73
Per share- basic and diluted 0.12 0.09 33
Net income 32 7 357
Per share- basic and diluted - - -
Operating netback ($ per boe) 33.02 28.49 16
Average daily sales (boe per day) 2,115 1,569 35
Capital expenditures 17,554 16,477 7
Property dispositions - - -
Total debt, including working
capital deficiency 48,969 44,675 10
Total assets 161,814 125,843 29


The calculation of barrels of oil equivalent ("boe") is based on a conversion ratio of six thousand cubic feet of natural gas to one barrel of oil to estimate relative energy content and does not represent a value equivalency - boes may be misleading, particularly if used in isolation.

NOTES: (a) "Funds flow from operations", "Funds flow - basic", and "Funds flow - diluted", are not measures that have any standardized meaning prescribed by Canadian GAAP and are considered non-GAAP measures. Therefore, these measures may not be comparable to similar measures presented by other issuers. These measures have been described and presented in this media release in order to provide shareholders and potential investors with additional information regarding the Company's liquidity and its ability to generate funds to finance its operations.

During the first quarter of 2008, the Company recorded net income of $32 thousand compared to net income of $7 thousand in the same period last year. Funds flow from operations increased 73 percent to $5.1 million from $2.9 million in the same period in 2007. The increase in both net income and funds flow from operations was primarily due to the increase in production volume and commodity prices.

The Company's first quarter production revenue from crude oil, natural gas liquids and natural gas sales increased 57 percent to $11.1 million from $7.0 million for the same period in 2007. Total production during the first quarter of 2008, averaged 2,115 boe per day, an increase of 35 percent from the 1,569 boe per day recorded in the same period of 2007. The increase in production was primarily due to the elimination of curtailments from third party facilities. The increase in production combined with the increase in commodity prices accounted for the 57 percent increase in production revenues in the first quarter of 2008.

Capital expenditures in the first quarter of 2008 increased slightly to $17.6 from $16.5 million in 2007. The flow through share issue completed in December 2007 enabled the Company to direct $18.3 million to its 2008 exploratory program, which, during the first quarter, resulted in significant future upside potential. The Company participated in 5 gross (4.5 net) wells in the first quarter of 2008 compared to 4 gross wells (2.75 net wells) for the same period last year. Grey Wolf achieved an overall 2008 drilling success rate of 100% (net 100%) compared to 100% (net 100%) in 2007.

OPERATIONS UPDATE

The first horizontal well in our Pouce Coupe Montney/Doig resource play is scheduled for July 2008. Grey Wolf plans to drill 3 gross (2 net) horizontal wells this year.

In addition, the winter drilling in Petitot showed that Grey Wolf is very well positioned to exploit the Horn River Shale gas resource play with land holdings consisting of 36 gross (36 net) prospective sections. The vertical well in 14-1-123-11 W6M fraced with only 16 tonnes in a single stage, tested gas as high as 1.4 MMcf/d demonstrating clearly the free gas potential of these horizons. Three horizontal wells are currently planned for the winter of 2008/2009.

Grey Wolf's recent Slave Point natural gas discovery at 2-17-121-11 W6M tested at 9 million cubic feet per day ("MMcf/d") with a draw down of only 13 psi. This indicates an absolute open flow ("AOF") of 75 MMcf/d and we expect the well will produce at rates between 3 to 6 MMcf/d (500 to 1,000 boe/d). This well is planned for tie-in during early 2009 due to winter only access. Net pay in the well is believed to be in excess of 60 feet. A third party engineering reserve evaluator places proved plus probable reserves at 5 billion cubic feet ("Bcf ") and possible reserves at 5 Bcf for this well. Grey Wolf plans to drill four or five horizontal Slave Point wells during the winter of 2008/2009 to prove up sufficient reserves to support gas plant and pipeline infrastructure.

If necessary, non-core properties will be sold through a third party to finance the horizontal drilling activity. We believe that the redeployment of non-core assets in this horizontal drilling will result, not only in replacing the production sold, but in making significant production gains in the short term.

Grey Wolf is an independent Alberta-based, junior oil and natural gas company involved in the development and production of natural gas and crude oil in the Western Canadian Sedimentary Basin. Its common shares trade on the Toronto Stock Exchange under the symbol "GWE".

Forward-Looking Statements - Certain statements contained in this Media Release constitute forward-looking statements. These statements relate to future events or our future performance. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. We believe the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Media Release should not be unduly relied upon. These statements speak only as of the date of this Media Release. We assume no obligation to revise or update these statements except as required pursuant to applicable securities laws.

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