Grey Wolf Exploration Inc.
TSX : GWE

Grey Wolf Exploration Inc.

August 25, 2006 09:30 ET

Grey Wolf Sells Certain Caroline Assets for $32.9 Million

CALGARY, ALBERTA--(CCNMatthews - Aug. 25, 2006) - Grey Wolf Exploration Inc. ("Grey Wolf") (TSX:GWE) is pleased to announce that it has signed a Purchase and Sale Agreement with PrimeWest Energy Inc. ("PrimeWest") pursuant to the terms of the Caroline Farmout Agreement.

On August 24, 2006, Grey Wolf entered into a definitive agreement to sell to PrimeWest certain assets in the Caroline area of west central Alberta for proceeds of $32.9 million subject to customary adjustments. Based on an updated April 30, 2006 reserves evaluation by DeGoyler and McNaughton, this divestiture represents approximately 15% of the proved plus probable corporate reserves by volume and approximately 550 barrels of oil equivalent per day ("boe/d") of current production. The effective date of the transaction is April 1, 2006 and closing is scheduled for today, August 25, 2006. Proceeds from the sale of these assets will be applied to reduce outstanding indebtedness and to fund a portion of the Company's capital expenditure program.

"This transaction provides us with the financial capability and flexibility to expedite development within our four core operating areas" stated Bob Watson, Chairman and Chief Executive Officer.

(x)Note: A barrel of oil equivalent (boe) is derived by converting natural gas to oil in the ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent. A boe conversion may be misleading, particularly if used in isolation, as it is based on an energy equivalency conversion method primarily applicable at the burner tip and may not represent a value equivalency at the wellhead.

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 information set forth in this document, including management's assessment of Grey Wolf's future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Grey Wolf's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Grey Wolf's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. No assurance can be given that any of the events anticipated will transpire or occur, or if any of them do so, what benefits Grey Wolf will derive from them. Grey Wolf disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.


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