ProspEx Completes Third East Kakwa Horizontal Well

ProspEx has provided an operational update with respect to the Company's winter drilling program and updating its 2010 production guidance.

"We are pleased to announce continued success with our horizontal drilling program at East Kakwa. ProspEx has recently completed its third horizontal well at East Kakwa, and has now evaluated drilling locations across the full length of its land base with successful horizontal wells", said John Rossall, President and Chief Executive Officer.

At East Kakwa, ProspEx's third horizontal well at 1-6-65-4-W6 (the "1-6 well") has been successfully drilled and completed. Following completion and clean up flow the well was produced on test for 21 hours with a final rate of 5.5 million cubic feet ("mmcf") per day and a flowing pressure of approximately 310 pounds per square inch. The 1-6 well is expected to be on stream by the end of March, 2010. Although this test rate does not match those recorded at ProspEx's first two East Kakwa horizontal wells, the 1-6 test rates are in line with the Company's economic model for the project, which assumes initial production rates of 4.5 mmcf per day.

ProspEx has a 50% working interest in the 1-6 well, with the remaining 50% working interest held by Seven Generations Energy Ltd., a private company.

ProspEx's first East Kakwa horizontal well at 2-33-63-4W6M has been on production since early November, 2009, at an average rate of approximately 7.5 mmcf per day (approximately 750 barrels of oil equivalent net to ProspEx under its 60% working interest, including associated liquids production) over the first three months of production.

ProspEx's second horizontal well at 15-19-64-4-W6 came on production in early February, 2010 at a facility-restricted rate of approximately 10 mmcf per day (approximately 1,050 barrels of oil equivalent net to ProspEx under its 60% working interest, including associated liquids production).

The estimated cost to drill and complete each of the three wells averaged approximately $4.1 million, prior to the deduction of an estimated average $0.7 million Alberta Drilling Royalty Credit per well.

With the completion of the 1-6 well, ProspEx has now drilled three successful horizontal wells spanning the full length of its contiguous, 13 kilometre long land block. The Company has identified an inventory of 20 gross (11 net) drilling locations on this 13 kilometre trend (assuming a drilling density of two horizontal wells per section), in addition to the three wells mentioned above. ProspEx has evaluated the majority of this inventory with 3D seismic, with 17 gross (8.5 net) of the identified locations lying within the boundaries of the Company's seismic surveys.

ProspEx is currently drilling a horizontal well (65% working interest) in the Brazeau River area in West Central Alberta, targeting a Mannville age channel. The Company expects that drilling and completion operations will be concluded prior to the end of March. This is the first well to be drilled by ProspEx on a land position acquired in the summer of 2009.

In light of the drilling success at East Kakwa, ProspEx is increasing its production guidance. After forecasting risked production additions resulting from planned 2010 capital activity and the timing of these additions, as well as estimated decline rates on existing and new production volumes, the Company now expects annual average production in 2010 to be 3,300 to 3,500 boe per day, compared to the previous guidance of 3,100 to 3,300 boe per day. In addition, the Company's December 2010 exit production rate is now forecast to be approximately 4,000 boe per day.

This production guidance assumes a 2010 full year capital budget of $30 million (net of Alberta Royalty Drilling Credits), which ProspEx anticipates can be funded from a combination of cash flow and incremental debt. The $30 million capital program includes six (3.2 net) horizontal wells planned for the second half of the year: three in East Kakwa, and three in West Central Alberta. With respect to West Central Alberta, the capital program in the second half of 2010 includes the Company's first horizontal well targeting a Mannville age channel in the Pembina area, as well as follow-up horizontal drilling in Brazeau River and Pembina, contingent on initial well results.

The Company attempts to mitigate commodity price risk through the use of financial derivative sales contracts, with the intention of creating a more predictable cash flow stream with which to fund its capital program. For the summer of 2010, ProspEx has entered into a series of contracts intended to ensure a $5.00/GJ price for the Company's gas production. In addition to previously disclosed winter hedges, ProspEx has hedges in place for 7,000 GJ/day of summer production, or approximately 40% of forecasted summer gas production


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