Kodiak Releases Operational Update

Kodiak Oil & Gas Corp., an oil and gas exploration and production company with assets in the Green River and Williston basins, on Wednesday issued an interim update on its drilling and completion activities.

Green River Basin—Wyoming

Vermillion Deep
Permitting procedures are in process for several wells on Kodiak's Vermillion Basin acreage in Sweetwater County, Wyo. During 2005, Questar Exploration, an independent Rockies exploration and production company, commenced drilling on a multi-pay Cretaceous gas exploration program targeting over-pressured gas in the Baxter Shale and Frontier and Dakota sandstones. The same operator recently announced a proposed environmental impact study (EIS) that includes plans for the drilling of more than 4,000 wells on its acreage block over the next 30 years. Approximately one-third of Kodiak's acreage in the Vermillion Basin has been included in the EIS. The balance of Kodiak's land has been excluded from the EIS so that drilling operations can continue while the EIS is being completed. The company will pay its share of the EIS costs, which are not known at this time. Kodiak currently controls 49,427 gross acres (29,767 net), giving it the potential for nearly 750 locations based upon a 40-acre spacing pattern.

The North Trail-State #4-36 (approximate 48% working interest [WI]; Kodiak-operated) is a proposed 14,625-foot test of the Baxter Shale and Frontier and Dakota sandstones. The nearest third-party production from the targeted formations is approximately 3 miles southwest of the proposed location. The Trail #31 well was placed on production in June 2006 with an initial flow rate of 3.8 MMcf per day. Drilling operations on the North Trail-State #4-36 should commence during the fall of 2006. Kodiak is currently permitting three additional locations in the same section.

Kodiak is permitting four wells in its Horseshoe Basin Unit to test the Baxter Shale and Frontier and Dakota sandstones. The nearest third-party production from the targeted formations is located approximately 6 miles east in the Canyon Creek and Whiskey Canyon units. The #5-3 HB Unit (approximate 40% WI; Kodiak-operated) well will be drilled to a total depth of 13,750 feet. Pipeline right-of-way is in process, and it is anticipated that drilling will commence in late-fall 2006.

Approximately 6 miles northwest of the North Trail #4-36 and 15 miles northeast of the Horseshoe Basin Unit, Kodiak has permitted the #1-8 CR Unit (approx. 45% WI; Kodiak-operated) well in its Chicken Ranch Unit. The proposed total depth is 14,800 feet to test the productive potential of the Baxter Shale and Frontier and Dakota sandstones. The company estimates that the well will spud in early 2007, subject to BLM lease stipulations.

In addition to its own locations, Kodiak owns varying working interest in acreage blocks that are within close proximity to locations permitted by another operator that are expected to be drilled during 2006. The proposed wells are located in the Trail Unit in Sweetwater County, Wyo. and the Sparks Ridge Unit in Moffat County, Colo.

Vermillion Shallow
Kodiak plans to participate in up to five Almond test wells (approximate 6,000 feet test) on its Chicken Springs Prospect (50% WI; non-operator) in Sweetwater County, Wyo. The locations will be drilled vertically and are direct offsets to the company's three producing wells in the field and are intended to develop Almond sands natural gas potential. In addition, Kodiak recently participated for its working interest in fracture stimulation work on the #2-31H well. This horizontal well was drilled in late-2005 and tested the natural gas potential of the Almond coals. The frac fluid is currently being flowed back, and production information is not available at this time.

At June 30, 2006, Vermillion Shallow production was 210,000 cubic feet of natural gas equivalent net to Kodiak.

Williston Basin—Montana and North Dakota

Kodiak recently completed drilling operations on the Kodiak Grizzly #13-6H well (62.5% WI; Kodiak-operated) in McKenzie County, N.D. The well tested the oil-prone Bakken Formation and was drilled to a vertical depth of 10,500 feet with dual-laterals and total measured depth of 19,397 feet. Completion work is scheduled for later this week. Approximately 2 miles to the west the company commenced drilling the Grizzly Federal #4-11H well (62.5% WI; Kodiak-operated), which is a projected tri-lateral well on a 960-acre drilling unit.

Kodiak recently completed a 20-square-mile 3D shoot over its Wrangler/Lowell prospect (50% WI; Kodiak-operated) in Sheridan County, Mont. The program was shot immediately to the west of where the company has four producing Mission Canyon Formation wells. The seismic data will be processed and evaluated, with development drilling scheduled to be commenced in late-summer 2006. Kodiak has permitted two development locations in an attempt to further delineate its current field.

Kodiak has set a pumping unit to attempt completion on the Pederson #14-9H well (43.75% WI; Kodiak-operated) in Divide County, N.D. Electric lines are currently being installed for the pumping unit, with production expected to commence by mid-July. The horizontal well was drilled to an approximate vertical depth of 10,600 feet and a total measured depth of 14,725 feet to test the Red River C Formation.

At June 30, 2006, Kodiak's net production from its Williston Basin projects was 150 barrels of oil per day.

"Our growing Williston production is providing Kodiak with meaningful cash flow during a time of unprecedented high-oil-price environment,” said Lynn Peterson, Kodiak’s president and CEO. “With Williston's stability, marked by recent Bakken success, we can focus on our over-pressured Baxter Shale and Dakota and Frontier tests scheduled for the second half of 2006. We expect that the EIS will also provide value to shareholders upon completion. By having a plan of development in place and approved by the BLM, we believe our future drilling can best exploit the Baxter Shale potential. Depending of course upon success, Kodiak's initial modest exploration investment in the Vermillion Basin could yield a strong inventory of reinvestment opportunities going forward."

Kodiak Oil & Gas, headquartered in Denver, is an independent energy exploration and development company focused on exploring, developing and producing oil and natural gas in the Williston and Greater Green River basins in the U.S. Rocky Mountains.