Grey Wolf Issues Ops Update

Grey Wolf Exploration Inc. announced that it has received approval from the Energy and Utilities Board ("the EUB") on the second of three downspacing applications in the Pouce Coupe/Valhalla area for Doig and Montney production. This approval relates to downspacing the Montney production and covers 15 sections of land. We anticipate approval of the third and final application prior to year end. During January 2007, Grey Wolf will initiate its previously announced natural gas development program in the area, under which, as many as 40 net wells may be drilled in the future. Construction of the Duke Energy 8-inch pipeline into the heart of the Grey Wolf land position is underway as scheduled, and will ensure our development program will proceed unimpeded by a lack of plant processing capacity.

Operational Update

A Pouce Coupe well (GWE 50 percent working interest) has been completed in three zones and flowed on test at a combined rate of 3.4 million cubic feet ("MMcf") per day. Tie-in and installation of compression has been completed and production from one zone in this well commenced last week to the CNRL Progress gas plant at a rate of approximately 1.5 MMcf per day.

A second Pouce Coupe well (GWE 50 percent working interest) has been completed in three zones where the combined flow was 2.8 MMcf per day. Tie-in and installation of compression is in progress and we anticipate production from this well will commence in December.

In the Caroline area, a well (GWE 18.8 percent working interest) has been completed and tested in excess of 400 barrels of oil equivalent ("boe") per day and currently is on production. Two wells (GWE 15 percent and 25 percent working interests) targeting the area's Cardium trend were recently drilled and each tested in excess of 400 boe per day. These wells are expected to come on production during the first quarter of 2007 when GPP is approved. A fourth well (GWE 14.9 percent working interest) tested at 700 Mcf per day from the Mannville and is waiting on tie-in.

It should be noted that production test data refers to preliminary tests only. Sustainable production information will be reported as it becomes available.

Grey Wolf's Pouce Coupe area production continues to be subject to curtailments due to third party gas plant and pipeline constraints. Current company-wide production is approximately 2,250 boe per day excluding approximately 1,150 boe per day currently curtailed. As a result of the successful tie-in of wells during the fourth quarter, we are revising our 2006 production capacity exit rate upward to approximately 3,200 boe per day. Actual 2006 annual production guidance of 2,280 boe per day remains unchanged.

Grey Wolf's 2006 capital program of $64 million included the drilling of 23 gross (12.4 net) wells, resulting in 22 gross (11.4 net) wells cased, 8 gross (3.5 net) wells waiting on completion/ tie-in and 2 gross (0.3 net) wells currently drilling. It is important to note that 32 percent of our 2006 capital program was directed toward constructing and expanding field infrastructure which will reduce the time required for future tie-ins and assist in getting production on stream quickly.

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.