Contact Exploration: Operations, Oil Production and Drilling Update

Contact Exploration Inc. updated its shareholders as to progress on the workover project in the Stoney Creek Field, the latest oil production volumes, and exploratory drilling plans in the South Stoney Creek Prospect.

In October, 2007 Contact commenced a rework program involving existing non-productive boreholes in the Stoney Creek Field. Initial results from the workover project have been very favourable, with inflow of oil seen in most of the wellbores as they were swab tested. Four successful candidates from the group are being prepared for production immediately, with pumps being installed in January. Approval to produce these wells has already been obtained from the New Brunswick government. It is expected that these four wells will add a total additional production of 25 barrels per day to the Stoney Creek Field.

Work on the remaining group of 10 wells in the workover program is still ongoing, with the candidates being analysed for bypassed gas pay. We anticipate bringing several more wells on production in the months ahead. Once this group of workovers is completed, additional non-producing wellbores with potential for re-work have been identified. A candidate for hydraulic fracturing has also been identified in the Stoney Creek Field.

It has been determined in the course of the workovers that there are several distinct production areas within the Stoney Creek Field, some of which have not been exploited. We are also examining the future feasibility of a low cost high density drilling program, once the use of existing wellbores has been maximized.

In December, 2007 Contact's monthly production was approximately 1,800 barrels. This includes both New Brunswick and Saskatchewan production and gives an average of 60 barrels of oil per day. The average sale price for the oil was $85 per barrel. With a low royalty rate, averaging 12%, this represents a very significant netback to the wellhead for Contact.

For the months prior to December, the approximate production volumes were; 1,850 barrels in November, 1,700 barrels in October, and 650 barrels in September, for production rates of 61, 57 and 21 barrels per day, respectively. It is expected that the exit production rate for February 2008, with the addition of the four wells from the workover campaign, will be approximately 85 barrels per day. Contact is pleased with the solid growth in production of crude and anticipates continued growth from the Stoney Creek Field in the future.

The second exploratory well in the Contact Operated South Stoney Creek Prospect, the Pound Hill C-67-2328 well, has been permitted by the New Brunswick Department of Natural Resources and location construction has commenced. Contact is projecting a February spud date, utilizing the Precision Drilling #176 rig. The planned maximum depth of the well is 1905 metres, with the target formations being the Hiram Brook, Fredricks Brook and Dawson Settlement sands. This location was chosen from evaluation of seismic as well as mapping the regional geology of the area. It is also located in proximity to the south-east corner of the Stoney Creek Field, which has been historically the most prolific production area.