Grey Wolf Reports Financial, Operating Results for 2008

Grey Wolf Exploration Inc. is pleased to provide an operational update and announce its financial and operating results for the year ended December 31, 2008.

Grey Wolf's business plan aims to boost production and pay down debt within the limits of cash flow. To this end, expenditures and investments have been aimed at and limited to projects which can help achieve these aims. We are pleased to report that the strategy is working. As stated in the February 24, 2009 press release, our production level is over 3,100 boe/d.

At Petitot, the 2-17 Slave Point gas well, which came on-stream at 5 MMcf/d (700 boe/d after shrinkage) on February 20, has been producing steadily at that rate to date, without significant problems. The well was brought on-stream using in-house staff, ahead of schedule.

On September 10, 2008, Grey Wolf reported that its first 100% horizontal well in Pouce Coupe had been brought on production from the Lower Doig at a rate of 4.6 MMcf/d on August 15. The well is currently producing at a rate of 3.5 MMcf/d. Our recent horizontal well (Grey Wolf 50% working interest ("W.I.")), which came on-stream from the Lower Doig on December 24, 2008 at 2.7 MMcf/d, was still producing 1.7 MMcf/d at the end of February 2009. These results validate the benefits to be obtained from the application of horizontal drilling technology to Grey Wolf's large inventory of locations in the Doig and Montney reservoirs at Pouce Coupe.

On November 25, 2008, we reported that a 50% W.I. vertical well in Pouce Coupe was being completed and was expected to come on-stream in December of that year. The well came on production from the Baldonnel on January 16, 2009 at 2.25 MMcf/d and is currently producing at that rate.

A second vertical 50% well in Pouce Coupe was drilled to preserve an expiring lease. As expected, a marginal section was found in the lowermost Montney which upon completion produced enough gas to preserve the lease. Much better pay in the Lower Doig is waiting on completion, while an oil reservoir in the Gething is being evaluated.

A shallow well in Pouce Coupe, in which Grey Wolf holds a 50% W.I., was drilled to exploit shallower zones observed in a previously drilled deeper test with multiple pays. This shallow well was recently completed in the Paddy, and is currently producing at a controlled rate of 700 Mcf/d. The well came on production December 4, 2008.

2008 Year End Results

  • Grey Wolf invested $38.2 million during the year ended December 31, 2008. This resulted in working interest proved plus probable reserve additions, after revisions, of 1,947 thousand barrels of oil equivalent ("Mboe"). These additions were offset by working interest annual production of 753 Mboe, resulting in 260 percent of production being replaced.
  • Grey Wolf's 2008 capital program was aimed at exploring for new reserves and developing proved undeveloped and probable reserves. During the year, proved reserves, increased by 11 percent to 7,163 Mboe, while proved and probable reserves, increased by 9 percent to 14,105 Mboe.
  • For 2008, finding and development costs for proved plus probable reserves, after revisions and before change in future development costs was $19.62 per boe, resulting in a recycle ratio of 1.7. When the change in future development costs is applied to the calculation, the finding and development costs increased to $28.71 per boe with a corresponding recycle ratio of 1.2.
  • Daily production in 2008 averaged 2,058 boe per day and production during the fourth quarter of 2008 averaged 2,115 boe per day. Production was impacted by plant turn arounds, repair and curtailment at various times throughout the year.

In other news, the Company has been actively seeking transactions in an effort to enhance the value of the Company. The Company's Board has decided to accelerate and significantly step up its efforts on this front and to this end, has appointed a Special Committee of independent directors with a mandate to consider all possible alternatives for the Company. Mr. Jim Smith will act as Chairman of the Committee. The Special Committee has appointed CIBC World Markets Inc. and Peters & Co. Limited as financial advisors to assist it in its mandate.

Mr. John B. Maher has tendered his resignation from the Board of Directors of Grey Wolf Exploration Inc. to focus on his primary business commitments. The Board and management thank Mr. Maher for his contributions to Grey Wolf's development and wish him well in his future endeavours. The Board has chosen not to replace Mr. Maher until the next annual meeting of shareholders, and, in the interim, have appointed Mr. Mark Smith to the Audit and Governance Committee and Mr. James Smith to the Reserves Committee.