ProspEx Resources Enters into Agreement to Dispose of Medallion Assets

    CALGARY, May 25 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the
"Company") has entered into an agreement to dispose of the Company's natural
gas assets in the Medallion area in Southern Alberta. The consideration to be
paid to ProspEx under the agreement is $28.0 million, subject to closing
adjustments. The acquisition has an effective date of January 1, 2009, with
closing expected to occur in early June, 2009.
    The key attributes of this asset disposition are as follows:

    -  The Medallion assets consist of 179 (115 net) producing wells with
       production (as of the effective date) of approximately 750 barrels of
       oil equivalent ("boe") per day, along with associated gas gathering
       and field compression facilities.
    -  The reserves associated with the assets to be acquired were evaluated
       on behalf of ProspEx by GLJ Petroleum Consultants Ltd. ("GLJ")
       effective December 31, 2008. These reserves were estimated to be:
         -  Proved Developed Producing Reserves - 1,495 thousand boe ("mboe")
         -  Total Proved Reserves - 2,348 mboe
         -  Proved plus Probable Producing Reserves - 1,889 mboe
         -  Total Proved plus Probable Reserves - 3,541 mboe

    This disposition should provide ProspEx with increased financial
flexibility to pursue the Company's inventory of repeatable drilling projects,
and to capture new prospect opportunities at a time when ProspEx believes that
new prospect opportunities can be captured at lower than historical costs.
    The disposition is expected to further consolidate ProspEx's asset base
around the core areas of West Central Alberta and the Deep Basin, where the
Company has allocated the majority of its recent capital spending, and
achieved its production growth over the past four years.

    2009 Guidance Summary

    Guidance for 2009 is summarized in the table below.

    Annual average production              2,800 to 3,000 boe per day
    Exploration and Development Capital
     expenditures                          $17 million
    Operating costs                        $8.00 per boe
    Royalties                              15% to 17%
    Expensed general and administration
     ("G&A") costs                         $3.00 per boe

    Annual average production is forecast to be 2,800 to 3,000 boe per day.
This forecast includes the disposition of Medallion production in June, as
well as the previously announced shut down of third party facilities at
Ricinus for the month of June for maintenance.
    The Board of Directors of ProspEx has approved an exploration and
development capital budget of $17 million (exclusive of acquisitions and
dispositions) for the year, approximately equal to forecasted cash flow.
    Operating costs are forecast to be $8.00 per boe, essentially in line
with historical costs.
    Royalty rates are expected to average between 15% and 17%. Under the
current Crown royalty regime in Alberta, royalties are sensitive to commodity
prices, as well as the extent to which the Company can take advantage of the
royalty incentives announced by the Province of Alberta on March 3, 2009.
    Expensed G&A is expected to average $3.00 per boe in 2009, as lower
production levels will drive unit G&A costs higher in 2009. The Company is
also incurring higher costs for the leasing of office space in 2009 compared
to 2008.
    ProspEx Resources Ltd. is a Calgary-based junior oil and gas company
focused on exploration for natural gas in the Western Canadian Sedimentary

    Reader's Advisory

    Guidance regarding production, capital expenditures, operating costs, G&A
costs, cash flow and royalties may constitute "financial outlooks" as
contemplated by National Instrument 51-102 of the Canadian Securities
Administrators entitled Disclosure Obligations. The purpose of such financial
outlooks is to forecast the anticipated operating results of the Company in
2009. Please be advised that the information may not be appropriate for other
    Certain information contained in this press release constitutes
forward-looking information or statements including, without limitation,
information and statements respecting: anticipated cash flow, capital
expenditures, production forecasts, production additions and deletions,
reserves and resources additions and deletions, additions to and deletions
from the Company's historical and future capital programs, acquisitions or
dispositions, operating expenses, G&A, royalties, expected timing of the
tie-in of wells, expected timing of the receipt of regulatory approvals and
expected timing of the completion of facilities projects.
    Statements relating to "reserves" and "resources" are forward-looking
information as they involve the implied assessment, based on certain estimates
and assumptions that, among others, the reserves and resources described exist
in the quantities predicted or estimated.
    The estimates of reserves and future net revenue for individual
properties may not reflect the same confidence level as estimates of reserves
and future net revenue for all properties, due to the effects of aggregation.
The reserves of the Company, effective as of December 31, 2008 were estimated
by GLJ to be: Proved Developed Producing - 5,387 mboe, Total Proved Reserves -
7,139 mboe, Proved plus Probable Producing - 6,947 mboe and Total Proved plus
Probable Reserves - 10,043 boe.
    Forward-looking information and statements are often, but not always,
identified by the use of words such as "anticipate", "seek", "believe",
"expect", "hope", "plan", "intend", "forecast", "target", "project",
"guidance", "may", "might", "will", "should", "could", "estimate", "predict"
or similar words or expressions suggesting future outcomes or language
suggesting an outlook. By their very nature, forward-looking information and
statements involve inherent risks and uncertainties, both general and
specific, and risks that predictions, forecasts, projections and other
forward-looking information and statements will not be achieved. We caution
readers not to place undue reliance on these statements as a number of
important factors could cause the actual results to vary materially from the
forward-looking information or statements. These factors include, but are not
limited to: the volatility of oil and gas prices; production and development
costs and capital expenditures; the imprecision of reserve and resource
estimates and estimates of recoverable quantities of oil, natural gas and
liquids; the Company's ability to replace and expand oil and gas reserves;
environmental claims and liabilities; incorrect assessments of value when
making acquisitions or dispositions; increases in debt service charges; the
loss of key personnel; the marketability of production; defaults by third
party operators; unforeseen title defects; fluctuations in foreign currency
and exchange rates; inadequate insurance coverage; compliance with
environmental laws and regulations; changes in tax and royalty laws; the
Company's ability to access external sources of debt and equity capital; and
the Company's ability to obtain equipment in a timely manner to carry out
development activities. Further information regarding these factors may be
found under the headings "Risk Factors" and "Industry Conditions" in the
Company's most recent Annual Information Form, under the heading "Business
Risks" in the Company's Management's Discussion and Analysis for the year
ended December 31, 2008, and in the Company's most recent consolidated
financial statements, management information circular, quarterly reports,
material change reports and news releases available under the Company's
profile on SEDAR ( Readers are cautioned that the foregoing
list of factors that may affect future results is not exhaustive. When relying
on our forward-looking statements to make decisions with respect to the
Company, investors and others should also carefully consider information set
forth in the section "Forward-Looking Information" of the Company's most
recent Annual Information Form respecting the assumptions upon which the
Company bases certain forward-looking information and the uncertainties
inherent in such assumptions.
    The Company does not assume responsibility for the accuracy and
completeness of the forward-looking information or statements and such
information and statements should not be taken as guarantees of future
outcomes. Subject to applicable securities laws, the Company does not
undertake any obligation to revise these forward-looking information or
statements to reflect subsequent events or circumstances. Furthermore, the
forward-looking information contained in this press release are made as of the
date of this document and the Company does not undertake any obligation to
update publicly or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by applicable law. The forward-looking information and statements
contained in this press release are expressly qualified by this cautionary
    For the purposes of this press release, boes have been calculated on the
basis of six thousand cubic feet of gas to one barrel of oil. The term boe may
be misleading, particularly if used in isolation. A boe conversion ratio of
six thousand cubic feet to one barrel is based on an energy equivalency
conversion method primarily applicable at the burner tip and does not
represent a value equivalency at the wellhead.

    %SEDAR: 00021285E

For further information:

For further information: John Rossall, President & CEO,
or George Yee, Vice President Finance & Chief Financial Officer,,
(403) 268-3940

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