ProspEx Resources Provides Operational Update and 2008 Business Plan Guidance

    CALGARY, Jan. 14 /CNW/ - ProspEx Resources Ltd. ("ProspEx" or the
"Company") is providing an operational update and guidance with respect to its
2008 business plan.


    In the fourth quarter of 2007, ProspEx participated in 16 (7.25 net)
wells. Three (1.75 net) wells were drilled in West Central Alberta with two
(1.5 net) wells cased, one (0.5 net) well was cased in the Deep Basin and one
(1.0 net) well was drilled and completed in Granum in Southern Alberta. The
remaining 11 (4.0 net) wells were partner operated wells drilled and cased at
Medallion in Southern Alberta.
    ProspEx continues to pursue its inventory of "high impact" prospects. At
Salter, a horizontal well on a foothills structure has been successfully
drilled pursuant to a farmout agreement with a larger industry partner.
Completion operations are scheduled to begin within the next few weeks.
ProspEx will not pay for any portion of the drilling and completion of this
well, but has retained a 40% interest in any production.
    Regulatory approval has also been obtained for the drilling of the
Company's Edson Wabamun prospect. This "high impact" exploration well is
expected to commence drilling in the first quarter of 2008.
    The Company estimates that production in the fourth quarter of 2007
averaged approximately 3,900 barrels of oil equivalent ("boe") per day.
Production for the month of December, 2007 is estimated at 3,800 boe per day.
Facility outages in the Deep Basin resulted in lost production of
approximately 75 boe per day averaged over the quarter. At Harmattan, third
party facility restrictions also constrained ProspEx's production over the
fourth quarter. In addition to its existing production, ProspEx has over 500
boe per day of new production awaiting tie-in at Harmattan. The Company has
entered into an agreement to process this new gas at an alternative facility
in the Harmattan area and expects to bring the new production onstream in
March, 2008. Fourth quarter and December 2007 production estimates do not
include any volumes attributable to the previously announced acquisition of
assets in the Ricinus area which is expected to close on January 22, 2008.


    Guidance Summary

                                           2007 Estimated      2008 Guidance
    Annual Average Production                       3,900      4,200 - 4,500
    Capital Expenditures ($million)                    52                 55
    Operating Costs ($/boe)                          8.00               8.00
    Royalties (%)                                      15                 20
    G&A ($/boe)                                      2.10               2.15

    ProspEx anticipates that North American natural gas prices will remain
weak through 2008, and is therefore planning a conservative capital spending
program. The Company's Board of Directors has approved a 2008 total capital
budget of $55 million which includes the $11.75 million acquisition of assets
in the Ricinus area announced previously.
    The West Central core area has been allocated the largest share of the
capital budget with approximately 35% of the drilling, completions and
facilities budget. The Deep Basin and Southern Alberta core areas have each
been allocated approximately 30% of this budget. Funding for high impact
exploration amounts to approximately 5% of the budget.
    Annual average production in 2008 is expected to be 4,200 to 4,500 boe
per day. Declines in the Company's existing production base are anticipated to
be greater in 2008 than in the prior year, mostly due to declines in the Deep
Basin, where production was essentially flat in 2007 due to facility
constraints on the high rate exploration discovery brought onstream in late
March, 2007.
    Operating costs for 2008 are expected to be $8.00 per boe, with the
corporate average royalty rate forecast at 20% of gross revenues.
    The Company will reassess its business plan and guidance in the second
quarter of 2008, when winter drilling results are known, especially from the
high impact program, and greater clarity on 2008 natural gas prices and the
New Royalty Framework in Alberta are available.
    ProspEx believes that maintaining a strong balance sheet is critical in
the current business environment. The Company's preliminary estimate of net
debt at December 31, 2007 is approximately $40 million. Cash flow for 2008,
assuming an AECO gas price of $6.50/GJ, is estimated to be $36 million.
Assuming that capital spending in excess of cash flow is funded by increased
debt, the Company's 2008 year end debt is projected to be approximately
$60 million, or 1.5 times annualized trailing quarterly cash flow and within
the Company's anticipated $65 million credit facility.
    The Company uses derivative financial instruments and physical contracts
to manage its exposure to volatility in commodity prices. These contracts are
entered into solely for hedging purposes and are not used for trading or other
speculative purposes.
    As of January 14, 2008, ProspEx has 10,000 GJ/d of production hedged for
the period April 1, 2008 to October 31, 2008 (approximately 40% of forecast
production). These hedges are costless collars with floor prices of $6.50/GJ
to $6.75/GJ, and ceilings of $6.75/GJ to $7.75/GJ at AECO. In addition, the
Company has entered into hedges for the period November 1, 2008 to March 31,
2009 for 4,000 GJ/d of production with a floor price of $7.00/GJ and ceilings
of $8.80/GJ to $9.15/GJ at AECO. These hedges are in addition to the
5,138 GJ/d hedged for the period November 1, 2007 to March 31, 2008, as
previously disclosed.

    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

    Certain information regarding ProspEx Resources Ltd. including
management's assessment of future plans and operations, constitutes
forward-looking information or statements under applicable securities law and
necessarily involve assumptions regarding factors and risks that could cause
actual results to vary materially, including, without limitation, assumptions
and risks associated with oil and gas exploration, development, exploitation,
production, marketing and transportation, loss of markets, volatility of
commodity prices, currency fluctuations, imprecision of reserve estimates,
environmental risks, competition, incorrect assessment of the value of
acquisitions, failure to realize the anticipated benefits of acquisitions and
ability to access sufficient capital from internal and external sources.
    The reader is cautioned that these factors and risks are difficult to
predict and that the assumptions used in the preparation of such information,
although considered reasonably accurate by ProspEx at the time of preparation,
may prove to be incorrect. Accordingly, readers are cautioned that the actual
results achieved will vary from the information provided herein and the
variations may be material. Readers are also cautioned that the foregoing list
of factors is not exhaustive. Additional information on these and other
factors that could affect ProspEx's operations or financial results are
included in ProspEx's reports on file with Canadian securities regulatory
authorities. In particular see ProspEx's MD&A and the Risk Factors and
Industry Conditions sections of ProspEx's Annual Information Form. ProspEx's
reports may be accessed through the SEDAR website (, at
ProspEx's website ( or by contacting the Company directly.
Consequently, there is no representation by ProspEx that actual results
achieved will be the same in whole or in part as those set out in the forward
looking information.
    Furthermore, the forward-looking statements contained in this news
release are made as of the date of this news release, and ProspEx 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 law. The forward-looking statements
contained herein are expressly qualified by this cautionary statement.
    Boe's 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: please contact John Rossall, President & Chief
Executive Officer,, (403) 268-3941; or George Yee, Vice
President Finance and Chief Financial Officer,, (403) 268-3942

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