Contact Announces Kakwa Montney Operations Update

Source: 10/9/2012, Location: North America

Contact Exploration Inc. is pleased to announce that it has successfully drilled its second horizontal Montney well (the "14-30 Well") to a measured depth of 4,678 metres, including a horizontal leg that remained within the target interval for its entire 1,230 metre length. The 14-30 well was drilled to total depth ("TD") seven days ahead of schedule and under budget, having reached TD 17 days faster than the Company’s initial Montney discovery well at 13-17-63-5W6 (the "13- 17 Well").

The 14-30 Well has been logged, cased and equipped with a packer-style completion system that will facilitate a fourteen stage nitrogen-based frac with an option to frac an additional prospective interval above the primary target, also within the Montney. Contact is planning to complete and test the well over the next 30 days. With successful test results, the well will be equipped for production and tied-in to the Company’s newly constructed gas transportation line by year end. Contact is preparing to drill another well from the same surface location as the 14- 30 Well later this winter, and is also in the process of licensing additional locations on its Kakwa acreage.

As previously announced on May 3, 2012, Contact’s 13-17 Well (37.5% working interest Contact before payout, 25% after payout) was successfully drilled and completed, demonstrating average gross production rates over the final 24 hours of production testing of 1,150 bbl/d condensate and 8,290 mscf/d gas, being 2,532 boe/d (431 bbl/d and 3,109 mscf/d, or 950 boe/d combined, net to Contact and before payout). The Company has finalized construction of the well site facilities and transportation line, connecting the 13-17 Well to Pembina's Musreau facility.

A series of outages at downstream liquids processing facilities in Alberta have caused a delay in the start-up of the 13-17 Well, as new volumes of propane and butane temporarily cannot be accepted at these facilities. Contact is investigating alternative solutions for this short-term restriction and is confident the delay will not affect the overall forecast economics for the project, which remain exceptional due to the strong condensate market and improving natural gas prices.

Contact operates the Deep Basin Montney project and is responsible for 25% of the costs of drilling and completion of the 14-30 Well and of the pipeline tie-in for the 13-17 Well. The Company holds a 25% interest in 16 contiguous sections of lands at Kakwa.

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