Exploration & Production

Contact Exploration JV Facility Commissioned

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Contact Exploration Inc. has provided an operations update on its activities in the Kakwa area of Alberta.

Operated Activities

Contact holds a 25% working interest in all Montney wells and associated facilities on a 16 3/4 section block in the Kakwa, Alberta area, other than in the 13-17-63-5W6 Well in which the Company's working interest is 37.5% before payout, 25% after payout. Contact is the operator of all wells and facilities on this 16 3/4 section block.

The central compression and condensate stabilization facility located at 16-7-63-5W6 has now been fully constructed and commissioned. The 16-7 Facility will be used to compress natural gas from the Contact-operated Kakwa area wells for transportation to a third party gas plant, as well as to stabilize and store condensate prior to trucking liquids to sales off-take facilities. Over the past two weeks the 16-7 Facility has demonstrated the ability to receive up to 14mmcf/d of natural gas production and associated condensate production. The commissioning of the 16-7 Facility extended from mid-December 2013 to mid-January 2014. Contact's December 2013 Kakwa production was thereby restricted due to additional downtime of the Kakwa wells while the 16-7 Facility underwent commissioning.

The Contact operated wells at 13-17-63-5W6, 14-30-63-5W6, 3-19-63-5W6 and 5-23-63-6W6 are currently flowing through the 16-7 Facility at aggregate gross production rates of up to 8mmcf/d natural gas and 1,200bbl/d condensate (2mmcf/d and 300bbl/d net to Contact). This flush production rate is expected to decline as production continues, in keeping with normal production declines. However, Contact anticipates that production from wells currently being drilled, completed or tied-in at Kakwa will continue to increase the Company's overall production levels.

Contact recently completed and production tested the 16-25-63-5W6 Montney well. During a short production test, the 16-25 Well demonstrated initial deliverability and condensate yields consistent with the Company's other operated wells at Kakwa. Contact notes that the results from production testing are not necessarily indicative of the long term performance or of the ultimate recovery from the 16-25 Well. The 16-25 Well is now being equipped to produce into the 16-7 Facility and Contact expects this well to be brought onto production in early February 2014.

Contact has completed drilling of the 16-17-63-5W6 Montney well to a total depth of 5,191m. The 16-17 Well was drilled from the same pad as Contact's first Kakwa Montney well at 13-17. Drilling operations were carried out on time and on budget, taking 42 days from spud to rig release. Completion operations are underway on the 16-17 Well and Contact expects to undertake production testing of the well in late January 2014. With success, the 16-17 Well will be equipped for production into the 16-7 Facility, with production expected to commence in mid-February 2014.

Also at Kakwa, Contact is currently drilling a Montney well at 15-30-63-5W6, the first of two back-to-back wells expected to be drilled by the Company from the drilling pad at 3-30-63-5W6. The 15-30 Well was spud on December 31, 2013 and is expected to take approximately 45 days to reach total depth. Upon casing the 15-30 Well, Contact intends to immediately spud an additional well from the 3-30 pad, with spudding expected to occur in February 2014. The 02/14-30 Well is being designed to penetrate the Upper Montney D4 interval. Contact expects to complete both the 15-30 Well and the 02/14-30 Well upon concluding drilling operations on the 02/14-30 Well. Contact anticipates drilling and completion operations on the 15-30 Well and the 02/14-30 Well to be finalized in April 2014 and, with success, expects both wells to be equipped and flowing into the 16-7 Facility in May 2014.

As previously announced Contact intends to employ one rig year round at Kakwa. The Company is currently permitting a new multi-well pad at 7-19-63-5W6 to facilitate the drilling of two long-reach (approximately 1.5 mile) horizontal wells between April and July 2014. The Company expects to complete these wells consecutively once the second well has finished drilling.

Non-Operated Activities

Adjoining the 16 3/4 section block discussed above, Contact holds a 23.75% working interest in two non-operated sections at Kakwa. The Company participated in the drilling of one Montney well on these lands, at 14-2-63-6W6. The 14-2 Well was placed into production in September 2013 but was shut in for substantially all of November and December 2013 due to the operator's infrastructure restrictions. The participants in the 14-2 Well met in late 2013 to discuss production strategies, and the operator agreed to re-commence production at restricted but stable rates. The 14-2 Well re-commenced production on January 7, 2014 as part of establishing a longer term performance profile, and determining an optimum go-forward production strategy, for the well.