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Hyperion Continues Cardium Delineation; Ups Reserves, Adds Wells

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Hyperion Exploration Corp. has reported its 2013 year end reserves and a development update for its Niton/McLeod Cardium light oil play.

2013 Year End Reserve Highlights:

• Increased P+P Net Asset Value by 4% to $1.53 per basic and fully diluted share
• On the basis of Proved plus Probable Developed Producing reserves achieved a NAV of $0.95 per basic and fully diluted share
• Invested $8.2 million to complete and tie-in one 1 gross (1 net) short reach horizontal well with a lateral length up to 1.0 mile (convert from undeveloped to producing reserve status) and drill, complete and tie-in 2 gross (2 net) SRH wells, not previously booked in the reserve report;
• Actual well cost was less than the capital estimated in the McDaniel year end 2012 reserve report. This resulted in a $10.965 million reduction of Company wide future development capital. This represents a reduction in FDC for future wells at Niton/McLeod of approximately 20%;
• Increased Total Proved plus Probable reserves Before Tax Net Present Value, discounted at 10% by 4% to $101.9 million;
• Modest drilling activity in 2013 was offset by a shallowing base decline (mainly from maturing SRH wells drilled in 2012) resulting in relatively minor changes in overall corporate reserves: P+P reserves decreased by 5.3% to 7,734.1 Mboe (54% liquids) and Total Proved reserves decreased by 4.7% to 4,688.8 Mboe (53% liquids);
• Achieved TP finding, development and acquisition cost of $8.71/boe and TP finding and development cost of $11.96/boe including changes in FDC;
• Due to the reduction in P+P FDC ($10.965 million), coupled with 2013 investment capital of ($8.2 million), total capital was less than zero for the year. As a result, the calculation of P+P FD&A and F&D is not relevant;
• Achieved a TP Recycle Ratio of 4.0 based on FD&A of $8.71/boe, a TP Recycle Ratio of 2.9 based on F&D of $11.96/boe and a 2013 field netback of $34.96/boe;
• Achieved a P+P F&D of $28.60/boe for the two wells drilled in 2013 (not booked in the 2012 reserve report). These wells were drilled to delineate the edge of the Niton/McLeod Cardium play;
• Based on industry results, management believes the application of extended reach horizontal wells with lateral lengths 1.5 mile's and greater has the potential to improve results and overall economics;
• Reserve Life Index (RLI) of 10.9 years (TP) and 18.0 years (P+P) based on 2013 production of 1,175 boe/day;
• The Company has proven up the Cardium light oil opportunity drilling SRH wells. The Company plans on drilling the next wells at Niton/McLeod as ERH's, at locations offsetting its best wells to date; and
• Based on lands currently captured and the implementation of ERH wells, the Company has an unbooked inventory of 51.6 ERH and 31.0 SRH wells at Niton/McLeod.

Niton / McLeod Go Forward Development

The Niton/McLeod Cardium light oil play has been the focus of the Company's capital activities for the past two years. Given the complex geological environment, there was limited industry understanding of the Cardium opportunity in this area until Hyperion drilled the first successful Hz well in early 2012. Since then the Company has drilled a total of six wells, delineating the play over a distance of approximately 23 kilometers (14 miles).

The initial concept was to use SRH wells with a lateral length of 1.0 mile completed with multi stage fracs to optimize production and yield competitive economic returns. Results from the initial six wells have demonstrated initial production rates that have varied well to well, though the reserve assignment per well has been similar. Hyperion is very encouraged by the results achieved thus far and is now focused on improving initial production rates.

Given the Cardium is a low permeability reservoir, industry has evolved to drilling ERH wells with a lateral length of 1.5 miles or greater to improve initial production rates, improve capital efficiencies and accelerate capital payouts. Hyperion's significant contiguous land position at Niton/McLeod (29,030 net acres) lends itself to development using ERH wells. The Company plans to use ERH on upcoming wells that offset its best performing SRH wells to date.

Based on industry results, drilling an ERH well has the potential to more than double initial production compared to a SRH well. The evolution to ERH wells in the Cardium at Niton/McLeod is expected to improve capital efficiency in excess of 20% and accelerate capital payouts to less than 1.5 years.

Based on lands currently captured, and with the successful implementation of an ERH development program, the Company has an unbooked inventory of 51.6 ERH and 31.0 SHR wells at Niton/McLeod. All wells at Niton/McLeod included in the reserves evaluated in the McDaniel Report were based upon SRH wells. Going forward the Company plans to convert wells currently booked as SRH to ERH where it has sufficient contiguous lands.

Subsequent Event

On January 31, 2013, Hyperion sold its Chip lake asset of 100 boe/d (70% gas, 12% NGL and 18% oil) for total consideration of $3.4 million cash, net of adjustments. The following reserves were attributed to Chip Lake in the McDaniel Report:

• Total Proved Reserves of 210.9 mboe (65% gas); and
• Total Proved plus Probable Reserves of 285.1 mboe (65% gas).

No Proven Undeveloped or Proved plus Probable Undeveloped locations were assigned to Chip Lake.