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Kicking Horse Energy Delays New Drilling Until 2016

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Kicking Horse Energy Inc. has reported its operating and financial results for the three and six months ended June 30, 2015.

Highlights:

• Completed expansion of 16-7-63-5 W6M compressor and condensate stabilization facility (16-7 Facility).
• Production increased to, and has been maintained at, approximately 4,000 boe/d since completing the 16-7 Facility expansion, with production for the three months ended June 30, 2015 averaging 3,034 boe/d.
• Brought 3 (2.25) net wells on production.
• Completed the 1-11-63-6 W6 and 8-11-63-6 W6 ("1-11 Well" and "8-11 Well") (1.5 net) wells.
• Sold 2.9 net sections, on an after earning basis, of shallow rights in the Wapiti area for $3.0 million.
• Acquired nine 100% working interest sections of Montney rights in Kakwa immediately offsetting the Company's West Kakwa acreage and within three miles of its East Kakwa production block in exchange for 27 sections of deep rights at Chime.
• As at June 30, 2015 Kicking Horse's debt to annualized Q2 2015 cash flow ratio was 1.7 times, down from 5.3 times at Q1 2015 and is based on Q2 2015 production volumes (being approximately 75% of current production).

Operations Update

• Each of the 14-25-63-6 W6 and 15-25-63-6 W6 wells ("14-25 Well" and "15-25 Well") were fraced with sliding sleeve technology and each has now produced for over 90 days. The 90 day initial production (IP 90) rates from each of these wells exceed the highest IP 90 rates experienced by the Company to date. The 14-25 Well has produced at gross average rates of 3,735 mcf/d and 704 bbls/d of liquids for a total average IP 90 production rate of 1,326 boe/d (gross), while the 15- 25 Well has produced at gross average rates of 3,421 mcf/d and 665 bbls/d of liquids for a total average IP 90 production rate of 1,235 boe/d (gross).
• As previously announced, Kicking Horse recently resumed drilling operations, spudding the 13-25-63-6 W6 well (13-25 Well) on July 5, 2015. The Company has now finished drilling the 13-25 Well and has prepared the well for completion operations, planning up to 98 individual fracs with frac spacing as close as 20 meters. Downhole pressure data from wells recently completed by the Company at East Kakwa has confirmed that fracs spaced at 30 meters are not in communication with each other, encouraging tighter frac spacing. Given the superior performance of the Company's newly completed wells, Kicking Horse expects that this tighter frac spacing should result in additional hydrocarbon production and improved economics from upcoming wells.
• The Company will continue to demonstrate financial and operational flexibility. The Company has finished completion operations on, and has flow tested, the 1-11 Well and the 8-11 Well (1.5 net) in July 2015. The 1-11 Well has now been successfully brought on production and 8-11 Well is expected to be brought on production within the next few weeks. The Company has moved its contracted drilling rig to the 8-35-63-7 W6 location for the planned drilling of a vertical test well on its recently acquired Kakwa acreage.
• The Company has delayed any additional drilling operations after the vertical test well until 2016. Within a scaled back capital program, the Company will proceed with completion of the 13-23-63-6 W6 ("13-23 Well") and the 13-25 Well (1.75 net) in late Q3 or early Q4 2015, which wells are expected to be on production late in 2015.
• The Company expects its 2015 capital program to be approximately $55 million with approximately $22 million to be incurred in the second half of the year with the majority of these expenditures expected to be incurred in Q3 2015.