Mr. David Reid reports

DELPHI ENERGY COMMENCES PRODUCTION AT ITS BIGSTONE EAST MONTNEY PROJECT

Delphi Energy Corp. is providing the following operations update.

At Bigstone East, liquids-rich Montney production began flowing on May 13, 2012, through Delphi's recently completed 30-million-cubic-feet-per-day compression and dehydration facility after receiving final EUB permitting. Commissioning and start-up of the $16-million facility and field gathering infrastructure progressed as planned over the first week of operation, with production volumes from the company's two wells reaching a combined gross target rate of 12 million cubic feet per day and 660 barrels per day of wellhead condensate on May 20, 2012.

Production from the company's first Montney horizontal well at Bigstone East (100-per-cent working interest) with a surface location of 1-19-60-22 W5M has been progressively increased since May 13, 2012, to a rate of 6.3 million cubic feet per day of raw natural gas and 330 bbl/d of wellhead condensate on May 20, 2012. With a shallow-cut gas plant NGL (natural gas liquids) yield estimated at 32 bbl/million cubic feet, the total liquids yield is currently 84 bbl/million cubic feet with 70 per cent being plant and wellhead condensate. Since recovering 100 per cent of the frac oil six days ago the well has produced at an average rate of 5.9 million cubic feet per day and 425 bbl/d of wellhead condensate.

Production from the second Bigstone East Montney well (75-per-cent working interest), with its surface location at 5-14-60-23 W5M, three miles (five kilometres) southwest of the first well, has also been progressively increased since May 16, 2012, to a rate of 5.6 million cubic feet per day of raw natural gas and 330 bbl/d of wellhead condensate on May 20, 2012. With a shallow-cut gas plant NGL yield estimated at 32 bbl/million cubic feet, the total liquids yield is currently 90 bbl/million cubic feet with 72 per cent being plant and wellhead condensate. This well has recovered 84 per cent of its frac oil.

The company plans to produce the wells at variable rates and pressures over the next few months to evaluate and optimize production rates and wellhead condensate yields.

A third horizontal well (100-per-cent working interest) with its surface location also at 5-14-60-23 W5M has been rig released after reaching a planned total depth of 5,119 metres with 2,238 metres of horizontal hole successfully drilled. Completion operations of this third Bigstone East well will commence after spring breakup.

The new facility and infrastructure provide Delphi with the capacity to fully develop the existing Bigstone East land base and generate processing revenue from excess capacity. The facility has been designed to be readily expanded in 15-million-cubic-feet-per-day increments to handle increased company and third party volumes. Delphi has also commenced a feasibility study to integrate this new facility with its ownership in the existing 80-million-cubic-feet-per-day sweet natural gas processing facility to create the lowest possible cost structure and best NGL recovery efficiencies for the company.

The Bigstone East Montney project provides a large inventory of economic projects in the current commodity price environment with current field netbacks of approximately $30.00 per barrel of oil equivalent. Dephi's three extended-reach horizontal wells and existing vertical well tests have efficiently evaluated eight sections of land, and with competitor drilling activity all around the company's 18 gross (14.75 net) sections, the remaining 30 net Montney horizontal locations identified at Bigstone East have been largely derisked. The company had only 1.7 net Montney drilling locations booked at Bigstone East in the GLJ independent engineering report at Dec. 31, 2011, with associated proved and probable reserves of approximately 2.0 million boe.

After giving consideration to the significant scheduled maintenance outage in the quarter at the SemCams K3 facility that will impact both the new Montney production and the company's Tower Creek production as well as a scheduled maintenance outage currently affecting the Devon Wapiti deep-cut facility, the company is forecasting second quarter production within a range of 8,900 barrels of oil equivalent per day to 9,400 boe/d, with greater production growth coming in the third quarter.

Drilling plans for the second half of 2012 will be finalized after well performance is gathered and evaluated over spring breakup.

We seek Safe Harbor.