Mr. Michael Greenwood reports

PRD ENERGY ANNOUNCES OPERATIONAL UPDATE

PRD Energy Inc. has completed its financial statements and operating results as at and for the six months ended June 30, 2014, and has provided an operational update on activities to date as well as an outlook for the remainder of 2014. The company's interim condensed consolidated financial statements and management's discussion and analysis for the reporting period will be filed on Aug. 27 on SEDAR and posted on the company's website.

Development of the Volkensen production licence

In early August, the company applied for a four-well development permit on its Volkensen production licence. Volkensen is an oil pool that was abandoned in 1993 after producing approximately 900,000 barrels. The company believes that potential recoveries can be enhanced through a three-stage development plan:

• Stage 1 -- drill two horizontal wells adjacent to the existing vertical wells based on existing 2-D seismic, well control, reservoir data and other geological data available to the company. This stage is expected to evaluate reservoir pressures, flow rates and logs, among other things, to be used in stage 2 of the development;
• Stage 2 -- drill two additional horizontal wells from the existing pad after the completion of the first two horizontal wells and evaluation of the planned 3-D seismic program described below;
• Stage 3 -- development of several additional wells depending on the results of the completed development program.

Subject to the receipt of all required regulatory approvals, site construction and drilling for the first stage are expected to commence in the fourth quarter of 2014 and continue into the first half of 2015.

The Volkensen well site design is expected to significantly reduce the environmental effect associated with large concrete pad structures typically used in the northwest German basin. The proposed matting and asphalt design is anticipated to have a secondary benefit of reducing costs of construction and remediation especially. This approach should also reduce the well site footprint, particularly when combined with the surface benefits of horizontal drilling.

Volkensen/Sittensen seismic program

The company has commenced the permitting of a 90-square-kilometre 3-D seismic program for its Volkensen and Sittensen licences. Early indications from both the reservoir and 2-D seismic data obtained to date have led the company to believe that its Sittensen licence is highly prospective for conventional horizontal oil development. Subject to the receipt of all required regulatory approvals, the seismic program is expected to start in the fourth quarter of 2014 and be completed and interpreted in the first quarter of 2015.

The seismic data are expected to enable the company to further delineate Volkensen and four additional high-impact exploration prospects identified to date. Other pools in the northwest German basin with reservoir intervals and trapping geometries similar to the company's prospects have each recovered more than five million barrels of oil during their development. The seismic program will be financed from existing cash balances at a cost of approximately $5-million.

PRD is the operator and 100-per-cent holder of both the Volkensen and Sittensen licences, subject to a 50-per-cent back-in right in favour of the prior operator in respect of the Volkensen production licence only. Given the scope and prospects of these licences, the company is evaluating one or more farm-out transactions with strategic partners with the goal of increasing activity and development on the company's other licences.

Boerger field

PRD has received an expanded 3-D seismic data set covering the Boerger field and the surrounding area. It has completed its reprocessing of these data and submitted a field development plan to the operator; the operator is currently reviewing this plan. The company is also in discussions with the operator to become the designated operator for all future field redevelopment in order to accelerate development time frames for this pool. The company has proposed drilling two wells from the Boerger 7A well site in the first quarter of 2015 as the next stage of development for the Boerger pool. In effect, the company's accelerated Volkensen development drilling has substituted the well development activity originally planned for Boerger in the last quarter of 2014.

The operator and the company completed facility modifications at Boerger 7A during June, 2014, and are assessing the effectiveness of these modifications. In that regard, the operator has shut in production in order to carry out certain pressure transient tests, and is expected to produce the Boerger 7A well intermittently for the remainder of the third quarter. Since being placed on production, the Boerger 7A well has completed 102 operating days between Feb. 24 and June 30, 2014, and produced a total of 15,729 barrels of oil. PRD is encouraged by the initial results of this well; however, it feels that the well is not producing to its full capability due to production being limited to a portion of the horizontal length. The company has proposed a workover plan to the operator using an acid squeeze to improve productive capability, a method that the company believes would optimize completion methods for future wells.

The Boerger 7A well represents a significant milestone in the company's development. The company can use the well to expand its business in Germany over its significant land position. This operation has provided the company with valuable operating experience, which it is currently using to develop cost-reduction strategies to apply to its independent operations elsewhere in Germany. Further, the knowledge gained of the regulations and regulatory process, the understanding of local service company dynamics, and the company's improved public communication methods, which incorporate transparency to all German stakeholders, are all as a result of drilling Boerger 7A. The permitting for the development of Volkensen and the 3-D seismic shoot over the Volkensen and Sittensen Licences stand to be substantial beneficiaries of this experience, which bodes well for the company's ability to be able to substantially increase activity in 2015 and beyond.

Other licences

The company recently obtained legacy geophysical and production data over one of its production licences from one of the largest oil and gas companies in the northwest German basin, marking the first transaction between PRD and this company. This transaction expands the company's strategic access to legacy data, which is an important step in advancing activity on its licences. The company is evaluating the data received to date.

PRD is continuing to augment its understanding of its existing land base of 2,413,300 acres with improved access to data of Germany's major oil and gas companies. Management has recently completed a technical review of its existing licences and prospects, resulting in the high-grading of certain exploration and production licences. These licences are expected to be the focus of corporate activity in late 2015 and throughout 2016.

PRD remains committed to the German marketplace both environmentally and economically. In the last 12 months, the company has increased its staffing levels in Germany from three professionals to over 10, while continuing to manage its general and administrative expenses to a modest level. PRD is committed to expanding its business in Germany with highly skilled German people, and expects to continue to increase employment in the country. World-class netbacks and an attractive underdeveloped geologic environment, combined with the current geopolitical situation in Eastern Europe, provide incentives for both the oil and gas industry and its stakeholders to progress with development of Germany's vast natural resources.

We seek Safe Harbor.