Painted Pony Petroleum Ltd. (TSX VENTURE:PPY) report its financial and operating results for the six and three month periods ending June 30, 2012. Highlights include:

• grew production in the first half of 2012 to average 6,369 boe per day (weighted 76% gas and 24% oil and liquids), an increase of 67% over the same period in 2011;

• produced funds flow from operations of $7.7 million, $0.11 per basic and diluted share in the second quarter of 2012;

• drilled 12 (9.7 net) wells in the first half of 2012, with 2 (1.9 net) wells drilled in the second quarter;

• generated an average second quarter 2012 field operating netback of $5.11 per boe for British Columbia gas weighted assets and $50.78 per boe for Saskatchewan oil weighted assets; and

• exited the quarter with a positive working capital position of $42.3 million and an undrawn demand credit facility of $100 million.

NORTHEAST BC MONTNEY GAS OPERATIONS

Painted Pony continues to develop its natural gas asset in the Montney formation of northeastern British Columbia. During the first half of 2012, Painted Pony completed drilling operations on 4 (2.2 net) new Montney wells. The Company is currently completing 4 (1.4 net) Montney wells. During the third quarter, the Company plans to conduct completion and testing operations on a total of 5 (2.4 net) Montney wells. In the balance of this year, the Company expects to drill up to 3 (2.2 net) additional Montney wells, of which 2 (2.0 net) wells are expected to be completed and tested in the fourth quarter.

The third party gas plant expansion at Blair (previously announced in the Company's December 21, 2011 press release) became fully operational on August 19, 2012. Painted Pony's allocated firm processing capacity has increased to 32 mmcf/d, with additional processing available on an interruptible basis. As part of this expansion, the forecast gas liquids recovery at the new Blair facility is expected to increase to between 15 and 20 bbls/mmcf. Accordingly, Painted Pony expects to realize an average liquids recovery of double its current rate at Blair once this expansion is optimized.

Earlier this year, the Company completed the acquisition of certain working interests in the Cypress area Montney gas trend. As a result of this transaction, coupled with additional mineral rights obtained at recent Crown land sales, Painted Pony currently has 101,700 net acres of Montney rights, or approximately 160 net sections.

The Company continues to pursue a strong interest in the BC LNG Export Cooperative group and anticipates that additional details will become available during the second half of 2012. The BC LNG Co-operative group has indicated they expect the export facility to become operational in 2014.

LIGHT OIL OPERATIONS

In Saskatchewan, operations are continuing on the Company's Bakken and Mississippian light oil projects. In the first half of 2012, the Company drilled 7 (6.5 net) wells and have drilled an additional 7 (5.4 net) wells to-date in the third quarter. In the balance of 2012, the Company is planning to drill an additional 9 (4.6 net) wells. Painted Pony expects to commence water injection on its planned Bakken pressure maintenance scheme at Midale late in the third quarter.

During the first half of 2012, the Company expanded its exploration program in western Canada to include several new light oil projects in Alberta. While the recently completed and tested first exploratory well targeting Viking light oil in the Wimborne district failed to produce commercial volumes of oil, Painted Pony continues to evaluate other Viking opportunities throughout central Alberta, including possible additional locations at Wimborne. The Company's current budget contemplates the drilling of up to 2 (2.0 net) additional Viking test wells in the last half of 2012.

PRODUCTION

During the second quarter, Painted Pony's production averaged 5,745 boe/d (weighted 75% gas and 25% oil and liquids), representing an increase of 60% over second quarter 2011 volumes of 3,593 boe/d. Sales from Saskatchewan operations averaged 1,489 boe/d in the quarter (93% oil and liquids), while sales from northeast British Columbia averaged 4,256 boe/d (99% gas).

To date, during the third quarter of 2012, field estimated sales have averaged approximately 5,400 boe/d, weighted 76% gas. With the expanded third party Blair facility on-stream this past weekend, the Company's curtailed Montney gas volumes (previously announced in the Company's July 30, 2012 press release) are expected to be placed on-stream.

FINANCIAL RESOURCES

Over the second quarter, Painted Pony generated funds flow from operations of $7.7 million equating to $0.11 per basic and diluted share. The Company remains strong financially, exiting the second quarter of 2012 with a positive working capital position of $42.3 million, combined with an undrawn demand credit facility of $100 million.