Redcliffe Announces Q2 2009 Financial Results

THIS NEWS RELEASE IS NOT FOR DISSEMINATION IN THE UNITED STATES OR TO U.S. PERSONS.

Redcliffe Exploration Inc. ("Redcliffe" or the "Company") (TSX VENTURE:RXP.A)
(TSX VENTURE:RXP.B) is pleased to announce that it has filed its unaudited
interim consolidated financial statements and related Management's Discussion
and Analysis as of and for the three and six months ended June 30, 2009 with
Canadian securities regulatory authorities. These filings are available for
review at www.sedar.com.


Q2/H1 2009 Highlights:

- Production for the six months ended June 30, 2009 increased 9% to 1,043 boe/d
compared to 948 boe/d for the corresponding period in 2008. This increase would
have been larger had the Company not experienced extensive shut-ins of
third-party processing and compression facilities in the Gold Creek and Wapiti
area lasting approximately seven weeks and four weeks, respectively, at the two
systems processing Gold Creek and Wapiti gas. As a result, production for Q2
2009 averaged 791 boe/d versus 983 boe/d for Q2 2008.


- Net debt decreased 15% to $7,333,000 at June 30, 2009, compared to $8,587,000
at December 31, 2008. This compares to Redcliffe's bank lines at June 30, 2009
of $14.1 million. The decrease was primarily the result of completing the first
tranche of a private placement equity financing on June 30, 2009 for gross
proceeds of $4,385,750. In July, the Company completed the second tranche of the
private placement financing for additional gross proceeds of $314,250, as well
as a public offering for gross proceeds of $3,500,000. On a pro forma basis,
after giving effect to the subsequent financings, net debt would be
approximately $4.4 million at June 30, 2009.


- Net capital expenditures totaled $685,000 for Q2 2009 and $2,641,000 for the
six months ended June 30, 2009. Redcliffe participated in the drilling of 2
(1.43 net) wells during Q2 2009 resulting in 1 (1.0 net) natural gas well and 1
(0.43 net) dry and abandoned well, for an overall net success rate of 70%. The
gas well was tested at rates of over 2,000 mcf/d and is expected to be tied in
during Q3 2009. Production is expected to commence once natural gas prices
strengthen. 


- Petroleum and natural gas sales decreased 39% to $2,162,000 and 61% to
$6,877,000 for the three and six months ended June 30, 2009, respectively,
compared to the corresponding periods in 2008. This was primarily caused by a
decrease in product prices realized of 44% and 59% for the respective periods in
2009 compared to 2008, and has had a corresponding impact on cash flows from
operations in 2009.




                                           Three months          Six months
                                                  ended               ended
                                                June 30             June 30
                                      --------------------------------------
Financial                                2009      2008      2009      2008
----------------------------------------------------------------------------
($ thousands, except per share amounts)

Petroleum and natural gas sales         2,162     6,565     6,877    11,282
Funds from operations (1)                 747     2,854     2,635     5,010
 Per basic and diluted share             0.01      0.04      0.03      0.07
Cash provided by operating activities       6     2,456     1,265     4,555
 Per basic and diluted share                -      0.03      0.01      0.06
Net loss and comprehensive loss         1,147       310     2,415     1,224
 Per basic and diluted share             0.01         -      0.03      0.02
Capital expenditures, net                 685     4,413     2,641     8,622
Basic and diluted weighted-average
 shares (thousands)                    92,446    76,729    91,718    73,036

Capital Structure                         June 30, 2009   December 31, 2008
----------------------------------------------------------------------------
($ thousands, except share amounts)

Working capital deficiency (2)                      439               4,885
Bank debt                                         7,333               8,587
Net debt (3)                                      7,772              13,472
Total assets                                     62,156              66,683
Shares outstanding (thousands)
 Class A (4)                                     95,051              74,235
 Class B                                          1,494               1,494

                                           Three months          Six months
                                                  ended               ended
                                                June 30             June 30
                                      --------------------------------------
Operations                               2009      2008      2009      2008
----------------------------------------------------------------------------

Daily production
 Crude oil and condensate (bbl/d)         151       188       187       151
 Natural gas liquids (bbl/d)              101       124       141       141
 Natural gas (mcf/d)                    3,233     4,027     4,287     3,939
 Oil equivalent (boe/d @ 6:1)             791       983     1,043       948
 Per million diluted shares               8.6      12.7      11.4      12.9
Average prices (5)
 Crude oil and condensate ($/bbl)       62.02    128.69     53.77    116.32
 Natural gas liquids ($/bbl)            20.25     55.85     23.64     55.92
 Natural gas ($/mcf)                     3.82     10.19      5.57      9.27
 Oil equivalent ($/boe)                 30.04     73.38     36.44     65.36
Netback
 Operating netback ($/boe) (6)          18.80     44.31     19.36     38.60
 Realized gain (loss) on financial
  derivatives ($/boe)                       -     (2.69)    (0.94)    (1.40)
 General and administrative ($/boe)     (6.79)    (8.19)    (5.17)    (6.66)
 Interest ($/boe)                       (1.63)    (1.54)    (1.16)    (1.53)
 Funds from operations ($/boe)          10.38     31.89     13.97     29.01
Drilling activity
 Gross wells                             2.00      3.00      3.00      3.00
 Net wells                               1.43      2.50      1.63      2.50
 Success rate, net wells                   70%      100%       74%      100%

----------------------------------------------------------------------------

(1) Funds from operations is calculated as cash provided by operating
    activities and adding changes in non-cash working capital and asset
    retirement expenditures, if any. Funds from operations is used to
    analyze the Company's operating performance and leverage. Funds from
    operations does not have a standardized measure prescribed by GAAP and
    therefore may not be comparable with calculations of similar measures
    for other companies.
(2) Working capital deficiency includes only accounts receivable, prepaid
    expenses and deposits, and accounts payable and accrued liabilities.
(3) Net debt represents the sum of working capital deficiency and bank debt.
(4) The Company completed additional equity financings subsequent to June
    30, 2009, resulting in the issuance of an additional 15,257,000 Class A
    shares. As of the date hereof, the Company has 110,307,788 Class A
    shares outstanding.
(5) Average prices are before the deduction of transportation costs; oil
    equivalent includes sulphur sales.
(6) Operating netback equals petroleum and natural gas sales less royalties,
    operating expenses and transportation costs, calculated on a boe basis.
    Operating netback does not have a standardized measure prescribed by
    GAAP and therefore may not be comparable with the calculation of similar
    measures for other companies.



Production & Operations:

Operationally, Redcliffe continued to closely monitor capital spending in Q2
2009, spending only $1,257,000 as we focused on strengthening our balance sheet
in a decreasing natural gas price environment. This capital was financed by the
sale of certain minor interest properties for $572,000 and cash flows from
operations in the quarter. The Company participated in the drilling of two wells
in the Pembina area during the quarter. This drilling resulted in a natural gas
well at 12-27 (WI 100%) that tested over 2,000 mcf/d. Redcliffe expects to
complete a short tie-in during Q3 2009 but not bring the well on stream until
late fall when gas prices are anticipated to show some recovery. The other well
drilled in the area (WI 43%) was unsuccessful.


At Redcliffe's Gold Creek/Wapiti/Karr core area there was no drilling in Q2
2009. The previously drilled 1-27 (WI 38%) potential multi-zoned gas well is
expected to be completed and tested in Q3 2009 but is not expected to be brought
on production until late fall or winter for gas pricing reasons. Similarly, the
previously tested 16-27 discovery (WI 30%) will remain shut-in pending gas price
improvement. Redcliffe will, however, continue to grow prospect inventory in
this core area and to enhance its position in the emerging Montney and
Nikanassin tight sand plays as well as the traditional multi-zoned
gas/condensate targets in the area. Redcliffe has interests in over 100 gross
sections of land within this core focus area. 


Redcliffe has planned the drilling of 2-3 gas prospects in Q4 2009 and a further
2 gas prospects in Q1 2010, including its first well in the Karr horizontal
Montney play. In Pembina, 1-2 oil prospects are also scheduled to be drilled
prior to year-end.


Production in Q2 2009 was negatively impacted by longer than anticipated
third-party processing plant and compressor station maintenance activities in
Gold Creek and Wapiti lasting approximately seven weeks and four weeks,
respectively, at the two systems processing Gold Creek and Wapiti gas. In
addition, again due to natural gas pricing concerns, productive zones within
certain producing wells were not brought on production once capacity to produce
was returned in the third quarter. Redcliffe is currently producing at
approximately 1,000 - 1,050 boe/d with an estimated 200 - 300 boe/d shut-in.
This does not include the potential contribution from the 1-27 Gold Creek
discovery scheduled to be completed in Q3 2009. Analysis of the drilling
information to date suggests a potential for this well to produce 100 - 200
boe/d net to Redcliffe from the three prospective zones.


Outlook:

The impact of significantly lower commodity prices, especially natural gas
prices, has resulted in lower than expected funds from operations in 2009
compared to 2008 despite increasing production rates. This reduced cash flow for
re-investment, combined with the uncertainty as to the timing of natural gas
price recovery, continues to impact capital spending and growth over the near
term. Redcliffe has taken immediate measures to reduce overhead and operating
costs as well as defer new production until gas prices rebound. 


In the longer term, Redcliffe remains committed to the development of the
potentially significant resource base within its Peace River Arch acreage
inventory. To finance this growth the Company has taken numerous steps this year
to increase financial strength. In Q1 2009, we completed the acquisition of
First Western Financial, which added approximately $1.6 million in capital. In
Q2 2009 we sold interests in some non-core properties for $572,000 and also
undertook two equity financings in late Q2 2009 and early Q3 2009 for aggregate
gross proceeds of $8.2 million. This included major investments by significant
investors based in both Calgary and Frankfurt, Germany. 


These measures place Redcliffe in a stable financial position to initiate
drilling activity if natural gas prices strengthen this winter. It also provides
us the ability to participate in the acquisition marketplace due to the
inability of most small juniors to finance any capital activity. The Company has
established itself with drilling success and an unequalled land and prospect
inventory base for a company of its size in one of the most active natural gas
focused areas in Alberta. With a stronger balance sheet, we are uniquely
positioned to aggressively develop this potential asset base commencing in the
fourth quarter of 2009. The drilling incentives announced by the Alberta
government through March 2011 make this basin competitive at lower pricing
levels, reducing our capital cost on an average 2,500 meter well by $500,000 and
the initial 5% royalty rate accelerates payout. We remain optimistic that gas
prices will recover through 2010 and 2011 and therefore anticipate improved cash
flows in the future. In addition, we have continued to demonstrate our ability
to raise supporting capital in the equity markets. Redcliffe therefore remains
optimistic of our growth prospects and our ability to enhance returns to the
shareholders over the next few years.


Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking
statements, including management's assessment of future plans and operations,
and capital expenditures and the timing thereof, that involve substantial known
and unknown risks, uncertainties and assumptions, certain of which are beyond
the Company's control. Such risks, uncertainties and assumptions include,
without limitation, those associated with oil and gas exploration, development,
exploitation, production, marketing, processing and transportation, loss of
markets, volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other producers,
inability to retain drilling rigs and other services, delays resulting from or
inability to obtain required regulatory approvals and ability to access
sufficient capital from internal and external sources, the impact of general
economic conditions in Canada, the United States and overseas, industry
conditions, changes in laws and regulations (including the adoption of new
environmental laws and regulations) and changes in how they are interpreted and
enforced, increased competition, the lack of availability of qualified personnel
or management, fluctuations in foreign exchange or interest rates, stock market
volatility and market valuations of companies with respect to announced
transactions and the final valuations thereof, and obtaining required approvals
of regulatory authorities. The Company's actual results, performance or
achievements could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurances can be given
that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits that the Company will
derive there from. Readers are cautioned that the foregoing list of factors is
not exhaustive. Additional information on these and other factors that could
affect the Company's operations and financial results are included in reports,
including the Company's annual information form for the financial year ended
December 31, 2008, on file with Canadian securities regulatory authorities and
may be accessed through the SEDAR website (www.sedar.com). All subsequent
forward-looking statements, whether written or oral, attributable to the Company
or persons acting on its behalf are expressly qualified in their entirety by
these cautionary statements. Furthermore, the forward-looking statements
contained in this news release are made as at the date of this news release and
the Company does not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required by applicable
securities laws. 


BOE may be misleading, particularly if used in isolation. A BOE conversion of 6
Mcf: 1 bbl is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead.