Stonefire Energy Corp. Announces 2008 Third Quarter Financial Results

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES.


Stonefire Energy Corp. (the "Corporation" or "Stonefire") (TSX VENTURE:SFE.A)
(TSX VENTUERE:SFE.B) is pleased to announce that it has filed on SEDAR its
unaudited financial statements and related management's discussion and analysis
("MD&A") for the three month and nine month periods ended September 30, 2008.
Selected operational and financial results are outlined below and should be read
in conjunction with Stonefire's unaudited financial statements and related MD&A
which can be found at www.sedar.com.




Financial and Operating Highlights
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                            Three months ended            Nine months ended
                    Sep 30, 2008  Sep 30, 2007   Sep 30, 2008  Sep 30, 2007
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($ except share       (unaudited)   (unaudited)    (unaudited)   (unaudited)
 amounts)
FINANCIAL
Petroleum and
 natural gas
 revenue            $  5,385,975  $    412,738  $  12,796,008  $  1,160,002
Funds flow from
 (used in)
 operations (1)        2,795,950       (24,135)     5,945,661       (41,642)
 Per share, basic
  (1)                       0.12          0.00           0.25          0.00
Net income (loss)        781,426      (245,681)     1,343,673      (742,568)
 Per share, basic           0.03         (0.01)          0.06         (0.03)
Capital
 expenditures       $  8,688,403  $  5,578,624     16,364,955    13,881,262
Working capital
 deficit
 (end of period)                                $ (18,111,215) $ (5,828,846)
Shares outstanding
 (end of period)
 Class A, including
  shares under share
  purchase loans                                   18,265,000    15,265,000
 Class B                                            1,012,000     1,012,000
 Options                                            1,775,000     1,421,000
Weighted average
 shares outstanding
 Class A              18,202,500    15,265,000     18,202,500    14,164,194
 Class B               1,012,000     1,012,000      1,012,000     1,012,000
 Conversion of Class
  B shares (2)         4,458,270     9,108,000      4,458,270     9,108,000
Weighted average
 basic shares
 outstanding          23,672,770    25,385,000     23,672,770    24,284,194
                     ------------  ------------   ------------  ------------
Class A share
 trading
 High                                           $        2.75  $       2.29
 Low                                                     0.65          0.95
 Close                                          $        1.85  $       1.00
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OPERATIONS
Production
 Crude oil (bbls/d)           81             -             27             -
 Natural gas liquids
  (bbls/d)                   137            26            121            21
 Natural gas (mcf/d)       4,318           516          3,369           433
 Total (boe/d at 6:1)        938           112            710            94
Reference prices
 WTI (US$ per bbl)  $     117.98  $      75.38  $      113.29  $      66.23
 AECO (Cdn$ per GJ)         7.34          4.91           8.17          6.21
Average selling
 price
 Crude oil (per bbl)      111.14             -         111.14             -
 Natural gas liquids
  (per bbl)                95.89         64.58          92.90         58.23
 Natural gas
  (per mcf)                 8.42          5.49           9.63          6.92
Operating netback
 (per boe at 6:1)          37.54         18.52          37.62         21.48
Funds flow netback
 (per boe at 6:1)   $      32.40  $      (2.34) $       30.56  $      (1.62)


(1) Management uses funds flow from operations (before changes in non-cash
    working capital) to analyze operating performance and leverage.  Funds
    flow from operations as presented does not have any standardized meaning
    prescribed by Canadian generally accepted accounting principles (GAAP)
    and, therefore, may not be comparable with the calculation of similar
    measures by other entities.
(2) For the period ended September 30, 2008, the Class B shares are
    converted at the period-end Class A share price of $1.85 (2007 - $1.00)
    and added to the Class A shares to calculate basic shares outstanding.



2008 Third Quarter Corporate Highlights

- Average production of 938 boe per day, an increase of 738 percent over Q3 2007
production of 112 boe per day and a record high quarterly rate.


- Continued exploration success in the quarter with the drilling of three (3.0
net), exploration wells in the Edson exploration area.


- Record high funds flow of $2.8 million with an operating netback of $37.54 per
boe in the quarter.


- Strengthened financial capacity, with lines of credit increased from $17.0
million to $30.0 million late in the quarter.


- Drilled the Corporation's first new oil pool discovery at Edson. This 100
percent working interest Edson oil well is producing 39.1 degrees API light
sweet oil at rates in excess of 300 bbls per day.


- Capital spending of $8.7 million for the quarter with the majority spent on
drilling, completion and the tie-in of 3.0 net wells.


- Average operating costs of $4.77 per boe for the quarter, 47 percent lower
than in Q3 2007. Operating costs are forecasted to continue to decline as
production and operating efficiencies increase.


- Completed a corporate reserves update to September 30, 2008 indicating that
the Corporation's proved plus probable reserves have more than doubled. All-in
finding and development costs per boe of reserves added in 2008 are on-track to
be lower than in previous years.


President's Message

It is a great pleasure to report on Stonefire's activities during the third
quarter of 2008. During the quarter Stonefire continued to experience success in
executing its business growth plan, delivering record production, record cash
flow and continued exploration success.


Average production for the quarter of 938 boe per day represented a 738 percent
increase over the third quarter of 2007 and a 30 percent increase over the
second quarter of 2008. Production exceeded the Corporation's prior
third-quarter guidance of 900 boe per day in spite of the shut-in of
approximately 225 boe per day at McLeod for most of July due to a third-party
pipeline disruption. With the new Edson light oil discovery well on production
with GPP status Stonefire's current total production is approximately 1,300 boe
per day of which one third is light oil and natural gas liquids.


Current production now exceeds the Corporation's previous guidance for a 2008
exit rate of 1,000 boe per day and Stonefire is on track to exceed all targets
originally set for 2008 including the average production rate of 800 boe per day
for the year.


Stonefire enjoyed significant exploration success in the quarter, drilling three
100 percent working interest exploration wells. Two wells were drilled in the
Corporation's core Edson field. The first was a successful multi-zone gas well
with an initial production rate of approximately 1.0 mmcf per day which is
tied-in to Stonefire's 100 percent working interest Edson gas plant. The second
well made a significant light oil pool discovery. It encountered over 12 metres
of net pay and was completed as a flowing oil well with rates as high as 400
bbls per day of sweet 39.1 degrees API oil. The well received GPP (Good
Production Practice) status for October from the ERCB, allowing it to produce at
unrestricted rates. The well is currently flowing at a restricted rate of 300
bbls per day of clean oil with solution gas tied-in to Stonefire's Edson gas
gathering system. This promising discovery has triggered a major follow-up
program and the Corporation is currently preparing drilling locations for up to
four offset wells. The first of these delineation wells spud in late-October
2008.


Stonefire's third well drilled in the third quarter was in the Leaman field. The
100 percent working interest exploration well was cased and completed in the
target zone which proved to be oil and gas-bearing but with lower permeability
than anticipated. It has potential as a lower rate well and is currently shut-in
while Stonefire evaluates production options.


Capital expenditures for the quarter totaled $8.7 million with the majority
($8.1 million) spent on the drilling, completion and tie-in of the 3.0 net
exploration wells. Operating costs averaged $4.77 per boe down significantly
from $6.77 per boe in the second quarter due to increased production and
operating efficiencies at the Corporation's core Edson area. Operating costs per
unit of production are expected to continue declining with increasing production
rates. The Corporation delivered record cash flow from operations of $2.8
million with operating netbacks averaging $37.54 per boe. The Corporation also
posted net earnings of $0.78 million.


Also in the quarter Stonefire's bank lines were increased from $17 million to
$30 million. With current net debt and working capital deficiency totaling only
$18.1 million, plus its rising cash flow, the Corporation has significant
financial flexibility to carry out its capital expenditure plans. As a result of
its strong successes in 2008 Stonefire has increased its capital budget for the
year from the original forecast of $12 million to a planned total of $18-$20
million.


Looking forward the Corporation is on track to exceed all targets originally set
for 2008 and is very well-positioned to deliver continued organic growth in 2009
using its cash flow and existing bank lines. At present the Corporation is
preparing for the drilling of up to 3.0 gross (2.5 net) wells before year-end
2008. Stonefire's 100 percent working interest gas plant at Edson is nearing
full capacity and preliminary engineering is underway for a possible plant
expansion in 2009. Following the exploration success in 2008 the Company's
drilling inventory stands at 42 gross (30.0 net) locations many of which are now
lower-risk development gas wells and delineation oil wells at Edson.


In spite of recent volatility in commodity prices and equity markets, Stonefire
remains on firm footing to execute its business growth plan. The Corporation
operates all its capital projects and 98% of current production, and controls
the majority of its gas processing through its 100 percent gas plant at Edson,
which means it is not vulnerable to project cancellations or schedule changes
imposed by operating partners. The Corporation's low and declining operating
costs provide a cushion against volatile commodity prices. Stonefire's long-life
production base is solid with multiple producing zones per well and no water
production in this Deep Basin area of Alberta. The resulting overall low cost
structure and stable production base create a strong foundation to cash flow
should commodity prices continue to soften.


Just as oil and gas prices likely overshot to the high side in mid-2008, the
reverse appears to now be happening at present, overshooting to the low side at
the end of Q3 2008. I believe that in the near future market forces and the
fundamentals of supply and demand will bring commodity prices back to somewhere
around the middle of the range, hopefully with somewhat less volatility. In the
meantime Stonefire has significant unused credit lines available and a large
inventory of high-quality drilling prospects. With our high average working
interest, low finding costs and control of all capital spending we can react
quickly and appropriately to developing market conditions to ensure continued
success and value creation.


Stonefire Energy Corp. is an Alberta-based company formed to participate in oil
and gas exploration, development and acquisitions focusing in the West Central
region of Alberta. The Company's shares trade on the TSX Venture Exchange under
the symbols SFE.A and SFE.B. The Company currently has 18,265,000 Class A shares
and 1,012,000 Class B shares outstanding.


As referred to above, to view a full copy of the Corporation's unaudited
financial results for the period ended September 30, 2008, including the
Corporation's unaudited financial statements and accompanying MD&A, please refer
to the SEDAR website at www.sedar.com or on the Corporation's website at
www.stonefire-energy.com.


Reader Advisory

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 and
uncertainties, certain of which are beyond Stonefire's control. Such risks and
uncertainties include, without limitation, risks associated with oil and gas
exploration, development, exploitation, production, marketing 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. Stonefire'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, including the amount
of proceeds, that Stonefire will derive therefrom. Readers are cautioned that
the foregoing list of factors is not exhaustive. All subsequent forward-looking
statements, whether written or oral, attributable to Stonefire 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 Stonefire 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.


Petroleum and natural gas volumes are converted to an equivalent measurement
basis referred to as a "barrel of oil equivalent" (boe) on the basis of 6
thousand cubic feet of natural gas equalling 1 barrel of oil. This is based on
an energy equivalency conversion method applicable at the burner tip and does
not necessarily represent a value equivalency at the wellhead. Readers are
cautioned that boe figures may be misleading, particularly if used in isolation.


To request a free copy of Stonefire's financial report or if you would like to
be put on Stonefire's mailing list please contact Ronald Williams, Vice
President, Finance and CFO at [e-mail].