Stonefire Energy Corp. Announces 2009 Second 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 VENTURE: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 six month periods ended June 30, 2009. 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          Six months ended
                              Jun 30,      Jun 30,      Jun 30,      Jun 30,
                                2009         2008         2009         2008
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($ except share amounts)  (unaudited)  (unaudited)  (unaudited)  (unaudited)
FINANCIAL
Petroleum and natural
 gas revenue             $ 3,992,257  $ 4,959,295  $ 8,416,624  $ 7,410,033
Funds flow from (used in)
 operations (1)            2,036,662    2,434,653    3,915,551    3,149,711
  Per share, basic (1)          0.08         0.11         0.15         0.14
Net income (loss)           (133,663)     708,520     (331,198)     562,247
  Per share, basic              0.00         0.03        (0.01)        0.02
Capital expenditures     $ 1,463,273  $ 3,654,880    6,332,891    7,676,552
Working capital deficit
 (end of period)                                  $(21,785,558)$(12,218,762)
Shares outstanding (end
 of period)
  Class A, including
   shares under share
   purchase loans                                   18,265,000   18,265,000
  Class B                                            1,012,000    1,012,000
  Options                                            1,775,000    1,775,000
Weighted average shares
 outstanding
 Class A                  18,202,500   18,202,500   18,202,500   18,202,500
 Class B                   1,012,000    1,012,000    1,012,000    1,012,000
Conversion of Class B
 shares (2)                7,637,573    3,609,005    7,637,573    3,609,005
                         ---------------------------------------------------
Weighted average basic
 shares outstanding       26,852,073   22,823,505   26,852,073   22,823,505
Class A share trading
  High                                            $       1.65 $       2.30
  Low                                                     0.95         0.65
  Close                                           $       1.17 $       2.19
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OPERATIONS
Production
 Crude oil (bbls/d)              211            -          256            -
 Natural gas liquids
  (bbls/d)                       200          128          189          113
 Natural gas (mcf/d)           5,751        3,569        5,465        2,889
 Total (boe/d at 6:1)          1,369          722        1,356          594
Average selling price
 Crude oil (per bbl)     $     59.97  $         - $      51.01 $          -
 Natural gas liquids
  (per bbl)                    46.59       103.38        43.24        91.05
 Natural gas (per mcf)          3.81        11.57         4.62        10.54
Operating netback (per
 boe at 6:1)                   19.82        43.45        19.78        37.69
Funds flow netback (per
 boe at 6:1)             $     16.35  $     37.06 $      15.95 $      29.13

(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 June 30, 2009, the Class B shares are converted at
    the period-end Class A share price of $1.17 (2008 - $2.19) and added to
    the Class A shares to calculate basic shares outstanding.
(3) Sales of crude oil by the Corporation commenced in August 2008.
    Accordingly, there was no selling price for crude oil in the
    comparative 2008 periods.



2009 Second Quarter Corporate Highlights

- Second quarter production averaged 1,369 boe per day, an all time quarterly
high for the Corporation and an 89.6 percent increase over the 722 boe per day
average production for the second quarter of 2008. Second quarter production
also grew by 2 percent over the first quarter of 2009 and was Stonefire's eighth
consecutive quarter of production growth.


- Funds flow from operations for the second quarter was $2.0 million or $16.35
per boe, an 8.4 percent increase over first quarter funds flow of $1.9 million
and a quarter-over-quarter increase of 5.1 percent on a funds flow per boe basis
due mainly to improved oil and NGL pricing and reduced Crown royalties. Second
quarter funds flow was 16.4 percent lower than second quarter 2008 funds flow of
$2.4 million mainly due to reduced commodity prices.


- The Corporation continued to achieve very low operating and cash costs
(inclusive of operating, transportation, interest and general and administrative
costs), which came in at $4.58 per boe and $9.33 per boe, respectively, in the
second quarter. This represents a decline in operating costs of 32.3 percent
from the second quarter of 2008. The most recent quarterly operating costs and
total cash costs are expected to position Stonefire in the most efficient decile
of junior and mid-sized exploration and production companies in Western Canada.
The Corporation remains on track to average $4.50 per boe in operating costs for
2009.


- Capital spending for the second quarter totalled approximately $1.5 million of
which approximately $1.0 million was spent on drilling, completion and equipping
of new wells.


- Stonefire commenced a three-well (2.5 net) drilling program late in the second
quarter with the spud of a 50 percent working interest operated gas well at
McLeod. All three wells will qualify for the Alberta Drilling Royalty Credit and
are expected to generate approximately $1.1 million of drilling credits net to
Stonefire. The wells also qualify for the New Well Royalty Reduction program.
Drilling and completion costs are trending approximately 25 percent lower than
one year ago.


- Added three gross sections (2.3 net) of land during the quarter. Of the total
land added, two gross (1.3 net) sections were added at Edson, bringing
Stonefire's total contiguous land holdings in the Edson area to 17.5 gross (16.8
net) sections, all of which are Stonefire- operated.


- The Corporation remains well-capitalized and liquid, exiting the second
quarter with net debt of $21.8 million versus total available bank lines of $30
million.


President's Message

Production, Prices, Costs

The Corporation is pleased to report another quarter of record production with
average production of 1,369 boe per day, an increase of nearly 90 percent from
second quarter 2008 production of 722 boe per day and up slightly over our first
quarter average. This represents Stonefire's eighth consecutive quarter of
production growth.


During the second quarter of 2009 Stonefire maintained a conservative strategy
with an emphasis on protecting the balance sheet during this period of low
natural gas prices, without completely halting its drilling-focused growth
program. The only new production came at the commencement of the quarter when we
brought a previously announced 100 percent working interest multi-zone gas well
at Edson on-stream. The well was brought on production April 1 to qualify for
the Alberta New Well Royalty Reduction (NWRR) program which provides for a flat
5 percent royalty on new wells for 12 producing months or 500 million cubic feet
of natural gas equivalent. The new well came on production at approximately 150
boe per day.


Stonefire continues to benefit from its high-quality and increasingly
diversified Deep Basin-focused production base, which in the second quarter
consisted of 30 percent light oil and natural gas liquids (NGL) and the
remainder sweet natural gas. The NGL and oil production saw an increase in the
average selling price over the first quarter of 2009, helping to offset the
quarter-over-quarter reduction in the natural gas selling price. On a total boe
basis the Corporation's average selling price in the second quarter was $32.04
per boe compared to $36.62 per boe in the first quarter of 2009 a reduction of
only 12.5 percent compared to a drop of 31.2 percent in the average natural gas
selling price over the same period. Funds flow from operations for the quarter
was just over $2 million, an increase of 8.4 percent over the first quarter of
2009 thanks to stronger crude oil and NGL prices, but down 16.4 percent from the
second quarter of 2008 due to lower prices of all commodities.


Also noteworthy during this period of lower commodity prices is Stonefire's
continued ability to deliver low operating and combined cash costs. Operating
costs for the quarter averaged $4.58 per boe, placing us on-track to meet our
2009 target of $4.50 per boe and expected to place Stonefire in the most
efficient decile for operating costs among junior and mid-sized exploration and
production companies in Western Canada. Importantly, total cash costs which
include operating, transportation, interest and general and administrative
costs, were $9.33 per boe for the quarter, again expected to be in the top
performing decile for Western Canada producers. The quarter also saw declining
royalty rates due to the Alberta NWRR, declining reference pricing for natural
gas and due to Gas Cost Allowance (GCA) recoveries for the Edson gas plant. The
total royalty rate averaged 20 percent in the quarter compared to 31 percent in
Q2 of 2008.


Operations

The main focus of operations in the quarter was the preparation and commencement
of a three- well (2.5 net) summer drilling program. The Corporation selected
three high-priority drilling locations, two of which were natural gas targets
required to extend our rights to otherwise expiring lands and the third well
targeted light oil in our Edson core area. The first well drilled was a 50
percent working interest, Stonefire-operated well spud in mid-June in the McLeod
field. The well encountered the target natural gas zone but with lower than
expected permeability resulting in a low rate gas well that will remain shut-in
for the time being to conserve tie-in and equipping capital. The well has helped
to delineate a large producing Ostracod marine sand trend. Subsequent to the
quarter Stonefire acquired an additional 2.5 gross sections of crown land over
this Ostracod sand trend which will justify additional drilling with increased
natural gas prices. The remaining 2 wells of the summer drilling program are 100
percent working interest wells drilled at Edson subsequent to the end of the
second quarter. Both have been cased with the first well at Edson testing at
approximately 100 boe per day of liquids rich natural gas and was placed on
production through Stonefire's Edson gas plant on August 18. The last well was a
1.5 mile step-out to the previously announced light oil pool discovery made in
mid-2008 at Edson. It encountered a thick fractured light oil zone and
completion operations are currently underway. This summer's drilling program saw
total costs approximately 25 percent lower compared to costs in 2008, due to the
slow down in the services sector. The program also generated approximately $1.1
million net of drilling royalty credits for Stonefire. All three wells will
qualify for the 5 percent royalty under the Alberta NWRR program.


Outlook

At the start of the second half of 2009 gas prices remain weak due to the
current oversupply of natural gas in North America, which has lead to unusually
high volumes of natural gas in storage. On the positive side, however, it
appears that North American supply may have peaked and may have started to
decline due to the drastic reduction in the drilling rig count, which is now
less than half of what it was one year ago. The other contributing factor to the
current natural gas oversupply has been the economic recession and reduced
industrial demand for natural gas, particularly in the United States. It now
appears that the U.S. economy may have reached bottom and is starting to rebound
which, if true, should lead to increased industrial gas demand. The combination
of declining supply and increasing demand should help bring supply and demand
for natural gas back into balance and result in more robust gas prices, which
could occur as early as late 2009 according to some forecasters.


In the meantime Stonefire is well-positioned with a low-cost, high-quality and
diversified Deep Basin-focused production base and complete control over its
capital spending projects. The Corporation entered the second half of 2009 with
over $8 million of unused Bank lines available, creating a comfortable cushion
of liquidity. Our solid financial positioning and conservative capital spending
has enabled us to continue refraining from issuing new equity under the current
weaker market conditions.


Going forward Stonefire's dedicated management team will continue to focus on
maintaining balance sheet integrity by carefully monitoring commodity prices and
adjusting capital spending. Our focus will remain on high- grading our inventory
of drilling opportunities and on maintaining low controllable costs.


Stonefire Energy Corp. is an Alberta-based corporation formed to participate in
oil and gas exploration, development and acquisitions focusing in the West
Central region of Alberta. The Corporation's shares trade on the TSX Venture
Exchange under the symbols SFE.A and SFE.B. The Corporation 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 June 30, 2009, 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,
uncertainties, and assumptions certain of which are beyond Stonefire's control.
Such risks, uncertainties, and assumptions 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].