Stonefire Energy Corp. Provides Operations Update and Announces Increased Capital Budget

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THE UNITED STATES.


Stonefire Energy Corp. (TSX VENTURE:SFE.A) (TSX VENTURE:SFE.B) ("Stonefire" or
the "Company") is pleased to report further exploration discoveries and
accelerated production growth as a result of the Company's successful summer
drilling program.


As previously reported, Stonefire initiated drilling of its four-well summer
exploration program on June 17. All four wells are 100 percent working interest
and Company-operated. The first three wells are in Stonefire's core Edson area
and all have been drilled, completed and brought on-production. This maintains
the Company's exploration success rate at 100 percent on five gross (4.5 net)
wells drilled to date in 2008. The program's fourth well is an exploration gas
well in the Leaman field and is expected to spud on September 5, with a planned
total depth of 1,830 metres.


The first two of the three Edson wells were drilled as Deep Basin exploratory
gas wells targeting multiple zones to depths of approximately 2,340-2,360
metres. The first well encountered four deep basin gas-bearing zones and the
second encountered five deep basin gas-bearing zones. Both wells have been
tied-in and are currently producing approximately 1.0 mmscf per day each of
liquids-rich natural gas with low initial declines. They are tied into
Stonefire's 100 percent working interest Edson gas gathering and processing
facilities.


The third Edson well was drilled as a light oil exploration well to a total
depth of 1,944 metres, encountering several meters of fractured oil-bearing
reservoir and is a new pool discovery. Following completion as a flowing oil
well the well was subjected to a 10-day extended flow test. During the test the
well producing a total of 3800 barrels of sweet, 40º API oil at restricted rates
of 350 - 400 barrels per day. The well showed little production decline over the
extended test with a maximum estimated drawdown of 45%. The new oil well is
scheduled to commence production in early September and initially will be
limited to an allowable rate of 122 barrels per day. The Company has applied to
the ERCB for Good Production Practice (GPP) to allow the well to produce at
unrestricted rates. Solution gas during the extended production test was
conserved and will continue to be conserved through Stonefire's Edson gas plant.
Stonefire is currently preparing a 100 percent working interest offset drilling
location to delineate the new pool, with drilling planned for the fourth quarter
of 2008.


With the strong success of its most recent three wells Stonefire is also pleased
to report that its current production rate is approximately 1,200 boe per day
which includes the new Edson oil well restricted to its 122 bbl per day
allowable rate. The current production rate now exceeds the Company's previous
year-end 2008 production guidance of 1,000 boe per day and is comprised of
approximately 30 percent light crude oil and natural gas liquids and 70 percent
natural gas.


Stonefire is also pleased to announce that its Board of Directors has approved
expanding the 2008 capital budget from $12 million forecast at the start of the
year to a forecast $18-$20 million. The added funds will allow the Company to
initiate early development of its new Edson light oil discovery and fund
drilling of an additional three (2.5 net) wells in the fourth quarter. The
budget increase is expected to be funded by cash flow and available bank lines.
Stonefire expects to exit 2008 with a debt to annualized December cash flow
ratio of less than 1 times.


Stonefire Energy Corp. is an Alberta-based company formed to participate in oil
and natural gas exploration, development and acquisitions focusing in the West
Central region of Alberta. As of this date the Company has 18,265,000 Class A
shares and 1,012,000 Class B shares outstanding.


Reader Advisory

This news release contains certain forward-looking statements, including
management's assessment of the Company's plans and future 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 there from. 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.