Painted Pony Petroleum Ltd ("Painted Pony" or the "Company") (TSX VENTURE:PPY.A)
is pleased to provide an operations update regarding its Montney gas development
program in northeast British Columbia.


BLAIR-CAMERON PROJECT

Painted Pony has now completed preliminary production testing on two previously
announced horizontal Montney wells (100% working interest) drilled on the Blair
d-8-F/94-B-16 pad. Upon termination of these tests, and on a combined basis, the
two wells are presently capable of delivering approximately 17.8 MMcf/d (2,967
boe/d) at the wellhead. These two wells will be permanently tied-in to area
facilities during the first quarter, however their production will be restricted
until additional third-party processing capacity becomes available. 


d-8-F Upper Montney: The upper Montney wellbore was tested for a total of 327
hours, including 65 hours on an unrestricted basis after milling out
flow-through plugs. During this latter period, the well flowed at an average
wellhead rate of 9.1 MMcf/d (1,517 boe/d) with an average casing pressure of
2,007 p.s.i. The final 24-hour wellhead test rate was 8.2 MMcf/d (1,367 boe/d)
at an average casing pressure of 1,593 p.s.i. 


d-8-F Lower Montney: The lower Montney wellbore was tested for a total of 275
hours, including 64 hours on an unrestricted basis after milling out
flow-through plugs. During this latter period, the well flowed at an average
wellhead rate of 9.9 MMcf/d (1,650 boe/d) with an average casing pressure of
1,772 p.s.i. The final 24-hour wellhead test rate was 9.6 MMcf/d (1,600 boe/d)
at an average casing pressure of 1,110 p.s.i. 


At the Daiber (Cameron) d-44-C/94-B-16 pad (50% working interest), Painted Pony
recently rig-released drilling operations on a second lower Montney horizontal
well. This well is scheduled to be completed and production tested as soon as
servicing equipment is available. This well is a direct offset to the Company's
lower Montney well which as previously reported flowed in excess of 24.5 MMcf/d
(see news release dated September 28, 2011). The Company anticipates that both
lower Montney wells on the d-44-C pad will be pipeline connected and commence
production during the first quarter. Painted Pony also plans to spud a third
well on this pad targeting the middle Montney on or about January 10, 2012.


At Kobes (Cameron), drilling operations recently commenced on the first well at
the c-75-J/94-B-09 pad (20% working interest, non-operated), targeting the lower
Montney. This well is expected to be completed and production tested during the
second quarter.


Painted Pony's field-estimated production for northeast British Columbia during
December 2011 averaged approximately 25 MMcf/d (4,167 boe/d), representing an
increase of more than 50% from average third quarter volumes. At the present
time, the Company estimates that it has approximately 45 MMcf/d (7,500 boe/d) of
total net wellhead productive capacity from the Montney project in northeast
British Columbia. Approximately 35% of this capacity (2,600 boe/d) is currently
shut-in and waiting on pipeline tie-in and/or plant expansions, all of which are
scheduled to be completed and operational by the end of the second quarter.


CYPRESS PROJECT

Painted Pony has recently purchased 100% of a partner's working interest,
consisting primarily of undeveloped lands, within the Company's Cypress block.
The Cypress area is considered highly prospective for Montney gas development
and is located approximately 15 miles west of the Blair-Cameron project. In this
transaction, Painted Pony acquired 8,427 net acres (approximately 13 net
sections) of additional Montney mineral interests, increasing the Company's
overall Montney position at Cypress to a 47% average working interest on 35,404
gross acres. 


PRODUCTION

Painted Pony's field-estimated total production during the fourth quarter of
2011 averaged 5,040 boe/d (approximately 34% oil and liquids). For the month of
December, the Company's total field-estimated volumes averaged 5,839 boe/d. For
the first quarter of 2012, Painted Pony expects field production to average
7,000 boe/d.


CORMARK LNG CONFERENCE

Painted Pony is pleased to announce that it will be participating in the Cormark
Securities Canadian LNG Conference taking place on January 11, 2012 in New York,
New York and January 12, 2012 in Toronto, Ontario. An updated investor
presentation will be available on the Company's website (www.paintedpony.ca) on
January 11, 2012.


For more information please visit www.paintedpony.ca 

Advisory

This news release contains certain forward-looking information (collectively
referred to herein as "forward-looking statements") within the meaning of
applicable Canadian securities laws. Forward-looking statements are often, but
not always, identified by the use of words such as "anticipate", "believe",
"plan", "potential", "intend", "objective", "continuous", "ongoing",
"encouraging", "estimate", "expect", "may", "will", "project", "should", or
similar words suggesting future outcomes. 


These forward-looking statements are based on numerous assumptions including but
not limited to (i) drilling success; (ii) production; (iii) future capital
expenditures; and (iv) cash flow from operating activities. The reader is
cautioned that assumptions used in the preparation of such information may prove
to be incorrect. 


Forward-looking statements are based upon the opinions and expectations of
management of the Company as at the effective date of such statements and, in
some cases, information supplied by third parties. Although the Company believes
that the expectations reflected in such forward-looking statements are based
upon reasonable assumptions and that information received from third parties is
reliable, it can give no assurance that those expectations will prove to have
been correct. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual events or outcomes to differ materially
from those anticipated or implied by such forward-looking statements. 


With respect to forward-looking statements contained in this document, Painted
Pony has made a number of assumptions. The key assumptions underlying the
aforementioned forward-looking statements include assumptions that: (i)
commodity prices will be volatile throughout 2012; (ii) capital, undeveloped
lands and skilled personnel will continue to be available at the level Painted
Pony has enjoyed to date; (iii) Painted Pony will be able to obtain equipment in
a timely manner to carry out exploration, development and exploitation
activities; (iv) Painted Pony will have sufficient financial resources with
which to conduct the capital program; (v) the accuracy of geological and
geophysical data and Painted Pony's interpretation of that data; (vi) production
rates in 2012 are expected to show growth from the fourth quarter of 2011; (vii)
that production from new wells will be substantially similar to production rates
associated with existing wells in the vicinity of the Company's properties;
(viii) the continued ability of the Company to generate internal cash flow and
the availability of capital on acceptable terms; and (ix) the current tax and
regulatory regime will remain substantially unchanged. Certain or all of the
forgoing assumptions may prove to be untrue. 


Certain information regarding Painted Pony set forth in this document, including
management's assessment of Painted Pony's future plans and operations, number,
type and timing of wells to be drilled, the planning and development of certain
prospects, production estimates, and expected production growth, may constitute
forward-looking statements under applicable securities laws and necessarily
involve substantial known and unknown risks and uncertainties. These
forward-looking statements are subject to numerous risks and uncertainties,
certain of which are beyond Painted Pony's control, including without
limitation, risks associated with oil and gas exploration, development,
exploitation, production, marketing and transportation, loss of markets,
volatility of commodity prices, environmental risks, inability to obtain
drilling rigs or other services, capital expenditure costs, including drilling,
completion and facility costs, unexpected decline rates in wells, wells not
performing as expected, 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 globally, 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, and stock market volatility and market valuations of
companies with respect to announced transactions and the final valuations
thereof. Readers are cautioned that the foregoing list of factors is not
exhaustive. Painted Pony's actual results, performance or achievement could
differ materially from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurance 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 the Company will derive therefrom. All subsequent
and forgoing 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. 


Additional information on these and other factors that could affect Painted
Pony's operations and financial results are included in reports on file with
Canadian securities regulatory authorities and may be accessed through the SEDAR
website (www.sedar.com) or Painted Pony's website (www.paintedpony.ca). 


The forward-looking statements contained in this document are made as at the
date of this news release and Painted Pony 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. 


Certain natural gas volumes have been converted to barrels of oil equivalent
(BOE) on the basis of six thousand cubic feet (Mcf) to one barrel (bbl). BOEs
may be misleading, particularly if used in isolation. A BOE conversion ratio 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. 


Certain oil and natural gas liquids volumes have been converted to thousands of
cubic feet of gas equivalent (Mcfge) on the basis of one barrel (bbl) to six
thousand cubic feet (Mcf). Mcfges may be misleading, particularly if used in
isolation. A Mcfge conversion ratio of 1 bbl: 6 Mcf is based on an energy
equivalency conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead. 


The well test results disclosed in this news release represent short-term
results, which may not necessarily be indicative of long-term well performance
or ultimate hydrocarbon recovery therefrom.


Painted Pony Petroleum Ltd., Class A (TSXV:PPY.A)
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