Cub Energy Inc. Announces Q2 2012 Financial and Operating Results

HOUSTON, TEXAS--(Marketwire - Aug. 24, 2012) - CUB Energy Inc. ("CUB", or the "Company") (TSX VENTURE:KUB), announces its financial and operating results for the three and six months ended 30 June 2012. The Company saw record quarterly production and operating cash flow with strong netbacks of $8.79 per Mcf. The Company's production and revenue is derived from nine licenses in Ukraine. Five licenses in Eastern Ukraine are owned and operated by KUB-Gas LLC ("KUB-Gas"), a subsidiary in which CUB has a 30% effective ownership interest, and four licenses are in Western Ukraine in which CUB has a 100% ownership interest. All dollar amounts are expressed in United States currency.

HIGHLIGHTS

Corporate

• Exit rate for Q2 of 1,217Boe/d;
• Second quarter net back of $54/Boe generating cash flow of $5.9MM;
• Continued strong natural gas price of $11.76/Mcf and condensate price of $102.32/bbl
• Production averaged 1201Boe/d (95% natural gas) an increase of more than 300% over second quarter of 2011;
• Drilled NM-1 and M-21 wells (30% net) in the quarter with one currently producing and one testing;
• Converted the Makeevskoye license into a 20-year production license. (5,211 net square acres);
• Two wells (30% net to Cub) were tied-in for commercial production at gross production rates of more than 1MMcf/d of natural gas from each well;
• M-20 well was drilled to TD of 2000m (30% interest) and completion operations are underway on the R-8 sand that currently produces 8.9MMcf/d (2.67MMcf/d net to Cub) from the M-19 and M-21 offset wells;

Eastern Ukraine - Cub Energy through equity investment in KUB-Gas

• Gas production averaged 21,304 Mcf/d (30% net: 6,391 Mcf/d) at the end of the period, and was more than triple the average production for the first six months of 2011.
• In June 2012 the Company's net production from Kub-Gas LLC had increased to more than 6.6MMcf/d with gross production of more than 22 MMcf/d from the four producing fields.
• On July 6, 2012, drilling commenced on M-20. The well was drilled to a total depth of 2,000 metres and is cased pending completion.
• On May 7, 2012, drilling commenced on NM-1. On June 19, 2012, the well was drilled to a total depth of 2,500 metres and cased after log and drilling information indicated 4 potential hydrocarbon-bearing zones.
• On April 10, 2012, the Makeevskoye license was converted into a 20-year production license.
• On March 27, 2012, O-8 and O-18 wells were tied-in for commercial production at gross production rates of more than 1 MMcf/d of natural gas from each well.
• On February 6, 2012, drilling commenced on M-21. The well was drilled to a total depth of 2,210 metres and was completed on March 22, 2012. Two potential gas-bearing zones were identified and have been tested. The well came on production in early August 2012 at initial production rates of 1.7 million MMcf/d.

Western Ukraine - Cub Energy wholly owned subsidiary Tysagaz

• The Company completed work overs on Yab 2 and RK 6. RK 6 well is now producing at a rate of 210Mcf/d.
• Production increased to approximately 0.510 MMcf/d at the end of the period.
• RK seismic was completed and preparations are under way to drill a well to approximately 1800 metres. As many as 2 wells are planned for the RK field pending the final seismic evaluation and company work plan assessment.
• Tysagaz is currently producing gas from the RK license one of its four licenses. The produced gas does not meet the standards of the gas quality for input into the main pipeline - it is wet, low calorie and containing approximately 30% nitrogen.
• The solution for marketing such low quality gas (i.e. being able to put it into the main pipeline) was found in 2007 by concluding an agreement with a regional transportation company for gas blending. In accordance with this contract the transportation company blends Tysagaz gas with the gas from the pipeline in the ratio 1:7, and the regional pipeline company receives a monthly fee for blending the gas from Tysagaz. With the upgrade of the RK facility (compression and dehydration) the blending ratio is expected to drop from 1:7 to 1:5 which would lower the overall blending cost of the gas.
• The design of the RK gas plant is complete. Compression and dehydrating equipment have been ordered and the upgraded plant is expected to be operational in the 4^th Quarter. This time frame fits well with the anticipated multi-well development-drilling program in the RK field, which is also expected to start in the 4^th Quarter 2012.
• 20 line kilometres of 2D seismic has been completed on the Stanivske field and the evaluation is underway.

Mikhail Afendikov, Chairman and Chief Executive Officer of Cub, commented:

"Second quarter results reflect our ongoing focus on low-risk development of proven and underexploited assets utilizing modern field-optimisation techniques. In the second quarter the Company demonstrated significant production growth along with continued strength in commodity prices for natural gas and condensate in Ukraine. These two combined led to growth in our cash flow generation, which will be used to fund further activity.

I am excited about the opportunities to further increase our production volumes in the second half of 2012. With the conversion of Olgovskoye and Makeevskoye licenses to 20-year production licenses, the cap on their production has been removed. Additionally, we are excited about the work program planned for the RK asset in the second half of the year."

Cub filed its second quarter operating and financial results on 24 August 2012 by filing on SEDAR (www.sedar.com) and has posted a link on its website at www.cubenergyinc.com.

About CUB Energy Inc.

Cub Energy Inc. is a TSX Venture Exchange company focused on the exploration and development of oil and gas in Ukraine. The Company has offices in Houston, Texas, Toronto, Ontario and Kyiv, Ukraine. Cub has 110,000 net acres, in nine fields, in the two major producing basins within Ukraine. The Company's strategy is to use western technology and capital, combined with local expertise to create value in its undeveloped land base, building a portfolio of high margin producing oil and gas assets. Cub shares are traded under the stock symbol KUB.

Reader Advisory

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. CUB believes that the expectations reflected in the forward-looking information are reasonable; however there can be no assurance those expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking information is based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking information. Some of the risks and other factors that could cause the results to differ materially from those expressed in the forward-looking information include, but are not limited to: general economic conditions in the Ukraine and globally; industry conditions, including fluctuations in the prices of natural gas; governmental regulation of the natural gas industry, including environmental regulation; unanticipated operating events or performance which can reduce production or cause production to be shut in or delayed; failure to obtain industry partner and other third party consents and approvals, if and when required; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for natural gas; liabilities inherent in natural gas operations; competition for, among other things, capital, acquisitions of reserves, undeveloped lands, skilled personnel and supplies; incorrect assessments of the value of acquisitions; geological, technical, drilling, processing and transportation problems; changes in tax laws and incentive programs relating to the natural gas industry; failure to realize the anticipated benefits of acquisitions and dispositions; and the other factors. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

This cautionary statement expressly qualifies the forward-looking information contained in this news release. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.