Profound Energy Inc. Announces Its Financial and Operating Results for the Second Quarter of 2008 and an Increase in Its 2008 Capital Program

CALGARY, ALBERTA–(EMWNews – Aug. 12, 2008) – Profound Energy Inc. (TSX:PFX) (“Profound” or the “Company”) is pleased to report its operational and financial results for the three month period ending June 30, 2008.

Profound was formed on November 19, 2007 through the amalgamation of Profound Energy Ltd. (“Former Profound”), a private oil and gas exploration and production company, and Cork Exploration Inc. (“Cork”), a public oil and gas exploration and production company.

Copies of the financial statements and management discussion and analysis in respect thereof for the quarter ended June 30, 2008 will be available at www.sedar.com or by visiting Profound’s website at www.profoundenergy.ca.

HIGHLIGHTS

On March 31, 2008 Profound closed its transaction acquiring all of the shares of Defiant Resources Corporation (“Defiant”) by way of a Plan of Arrangement. Second quarter results include a full quarter of operations of Defiant.

Profound increased production by 28% from 2,220 boe/day in the first quarter to 2,831 boe/day in the second quarter of 2008.

Funds flow from operations increased 82% from $5.9 million ($0.23 per share) to $10.7 million ($0.28 per share).

Net income of $3.3 million for the second quarter compared to a loss of $0.3 million in the first quarter of 2008.

Increased operating netback from $34.61/boe in the first quarter to $53.97/boe in the second quarter.

Capital expenditures in the second quarter totalled $5.5 million (before property dispositions) which was invested in the drilling, completion and equipping for production of 3 (2.1 net) wells resulting in 1 (0.4 net) natural gas wells, 1 (0.7 net) oil well and 1 (1.0 net) dry hole.

Total net debt at June 30, 2008, including negative working capital and excluding commodity contracts, was $42.0 million or 0.98X the annualized second quarter funds flow.

Asset sales at Brazeau and Majeau, Alberta closed May 15, 2008 yielding $13.4 million in net proceeds after customary adjustments.

Profound holds 125,192 net undeveloped acres of land on which the Company has identified over 100 drilling locations; 25 of which are multi-stage completion horizontal wells and 75 of which are vertical wells. Profound holds an approximate average working interest of 65 percent in the identified drilling inventory.

Financial and operating highlights for the first and second quarters of 2008 are presented as follows:

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FINANCIAL AND OPERATING HIGHLIGHTS
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                                            Three Month Periods Ended
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                                    June 30, 2008  March 31, 2008  % Change
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FINANCIAL HIGHLIGHTS
($000 unless otherwise indicated)

Petroleum and natural gas sales            20,711          11,657        78%
Funds flow from operations (1)             10,636           5,854        82%
Per share - basic and diluted ($)            0.28            0.23        22%
Net earnings (loss)                         3,297            (330)     1099%
Per share - basic and diluted ($)            0.09           (0.01)     1000%
Net debt (2)                               42,028          60,270       -30%
Capital expenditures (3)                   (7,912)         12,266      -165%
Common shares outstanding (000's)          37,339          37,339         -
Weighted average shares outstanding
 - basic and diluted (000's)               37,339          25,039        49%
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OPERATING HIGHLIGHTS

Average daily production
 Crude oil & NGL's (bbls/d)                   809             636        27%
 Natural gas (mcf/d)                       12,129           9,503        28%
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Total (boe/d)                               2,831           2,220        28%
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Average selling prices (4)
 Crude oil & NGL's ($/bbl)                 114.69           80.13        43%
 Natural gas ($/mcf)                        11.11            8.12        37%
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Total ($/boe)                               80.41           57.71        39%
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Operating netback ($/boe)
 Oil and natural gas sales                  80.41           57.71        39%
 Royalties                                  15.52           14.21         9%
 Operating costs                             9.81            8.61        14%
 Transportation costs                        1.11            0.28       296%
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Operating netback                           53.97           34.61        56%
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Wells drilled - gross (net)
 Oil                                       1 (0.7)              -         -
 Natural Gas                               1 (0.4)         6 (3.4)        -
 Abandoned/Other                           1 (1.0)         1 (0.8)        -
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Total                                      3 (2.1)         7 (4.2)        -
Drilling success rate (%)                      52              81         -
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(1) Funds flow from operations is calculated as cash flow from operating 
    activities before the change in non-cash working capital 
(2) Net debt includes working capital and excludes unrealized financial 
    instruments.
(3) Capital expenditures are presented net of proceeds of disposals
(4) The average selling prices reported are before hedging activities.

FINANCIAL REVIEW

The second quarter of 2008 included a full quarter of operations from the Defiant acquisition. Defiant added approximately 900 boe/day to Profound’s production for the quarter. This production increase was partially offset by gas plant capacity restrictions at Carrot Creek and the disposition of the Brazeau and Majeau properties. Increased oil and natural gas prices combined with the production increases from the Defiant acquisition resulted in a 78% increase in revenues from $11.7 million in the first quarter to $20.7 million in the second quarter. Funds flow increased from $5.8 million to $10.6 million for the quarter, an 82% increase.

On an absolute basis, royalties increased due to increased product sales, but the royalty rate decreased for the quarter due to 2007 gas cost allowance credits received. Operating expenses increased due to the acquisition of higher-cost production associated with the Defiant properties. Profound is reviewing all of its properties to identify where production operations may be optimized to reduce costs.

Profound marketed a portion of its gas and oil to SemCams ULC and SemCanada Crude Company both of which filed for protection under The Companies’ Creditors Arrangement Act in July 2008. Potential exposure is estimated to be $1.8 million for June production and $1.2 million for the period July 1 through July 22nd 2008. At this time we are unable to confirm the amount of revenues that will be recoverable, but have recorded a provision of $600,000 in our second quarter financial statements related to June sales. In the third quarter, Profound will reassess the recoverability of June revenues and estimate a provision for July.

General and administrative expenses increased due to booking an allowance for doubtful accounts of $600,000 associated with the SemCams ULC and SemCanada Crude Company bankruptcy. As well, additional costs associated with the purchase of Defiant Resources which included rent, moving expenses, legal and consulting fees, and additional staff hired were incurred during the quarter.

A lengthy spring break up delayed drilling and completion operations resulting in only 3 (2.1 net) wells being drilled. A total of $5.5 million was spent on capital expenditures. In addition to drilling and completing wells, Profound spent $0.6 million on land and seismic and $2.7 million on well equipment and facilities. The majority of the facility costs were at Carrot Creek where a compressor and gathering lines were installed to mitigate capacity restrictions. Offsetting this was $13.4 million received from the sale of properties at Brazeau and Majeau which closed on May 15, 2008. Proceeds from the disposition were applied against the bank debt, resulting in an improved Net Debt to Annualized Funds Flow from 1.92X in the first quarter to 0.98X in the second quarter.

OPERATIONS OVERVIEW

Production

During the three months ended June 30, 2008 Profound produced an average of 12.1 mmcf/day and 809 bbls/day of oil and natural gas liquids for an average daily production of 2,831. During the period, production was adversely affected when a third party gas plant operator, who was taking gas from certain of our wells at Carrot Creek on a best efforts basis, shut-in several of them due to insufficient capacity at the gas plant. This situation served to reduce production in the quarter by 173 boe/day. Currently Profound is producing 9.6 mmcf/day and 665 bbls/day of oil and natural gas liquids or a total of 2,275 boe/day. It is estimated that the restrictions at Carrot Creek are reducing production from this area by between 500 and 600 boe/day.

Carrot Creek, Alberta

Profound drilled 2 (1.1 net) vertical wells at Carrot Creek during the quarter which resulted in 1 (0.4 net) Rock Creek well, and 1 (0.7 net) Ostracod oil well. Three horizontal (1.8 net) Rock Creek wells are planned for the remainder of 2008 one of which is currently drilling. In addition to the horizontal multi-stage completion wells, Profound intends to drill 5 (3.1 net) vertical wells in the second half of the year to further exploit the discoveries made in the Ostracod formation and provide additional delineation of the Rock Creek formation.

Five wells have been successfully drilled to the Ostracod formation in 2008 in which Profound holds working interests of between 20 and 100 percent. Four of them have been completed for production and tested at rates of between 500 boe/day to 1500 boe/day. Work is underway to gather information that will allow Profound to submit the appropriate applications to achieve Good Production Practice (“GPP”) status for the pool. After GPP is obtained, a process that can take several months, the wells will be allowed to produce at their maximum rate but until that time are likely to be restricted to less than 100 boe/day.

Production restriction issues at Carrot Creek are being addressed with additional compression and pipeline projects that are currently underway. These projects are being operated by Profound with participation by other parties who are affected. In addition to the pipelining and compression work, a decision has been made to participate in the expansion of a nearby gas plant that will provide Profound with ownership of 12 mmcf/day of processing capacity. The investment in pipelines, compression facilities and Profound’s participation in the gas plant expansion are estimated to cost approximately $5.0 million net to the Company. When these projects are all complete, estimated to be late this year or early in 2009, Profound will have sufficient capacity to realize the value being created at Carrot Creek without production interruptions being imposed by others.

Profound estimates that it currently has a drilling inventory in excess of 10 horizontal wells and 15 vertical wells at Carrot Creek.

Pembina Area, Alberta

During the quarter, one vertical oil well (1.0 net) and 3 re-completions (2.7 net) were undertaken in the Pembina, Alberta area.

Test rates of between 300 mcf/day and 3000 mcf/day were obtained in the re-completion operations where Profound holds a 60% working interest One (0.6 net) of these wells is currently producing and one (0.6 net) other is in the pipeline and preparation for production process.

Plans are underway to exploit this seismically defined natural gas accumulation with horizontal wells using multi-stage fracture stimulations. Profound anticipates spudding its first horizontal well (0.6 net) in this area in August 2008. Production performance will be carefully evaluated to determine the optimum well spacing and stimulation density required to maximize reserves recovery. If successful, Profound has identified an inventory of 10 additional horizontal drilling locations.

Gas from this area will be transported to a nearby plant owned and operated by a midstream gas processing company. This plant has excess capacity and processing fees have been negotiated.

Peace River Arch

As a result of the acquisition of Defiant Resources Corporation, a second core area has been added in the Peace River Arch area of Alberta. Five wells (4.0) net are budgeted for the last half of 2008 to further exploit existing discoveries. Profound plans to continue to diversify its asset base in the area, with an emphasis on growing the Karr and Gold Creek areas.

A well was drilled in the Karr area in July that has since been production tested at 4.5 mmcf/day. Profound holds a 70% working interest in the well and has at least two follow-up locations, one at a 70% working interest and one at 100%. Plans are underway to drill the follow-up wells and locate processing capacity for this significant discovery.

Currently a well (1.0 net) is being drilled at Dimsdale, Alberta with the Dunvegan formation as its primary target. After this well is finished the drilling rig will move to Clairmont, Alberta where a horizontal well will be drilled to exploit an established gas pool.

2008 CAPITAL PROGRAM

The Board of Directors has reviewed Profound’s capital expenditure program for the remainder of the year and has approved an increase from $36.5 million to $57.2 million for 2008. The budget now anticipates a total of $34.2 million for drilling and completing 25 wells (16.2 net), $16.8 for facilities and pipelines and $6.2 for land, seismic and other.

OUTLOOK

Profound has had a successful six months of drilling wells. Production levels have been a disappointment due to the gas plant restrictions. These issues are being addressed with projects that have been initiated at Carrot Creek and the ability to produce at maximum rates should be established by late 2008 or early 2009.

The recent discovery at Karr, the Ostracod wells and Rock Creek horizontal wells at Carrot Creek and the horizontal drilling at Pembina each represent significant growth areas for Profound.

In total, Profound has assembled an inventory of over 100 gross exploration and development locations on land it has acquired over the last 12 months. Of these locations, 25 are horizontal wells which will incorporate multi-stage fracture stimulations. This represents almost 50% of the proposed future capital expenditures. These horizontal wells target formations with existing gas accumulations, and represent a low risk exploitation program for the next 2-3 years.

ABOUT PROFOUND

Profound explores for and produces oil and natural gas in Alberta, Canada. It was formed on November 19, 2007 through the amalgamation of Profound Energy Ltd., a private oil and gas exploration and production company, and Cork Exploration Inc. a public oil and gas exploration and production company. On March 31, 2008 Profound acquired Defiant Resources Ltd., a public oil and gas company operating in Alberta.

The Company operates in central Alberta west of the fifth meridian and in the Peace River Arch area of Alberta.

DISCLAIMER

Certain information regarding Profound in this news release including management’s assessment of future plans, asset dispositions, production, drilling program and operations and the effect on Profound may constitute forward-looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, risks associated with sour hydrocarbons, changes to the proposed royalty regime prior to implementation and thereafter, 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, capital expenditure costs, including drilling, completion and facilities costs, unexpected decline rates in wells, delays in projects and/or operations resulting from surface conditions, 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. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Readers are cautioned that the forgoing list of factors is not exhaustive. Additional information on these and other factors that could effect Profound’s operations and financial results are included in Profound’s Annual Information Form on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Profound does not undertake any obligation to update publicly or to revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

In this news release, reserves and production data are commonly stated in barrels of oil equivalent (“boe”) using a six to one conversion ratio when converting thousands of cubic feet of natural gas (“mcf”) to barrels of oil (“bbl”) and a one to one conversion ratio for natural gas liquids (“NGLs” or “ngls”). Such conversion may be misleading, particularly if used in isolation. A boe conversion ratio of six Mcf to one 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.

As an indicator of the Company’s performance, the term “funds flow from operations” contained within this news release should not be considered as an alternative to, or more meaningful than, cash flow from operating activities as determined in accordance with Canadian generally accepted accounting principles (“GAAP”). This term does not have a standardized meaning under GAAP and may not be comparable to other companies. Profound believes that “funds flow from operations” is a useful supplementary measure as shareholders and/or investors may use this information to analyze operating performance, leverage and liquidity. Funds flow from operations, as disclosed within this news release, represents funds flow from operating activities before changes in non-cash operating activities working capital. The Company presents funds flow from operations per share whereby per share amounts are calculated consistent with the calculation of earnings per share.

“Total net debt” refers to projected bank debt plus estimated working capital deficit (excludes any current unrealized amounts pertaining to risk management commodity contracts). Total net debt is not a recognized measure under Canadian GAAP.

References in this news release to test production rates and test rates for recently drilled wells are useful in confirming the presence of hydrocarbons, however, such rates are not determinative of the rates at which such wells will commence production and decline thereafter. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company.