DENVER, COLORADO, January 7, 2003—CREDO Petroleum Corporation (NASDAQ: CRED) today reported results for its fiscal year ended October 31, 2002. Net income fell 36% to $1,282,000 due to sharply lower natural gas prices. This compares to net income of $2,002,000 last year. On a per diluted share basis, net income was $.39 compared to $.61 last year. Revenue fell 8% to $5,358,000 compared to $5,807,000 last year. Cash flow from operating activities (before working capital changes) fell 15% to $2,870,000.

Fourth quarter net income, before a $66,000 ($90,000 pre-tax) one-time charge, rose 19% to $440,000, or $.13 per diluted share, compared to $369,000, or $.11 per diluted share, last year. The one-time charge was for gas revenues received in error over the past six years. Including the charge, net income was $374,000, or $.11 per diluted share.

James T. Huffman, President said, "The year was highlighted by a 62% increase in natural gas production from successful drilling. The increase in production, however, was more than offset by a 40% drop in natural gas price realizations." Huffman further stated, "Product price changes are encumbered only by taxes, and have a much more direct effect on the company’s bottom line than production volumes. In addition to taxes, production volumes are encumbered by the costs of depletion and lease operating expenses."

Total production volumes rose 43% to a record 1.52 Bcfge (billion cubic feet of gas-equivalent) in fiscal 2002 compared to 1.06 Bcfge last year. Natural gas production rose 62% to a record 1.30 Bcfg compared to .80 Bcfg last year. Crude oil and condensate sales fell 16% to 37,000 barrels.

Fourth quarter production volumes rose 20% to 350 MMcfge (million cubic feet of gas-equivalent) compared to 291 MMcfge last year. Natural gas production rose 26% to 296 MMcfg while crude oil and condensate sales fell 3% to 9,100 barrels.

Total natural gas price realizations for fiscal 2002 fell 40% to $3.00 per Mcf compared to $5.00 last year. Hedging transactions added $.39 per Mcf to gas price realizations compared to $.83 last year. Net wellhead natural gas prices were $2.61 per Mcf compared to $4.17 last year. Wellhead oil prices fell 17% to $22.01 per barrel compared to $26.45 last year.

For the fourth quarter, total natural gas price realizations fell 18% to $3.18 per Mcf compared to $3.89 last year. Hedging transactions added $.51 per Mcf to gas price realizations compared to $1.58 last year. Net wellhead natural gas prices were $2.67 per Mcf compared to $2.31 last year. Wellhead oil prices rose 13% to $26.51 per barrel.

The only hedge position currently open is for March 2003 production totaling 110,000 Mcf at a price of $4.07. Hedges for November 2002 through February 2003 were closed early. Gains totaling $129,000 were realized on those hedges and will be recognized in the appropriate months of fiscal 2003.

"The fundamentals for higher natural gas prices are the best I have ever seen," Huffman said. "Put simply, there is an imbalance between North American supply and demand. In the face of rising demand, there is ample evidence that our industry is "opportunity poor" to provide the required supplies. If that is true, we will see a sustained period of higher natural gas prices and excellent demand for our drilling prospects and Calliope technology."

The company replaced 121% of reserves produced during fiscal 2002, adding 1.6 Bcfge to reserves. At fiscal year-end, the company’s reserve base consisted of 82% natural gas and 18% crude oil and condensate.

"The surge in 2002 production significantly raised the threshold for replacing our reserves," Huffman said. "We are pleased to have met the higher threshold and then to have added to our reserve base. We are also pleased with this year’s $6.58 reserve replacement cost which should again rank CREDO in the top quartile of U. S. exploration and production companies."

Total reserves rose 3% to a record 11.4 Bcfge at fiscal year-end 2002. The undiscounted value of reserves was $29,774,000 at October 31, 2002, and the discounted value (at 10%) was $18,035,000. Average wellhead prices used to calculate reserve values were $3.74 per Mcf and $26.76 per barrel.

At October 31, 2002, working capital was $6,630,000, up 15% from last fiscal year-end. Total assets were $18,811,000 including cash and short-term investments of $6,910,000. Stockholders’ equity was a record $14,307,000. The company's only long-term debt is a $408,000 exclusive license obligation that is payable over seven years.

Capital spending totaled $2,464,000, the second highest level in the company’s history. CREDO’s business focuses on two core projects—natural gas drilling along the Anadarko Shelf of Oklahoma and application of its patented Calliope Gas Recovery System.

Drilling Activities. During fiscal 2002, the company drilled thirteen wells in Oklahoma with interests ranging up to 40%. Eleven of the wells were successful and two were dry holes. In addition, 281 coal bed methane wells were drilled on the company’s royalty interest acreage in Wyoming. Oklahoma drilling was concentrated in Ellis and Harper Counties on the company’s 11,000 gross acre Sand Creek Prospect and its 3,000 gross acre Two Springs Prospect where eight wells were drilled. The wells targeted the Morrow and Chester formations between 7,500 and 9,000 feet.

To date, 14 wells have been drilled on the two prospects of which 11 were successful and three were dry holes. Two of the wells are exceptional for the area. The Glendena and Redfearn wells both commenced production at 3.0 MMcfg per day and are still producing between 1.7 and 1.9 MMcfg per day. These wells are primarily responsible for the increase in CREDO’s 2002 production.

Huffman further stated, "Several new wells have been drilled or completed since we last updated drilling results on October 11, 2002, and several new wells are planned. However, we postponed releasing additional information pending the outcome of certain competitive matters, and now expect to issue an update in mid-January."

Calliope Gas Recovery System. CREDO owns the exclusive right to a patented technology known as the Calliope Gas Recovery System. Calliope achieves substantially lower flowing bottom hole pressure than conventional production methods because it does not rely on reservoir pressure to lift liquids. In most of the applications to date, Calliope has developed more reserves than the average new well drilled by the company, and at one-half the cost and a small fraction of the risk.

"We have proven that Calliope will add .5 to 2.0 Bcfg to many dead and uneconomic wells and that it is a new generation of gas recovery technology for many low pressure gas wells," Huffman said. "To date, Calliope systems have been installed on eight company-owned wells. In terms of reserve quantities, Calliope wells rank first, second and fourth among CREDO’s largest producing wells."

As previously reported, the company recently acquired nine wells intended for new Calliope installations. Each well has substantial Calliope reserve potential ranging from several hundred million to 2.0 billion cubic feet of gas. Installations are expected to be completed on three of the wells in the first calendar quarter of 2003. The remaining wells are in various stages of evaluation.

Also as previously reported, the company is preparing a multimedia presentation about Calliope. The presentation will be used to introduce Calliope to certain companies with the objective of joint venturing, licensing or providing Calliope for a fee.

"The below surface animation that shows how Calliope works has been the most complex portion of the project and is near completion," Huffman said. "Once it is complete, the entire project goes to post-production assembly. We estimate the final presentation will be ready in March 2003."

For a more detailed discussion of current operations, refer to the company’s Form 10-QSB for the fiscal quarter ended July 31, 2002 and its Form 10-KSB for fiscal year ended October 31, 2002 which is expected to be filed by January 29, 2003.

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CREDO Petroleum Corporation is a publicly traded independent energy company headquartered in Denver, Colorado. The company is engaged in the exploration for and the acquisition, development and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions. The company's stock is traded on the NASDAQ System under the symbol "CRED" and is quoted daily in the "NASDAQ Small-Cap Issues" section of The Wall Street Journal.