DENVER, COLORADO, January 7, 2004—CREDO Petroleum Corporation (NASDAQ: CRED) today reported record results for its fiscal year ended October 31, 2003. Net income jumped 144% to $3,130,000 on higher gas prices and record production. This compares to net income of $1,282,000 last year. On a per diluted share basis, net income was $.78 compared to $.32 last year. Revenue rose 58% to $8,491,000 compared to $5,358,000 last year. Cash flow from operating activities (before changes in operating assets and liabilities) jumped 89% to $5,413,000.

Fiscal 2003 net income includes $.02 per share related to a one-time credit for the cumulative effect of adopting Financial Accounting Standards Board Statement No. 143, Accounting for Asset Retirement Obligations.

Fourth quarter net income surged to $1,146,000 compared to $374,000 last year. On a per diluted share basis, net income was $.28 compared to $.11 last year.

James T. Huffman, President said, "In 2003, we established significant new records in virtually every operational and financial category, highlighted by a 22% return on equity. New drilling propelled production growth while Calliope drove reserve growth. As 2003 demonstrates, that combination, together with good product prices, can produce excellent results."

On the heels of last year’s 43% increase, total production volumes rose another 9% in fiscal 2003 to a record 1.66 Bcfge (billion cubic feet of gas-equivalent) compared to 1.52 Bcfge last year. Natural gas production rose 12% to a record 1.45 Bcfg compared to 1.30 Bcfg last year. Crude oil and condensate sales fell 5% to 35,000 barrels.

Fourth quarter production surged 48% to 516 MMcfge (million cubic feet of gas equivalent) compared to 350 MMcfge last year, as new wells came on line.

Capital spending increased 124% to $5,520,000, by far the highest level in company history. As a result, reserve additions and production replacement rose to significant new records.

Proved reserves jumped 41% to a sixth consecutive annual record. At year-end 2003, proved reserves totaled 16.1 Bcfge. Virtually all reserves were classified in the proved developed category. The company typically does not add reserves for offset drilling locations or Calliope candidate wells. Natural gas accounted for 86% of reserve volumes.

The undiscounted value of reserves was $45,165,000 at year-end, and the discounted value (at 10%) was $28,024,000. Average wellhead prices used to calculate reserve values were $3.99 per Mcf and $28.64 per barrel.

The company added 6.3 Bcfge of new reserves, replacing 377% of its 2003 production. The per unit finding cost was $0.86 per Mcfge (thousand cubic feet of gas equivalent), or $5.15 per barrel of oil equivalent. This year’s finding cost is 22% lower than last year and 10% under the company’s three-year average finding cost. Historically, the company’s finding costs have ranked in the best quartile of U.S. oil and gas companies.

"Driving down finding cost was a very significant achievement because tight supply and increased demand are rapidly increasing the price of field services," Huffman said. "This demonstrates how Calliope’s low risk and modest cost balanced the higher risk and cost of our drilling program to yield an excellent overall result."

Net income per unit of production increased 125% to $1.89 per Mcfge, or $11.32 per BOE. This compares to $0.84 per Mcf, or $5.06 per BOE. Last year John S. Herold, Inc. ranked the company 14^th among U.S. oil and gas companies based on net income per unit of production.

Total natural gas price realizations for fiscal 2003 rose 50% to $4.50 per Mcf compared to $3.00 last year. Hedging transactions reduced gas price realizations by $.07 per Mcf in 2003 compared to adding $.39 last year. Net wellhead natural gas prices were $4.57 per Mcf compared to $2.61 last year. Wellhead oil prices rose 26% to $27.68 per barrel compared to $22.01 last year.

For the fourth quarter, total natural gas price realizations rose 58% to $5.02 per Mcf compared to $3.18 last year. Hedging transactions increased gas price realizations by $.14 per Mcf in the fourth quarter compared to $.51 last year. Wellhead oil prices rose 5% to $27.88 per barrel.

In 2003, hedging transactions resulted in a $66,000 after tax loss compared to a $369,000 gain last year. For the first quarter of fiscal 2004 (November through January), hedging transactions resulted in a $60,000 after tax gain.

The company currently has open hedge positions totaling 1.0 Bcfg covering the months of February through October 2004 at an average NYMEX price of $4.92 per Mcf. This hedge represents approximately 85% of the company’s estimated production for the months of February and March and 55% to 60% of such production for April through October 2004. Average gas prices in the company’s market areas are expected to be 15% to 17% below NYMEX prices due to basis differentials and transportation costs.

At October 31, 2003, working capital was $6,577,000. Total assets were $23,572,000 including cash and short-term investments of $6,663,000. Stockholders’ equity was a record $17,635,000. The company's only long-term debt is a $355,000 exclusive license obligation that is payable over six years.

CREDO’s business focuses on two core projects—natural gas drilling along the shelf of the Northern Anadarko Basin of Oklahoma and application of its patented Calliope Gas Recovery System. The company believes that, in combination, these two projects provide an excellent (and possibly unique) balance for achieving its goal of adding long-lived gas reserves and production at reasonable costs and risks.

Drilling Activities. During 2003, the company drilled 21 wells in Oklahoma with working interests ranging up to 60%. Eighteen (18) of the wells were completed as producers. Drilling was concentrated in Ellis and Harper Counties on the company's 17,000 gross acre Sand Creek Prospect and its 6,000 gross acre Two Springs Prospect where 18 wells were drilled. The wells targeted the Morrow and Chester formations between 7,000 and 9,000 feet. A promising well was also drilled on the Traxler Prospect located in Beaver County, Oklahoma. Both the Sand Creek and Two Springs properties have ample room for additional wells to be drilled and the company believes that more excellent wells are likely.

Calliope Gas Recovery System. During 2003, the company installed Calliope on six dead or uneconomic wells with 100% success. Included in those wells was an 18,400-foot well which has recently produced over 600 Mcfg per day after being dead for three years. This well extended Calliope's depth record by 5,600 feet, or 43%. The company is in various stages of preparing to install new Calliope systems on four additional wells in Oklahoma.

"This was a superb year for our company because both core projects produced excellent results during a period of strong product prices," Huffman said. "We added significant value to our company in 2003. Because these two core projects are repeatable and scalable, we are confident that CREDO will continue to produce superior long-term results."

*    *    *    *    *

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.