DENVER, COLORADO, Thursday, September 12, 2002 – CREDO Petroleum Corporation (NASDAQ:  CRED) reported that natural gas production volumes surged 74% in the third quarter of fiscal 2002 and 77% for the nine months ended July 31, 2002.

"Successful drilling in northwestern Oklahoma has resulted in very significant production gains this year," said James T. Huffman, President. "Three new wells are currently producing on our Sand Creek and Two Springs Prospects. In addition, two wells are awaiting pipeline connection and two wells will be drilled this month. A separate press release made today updates the company’s activities related to its drilling program and its Calliope Gas Recovery technology."

For the nine months ended July 31, 2002, net income was $908,000 on revenue of $3,975,000 compared to $1,633,000 on revenue of $4,483,000 last year. On a per diluted share basis, net income was $.28 compared to $.50 last year. Cash flow from operating activities (before working capital changes) was $2,041,000 compared to $2,617,000 last year.

For the third quarter ended July 31, 2002, net income was $371,000, or $.11 per diluted share, compared to $501,000, or $.15 per diluted share last year.

"Product prices and hedging realizations have a more direct effect on the company’s bottom line than production which is encumbered by depletion and lease operating expenses," Huffman said. "Our nine-month financial results are lagging last year because the positive financial effect of increased production has been more than offset by lower price realizations."

Wells drilled in the first nine months boosted total production 51% to a record high 1.2 Bcfge (billion cubic feet of gas-equivalent) compared to 773 MMcfge (million cubic feet of gas-equivalent) last year. Natural gas production surged 77% to a record 1.0 Bcfg compared to 566 MMcfg last year while crude oil sales fell 20% to 27,700 barrels compared to 34,500 barrels last year.

Third quarter production volumes rose 52% to 441 MMcfge compared to 290 MMcfge last year. Natural gas production rose 74% to 382 MMcfg while crude oil sales fell 16%.

Net wellhead natural gas prices for the nine months ended July 31, 2002, fell 48% to $2.59 per Mcf compared to $4.94 last year. Hedging transactions added $.35 per Mcf to 2002 natural gas price realizations compared to $.52 last year. As a result, total natural gas price realizations were $2.94 per Mcf compared to $5.46 last year. Wellhead oil prices fell 25% to $20.54 per barrel compared to $27.25 last year.

For the quarter ended July 31, 2002, net wellhead natural gas prices fell 20% to $2.87 per Mcf compared to $3.61 last year. Hedging transactions added $.05 per Mcf to 2002 natural gas price realizations compared to $1.02 last year. As a result, total natural gas price realizations were $2.92 per Mcf compared to $4.63 last year. Wellhead oil prices fell 10% to $23.27 per barrel compared to $25.75 last year.

The company’s most recent natural gas hedge data for months subsequent to third quarter-end shows 280 MMcfg hedged for the months of December 2002 through February 2003. This hedge is at an average NYMEX (Henry Hub, Louisiana delivery point) price of $4.19 per Mcf, and represents approximately 83% of the company’s total estimated gas production for those three months. Subsequent to third quarter-end, hedges covering the months of August through November 2002 were closed and a gain of $204,000, or $0.47 per Mcf, was realized. The company hedges only its Oklahoma production where the "basis" for its pipeline index prices is generally $.15 to $.30 below the Henry Hub.

"The fundamentals for natural gas appear to be improving, making us more bullish on prices for 2003," Huffman said. "Reported production data and summer storage injections indicate that natural gas demand has increased up to 3% over last year while supply has fallen 4% to 6%. This supply-demand imbalance together with normal winter temperatures would be very bullish for natural gas prices, despite current high storage levels due to gas left over from last winter."

At July 31, 2002, working capital was $6,754,000, up 17% from October 31, 2001 fiscal year-end. Total assets were $18,515,000 including cash and short-term investments of $7,083,000. Stockholders’ equity was $14,218,000. The company’s only long-term obligation is a $456,000 exclusive license obligation that is payable over eight years.

"We continue to be very pleased with our two core projects—natural gas drilling in northwestern Oklahoma and application of our patented Calliope Gas Recovery System," Huffman said. "Successful drilling has caused our production to surge. The convergence of our increased production with anticipated higher gas prices causes us to be very optimistic about 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, 2001.

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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.

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