KFG Resources Ltd. (the "Company") announced today that its wholly-owned subsidiary, KFG Petroleum Corporation ("KFG Petroleum"), has entered into a settlement agreement (the "Settlement Agreement") with Conley P. Smith LLC. ("Conley Smith") terminating an exploration and participation agreement (the "EP Agreement") between KFG Petroleum and Conley Smith with respect to the Spearman Groves properties in Hansford County, Texas. The Settlement Agreement provides for the termination of the EP Agreement upon a cash payment by KFG Petroleum to Conley Smith of US$300,000; delivery of a note to Conley Smith for US$285,970 due May 1, 1999, with interest at prime plus one percent; and the subscription by Conley Smith for 752,632 common shares of the Company at an agreed price of Cdn.$0.19 per share in satisfaction of an additional payment of US$100,000. The funds for the cash payment to Conley Smith will be provided by a joint bank loan for US$350,000 to KFG Petroleum and its subsidiary, Shamrock Drilling Inc. ("Shamrock"), which loan bears interest at prime plus one percent, payable interest only for six months beginning February 1, 1998, then payable in equal monthly installments through July, 2001, and is secured by a pledge of the drilling rig of Shamrock and all equipment, receivables and contracts of Shamrock and KFG Petroleum, together with the personal guarantee of Mr. Robert A. Kadane, President of the Company. The closing of the settlement agreement transactions is subject to the approval of the Vancouver Stock Exchange.

The Company's common shares are listed on the Vancouver Stock Exchange, trading symbol "KFG". For additional information, please contact Mr. Robert A. Kadane, President, at (303) 825-7080.