Contact: Robert A. Kadane, President (303) 825- 7080

"KFG Reports First Phase of Coalbed Methane Project Nearing Completion

Mr. Robert A. Kadane, President, reported today that the first phase of a coalbed methane project previously announced by the Company in November, 2004, has result in the successful drilling of the initial six well phase of the project.  The initial wells have been drilled to 5,000 feet in coal seams of the Wilcox formation in Catahoula Parish, Louisiana, and have been logged and production casing run in each well.  In addition, a salt water disposal well has been drilled and cased for these initial wells.  The wells have not been perforated and tested to determine gas volume, waiting the completion of water lines and a gas line to be laid to the main gas transmission line about four miles from the initial wells.  These lines should be completed during the first half of 2005.

This project was a farmout of 12,900 acres by the Company to a private concern in Houston, Texas.  The Company retained a 2.5% overriding royalty interest in the acreage, with an option to convert its overriding royalty to a 17% working interest going forward.  The Company also retained all oil rights, with the right to twin any wells drilled by the farmee finding oil.

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

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release."