Exall Energy Corporation announced to update drilling, production and waterflood operations in the Marten Mountain, Mitsue area. Current production estimate for the third quarter is 1,100 boepd, The second well of the Summer-Fall program has been placed on production at a stable rate of 175 bopd (128 bopd net) through the Exall gathering and treating facilities. The third well of the program has been drilled, completed as a slant-hole and production tested.

The well produced 500 barrels of clean oil during the last 24 hours of the test. The well is currently being equipped and tied in with an expected production start of mid-week. The next well, the fourth of the 2012 Summer-Fall drilling program is scheduled to spud the first week of October.

Interpretation of the 56 section 3D seismic program in the Mitsue area acquired in the first quarter of 2012 has identified nine Tier I and II Gilwood channel locations in the northern portion of the coverage which Exall is in the process of permitting surface access for drilling during the coming year. Six of the locations are classified as Exploratory. Four enhanced recovery applications submitted to the ERCB in 2012 have been approved, three are active and on the fourth the conversion of a currently shut in oilwell to injection well and drilling of the water source well is scheduled for October.

The applications group the approvals into three project areas which the Company terms the South, Central and North Waterfloods. The "Central Waterflood Area", which includes the first three wells drilled in the Marten Mountain area, continues to perform well, having produced over 820 mboe to date and it continues to produce 190 to 240 boepd from two producing wells and one water injector. Although the "South Marten Waterflood Area" has shown positive pressure response and increased well production, it continues to under-perform, in terms of well responses and early water production.

One well has been identified for a water shutoff procedure which is scheduled for early October, and a high-water cut well has been shut in to direct energy to oil-producing areas in the reservoir. Exall is continuing to look at options for facilities alterations to remedy high producing well backpressure in the North Channel wells. Pipeline pressure on the North leg of the gathering system is high due to the 220 meter elevation change along the route over Marten Mountain.

The company believes that the back-pressure is inhibiting maximum production from the wells in that area and will be taking appropriate measures to remedy the problem. After considerable weather delays due to heavy summer rains, the Exall North Road, accessing the new North Waterflood area wells and new drilling locations has been completed, allowing all weather access to the new area. Disposal of produced water into the Water Disposal Well drilled and completed by Exall during first quarter is now pipelined from the battery, which is expected to reduce trucking and disposal costs by $50,000 per month net to Exall.

Field construction of the main power line by ATCO and installation of distribution systems on the wellsites has been completed with substantial anticipated savings in generator rental and fuel costs, expected to be approximately $100,000 per month net to Exall. Drilling results: The second well of the Summer-Fall program, drilled in August, was placed on production September 10 at a stabilized rate of 175 BOEPD (128 BOEPD net) through the Exall gathering and treating facilities. The well was a northerly stepout drilled on the seismically-defined channel.

The third well of the program has been drilled, completed as a slant-hole and production tested. The well produced 500 barrels of clean oil during the last 24 hours of the test. The well is currently being equipped and tied in with an expected production start of mid-week.

This well was the first of up to six infill wells to be drilled between the North Waterflood and the Central Waterflood areas. The next well, the fourth of the 2012 Summer-Fall drilling program is scheduled to spud the first week of October. The fourth well also an infill well and is a northerly extension of the Central Waterflood area, although not seismically defined, as the bottom-hole location lies under Lesser Slave Lake Provincial Park.

A water source well for the North Waterflood area is also scheduled for drilling in early October. Interpretation of the 56 section 3D seismic program in the Mitsue area acquired in the first quarter of 2012 has identified nine Tier I and II Gilwood channel locations in the northern portion of the 3D coverage which Exall is in the process of permitting surface access for drilling during the coming year. Six of the locations are classified as Exploratory.

Four enhanced recovery applications submitted to the ERCB in 2012 have been approved, three are active and on the fourth the conversion of a currently shut in oilwell to injection well and drilling of the water source well is scheduled for October. The applications group the approvals into three project areas which the Company terms the South, Central and North Waterfloods. Facilities: The company is continuing to look at options for facilities modifications to remedy high producing well backpressure in the North Channel wells.

Pipeline pressure on the North leg of the gathering system is high due to the 220 meter elevation change along the route over Marten Mountain. The company believes that the back-pressure is inhibiting maximum production from the wells in that area and will be taking appropriate measures to remedy the problem. Field construction of the main power line by ATCO and installation of distribution systems on the wellsites has been completed with substantial anticipated savings in generator rental and fuel costs, expected to be approximately $100,000 per month net to the company.