Strategic Oil &Gas Ltd. announced that it has tested a third successful Muskeg well 14-12 at an average rate of 810 boe/d (59% oil) over a 4 day production period. On November 1, 2016 the company announced results from the Muskeg well 2-13 which tested 1,057 boe/d (54% oil) over 7 days. Both new wells have been tied in, equipped with artificial lift and are producing to Company-owned pipelines and facilities. Wells 14-12 and 2-13 follow the success of the Muskeg well 14-35 which employed a new completion technique resulting in a test rate of 1,060 boe/d in the first quarter of 2016. During the fourth quarter, the company successfully drilled four Muskeg wells on a pad with an average lateral length of 1,900 meters and 20 completion stages. The first two wells are tied in and producing significantly above the company's type curve. The third Muskeg well 2-27 is equipped, tied in and producing 85 boe/d while still cleaning up. The completion program for the fourth well on the pad has been delayed due to operational issues. Strategic's continued focus on cost reductions in 2016 is positively affecting operating netbacks and cash flows. In late 2015 the Company estimated reductions in operating and general and administrative ("G&A") costs of 15% in 2016 from 2015 levels. Based on internal projections, operating costs are estimated to decrease from $19.8 million in 2015 to $14.25 million for 2016. G&A costs are projected to decrease from $6.7 million for 2015 to $5 million in 2016. Total operating and G&A costs are expected to be reduced by over $7 million or 27% in 2016 from 2015 levels.

The company's board of directors has also approved a capital budget of $30 million for the first half of 2017. Capital will be directed primarily to drill six Muskeg wells at Marlowe adjacent to the wells drilled during 2016. The capital budget also includes building road and pipeline to tie-in the 14-35 Muskeg well. Strategic is well positioned to execute on this 2017 program while delivering continued efficiencies and cost savings, which are expected to be repeatable. Anticipated production exiting the first half of 2017 is 4,000 boe/d.