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Press release from Marketwire

Questerre Develops New Core Area in 2012 and Increases Reserves

Wednesday, February 27, 2013

Questerre Develops New Core Area in 2012 and Increases Reserves00:25 EST Wednesday, February 27, 2013CALGARY, ALBERTA--(Marketwire - Feb. 27, 2013) -NOT FOR DISTRIBUTION ON U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATESQuesterre Energy Corporation ("Questerre" or the "Company") (TSX:QEC)(OSLO:QEC) reported today on its preliminary financial and operating results for the year ended December 31, 2012.Michael Binnion, President and Chief Executive Officer, commented, "We refocused the company in 2012 adding two new projects we believe will create significant value. Our discovery well in the Kakwa-Resthaven area of Alberta for liquids-rich natural gas created a new core area that has the same scale of resource potential as our Utica shale discovery in Quebec. Following our successful wells in 2012, we made a major investment in this area this year and we now hold a total of 45 net sections. The increase in our proved and probable reserves at year-end reflects our early success on this large-scale project." Mr. Binnion added, "In keeping with our strategy of capturing large-scale resources, we also made a significant investment in oil shale. We partnered with Total S.A. and Red Leaf Resources to scale up the proven EcoShale process that will unlock this major resource. Initial field work is underway."2012 HighlightsWells testing at 2,000 boe/d created new core area at Kakwa-Resthaven for Montney liquids-rich natural gas Invested $40.73 million in oil shale to acquire an equity interest in Red Leaf, licensing rights to the EcoShale process and a 20% working interest in oil shale acreage in Wyoming Commenced pilot waterflood at Antler to increase recovery of light oil reserves Tripled proved and probable reserves to 6.72 MMboe from 2.59 MMboe with oil and natural gas liquids accounting for 71% of volumes with an NPV-10 of $126.59 million Increased oil weighting generated cash flow from operations of $10.24 million with average daily production of 678 boe/d for the year He commented, "Our business plan going forward is to focus on the condensate-rich Montney. This project can be large-scale while adding incremental production and reserves in the short term. Our Utica discovery in Quebec and our oil shale assets offer big-scale upsides in the future. In the meantime, we are moving forward with our conventional assets in Antler which provides a base of production with an enhanced recovery upside. We invested almost $17 million in Antler in 2012, drilling several infills into our oil pool as part of a waterflood. While exploring for another Antler oil pool in Wawota, Saskatchewan was unsuccessful, our discovery in Kakwa exceeded our expectations. As a result of this discovery, on a proved and probable basis, we increased our light oil and natural gas liquids reserves from 2.38 million to 4.78 million barrels and our natural gas reserves to 11.6 Bcf or 1.94 million boe."For the year ended December 31, 2012, the Company reported cash flow from operations of $10.24 million as compared to $10.06 million for the prior year. Although oil and natural gas liquids volumes increased by 18% over the prior year, the impact on cash flow was mitigated by lower realized prices. Questerre's production averaged 678 boe/d (2011: 646 boe/d) with oil and liquids accounting for 86% (2011: 76%) of the product mix. As at December 31, 2012, the Company reported a working capital surplus of $33.22 million (2010: $104.48 million).The Company also reported on the evaluation of its proved and probable reserves as at December 31, 2012. The report was prepared in accordance with the COGE Handbook by McDaniel & Associates with an effective date of December 31, 2012.In accordance with the requirements of National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities of the Canadian Securities Administrators, the Company anticipates filing its Annual Information Form that includes more detailed disclosure and reports relating to petroleum and natural gas activities for the 2012 fiscal year at the end of March 2013.SUMMARY OF OIL AND GAS RESERVESas of December 31, 2012FORECAST PRICES AND COSTSLIGHT AND MEDIUM OILNATURAL GASNATURAL GAS LIQUIDSRESERVES CATEGORYGross (Mbbl)Net (Mbbl)Gross (MMcf)Net (MMcf)Gross (Mbbl)Net (Mbbl)ProvedDeveloped Producing1,075.51,021.81,398.81,258.0153.3116.4Developed Non-Producing13.513.3465.9433.2125.995.9Undeveloped384.7370.72,262.32,100.9674.3516.8Total Proved1,473.71,405.74,126.93,792.2953.6729.1Probable724.9691.27,508.56,824.81,632.11,188.1Total Proved Plus Probable2,198.62,096.811,635.410,617.02,585.71,917.2SUMMARY NET PRESENT VALUES OF FUTURE NET REVENUEas of December 31, 2012FORECAST PRICES AND COSTSBEFORE INCOME TAXES DISCOUNTED AT (%/YEAR)AFTER INCOME TAXES DISCOUNTED AT (%/YEAR)RESERVES CATEGORY0% (M$)5% (M$)10% (M$)15% (M$)20% (M$)0% (M$)5% (M$)10% (M$)15% (M$)20% (M$)ProvedDeveloped Producing81,912.667,364.457,406.850,263.444,930.781,912.667,364.457,406.850,263.444,930.7Developed Non-Producing5,671.94,687.64,000.83,499.43,119.05,671.94,687.64,000.83,499.43,119.0Undeveloped27,334.219,300.913,586.09,369.86,166.127,334.219,300.913,586.09,369.86,166.1Total Proved114,918.691,353.074,993.663,132.654,215.8114,918.691,353.074,993.663,132.654,215.8Probable117,946.774,592.051,599.037,986.629,210.690,244.757,356.240,043.429,791.223,142.8Total Proved Plus Probable232,865.4165,945.0126,592.6101,119.283,426.4205,163.3148,709.2115,037.092,923.877,358.6SUMMARY OF PRICE FORECASTSYear201320142015201620172018201920202021AECO Spot Price ($C/MMBtu) 3.35 3.85 4.35 4.70 5.10 5.45 5.55 5.70 5.80Edmonton Light Crude Oil ($C/bbl) 87.50 90.50 92.60 94.50 96.40 98.30 100.30 102.30 104.30The term "cash flow from operations" is a non-GAAP measure. Please see the reconciliation elsewhere in this press release.Questerre Energy Corporation is leveraging its expertise gained through early exposure to shale and other non-conventional reservoirs. The Company has base production and reserves in the tight oil Bakken/Torquay of southeast Saskatchewan. It is bringing on production from its lands in the heart of the high-liquids Montney shale fairway. It is a leader on social license to operate issues for its Utica shale gas discovery in the St. Lawrence Lowlands, Quebec. In conjunction with a supermajor, it is at the leading edge of commercializing a proven process to unlock the massive resource potential of oil shale.Questerre is a believer that the future success of the oil and gas industry depends on a balance of economics, environment and society. We are committed to being transparent and are respectful that the public must be part of making the important choices for our energy future. This media release contains certain statements which constitute forward-looking statements or information ("forward-looking statements"), including the potential and future development of the Kakwa-Resthaven area, the investment in Red Leaf, development of oil shale assets, production forecasts and timing of future development in Quebec. Although Questerre believes that the expectations reflected in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information available to Questerre. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, Questerre does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.This news release does not constitute an offer of securities for sale in the United States. These securities may not be offered or sold in the United States absent registration or an available exemption from registration under the United States Securities Act of 1933, as amended.Barrel of oil equivalent ("boe") amounts may be misleading, particularly if used in isolation. A boe conversion ratio has been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil and is based on an energy equivalent conversion method application at the burner tip and does not necessarily represent an economic value equivalent at the wellhead.This press release contains the terms "cash flow from operations", "working capital surplus", and "netbacks" which are non-GAAP terms. Questerre uses these measures to help evaluate its performance. As an indicator of Questerre's performance, cash flow from operations should not be considered as an alternative to, or more meaningful than, cash flows from operating activities as determined in accordance with GAAP. Questerre's determination of cash flow from operations may not be comparable to that reported by other companies. Questerre considers cash flow from operations to be a key measure as it demonstrates the Company's ability to generate the cash necessary to fund operations and support activities related to its major assets. For the year ended December 31,20122011Cash flows from operating activities$10,116,671$ 10,595,507Net change in non-cash operating working capital127,772(532,570)Cash flows from operations$ 10,244,443$ 10,062,937The Company considers netbacks a key measure as it demonstrates its profitability relative to current commodity prices. Operating netbacks per boe equal total petroleum and natural gas revenue per boe adjusted for royalties per boe and operating expenses per boe.The Company also uses the term "working capital surplus". Working capital surplus, as presented, does not have any standardized meaning prescribed by GAAP and may not be comparable with the calculation of similar measures for other entities. Working capital surplus, as used by the Company, is calculated as current assets less current liabilities excluding the current portions of the share based compensation liability and risk management contracts.FOR FURTHER INFORMATION PLEASE CONTACT: Contact Information: Questerre Energy CorporationAnela DidoInvestor Relations(403) 777-1185(403) 777-1578 (FAX)