Drilling Commenced at Kenedy 3D Seismic Prospect

Strategic American Oil announced that drilling operations have commenced on the Company's KMF 64-1 No. 1, 3D Seismic prospect in Kenedy County, South Texas. As previously announced, Chinn Exploration will be the operator of the project and has contracted with Coastal Drilling Company to drill the initial well to the primary Frio Sand target at approximately 13,800 feet. Should geologic conditions warrant, the well could be drilled to a total permitted depth of 18,000.

The KMF 64-1 No. 1 is located on a 1,043 acre oil & gas lease obtained from the Kenedy Memorial Foundation (Lessor) by Strategic American Oil in 2009. The prospective Frio Sands and anticlinal structure were identified in-house through detailed evaluation of 303 sq. miles of 3D seismic data. The Company's exploration team believes the multiple Frio sands identified in the seismic profile could contain substantial gas reserves. Additional drilling may be required to fully evaluate the leased area.

Bob Bennett, Strategic American Oil's contract seismic expert who has more than 20 economic oil and gas discoveries to his name, said of the prospect, "With more than two decades of experience exploring for oil and gas in South Texas with 3D seismic, I have never had the opportunity to discover or participate in a 4-way closure Frio structure such as this. These structures are usually cherry-picked by the major oil companies as drilling locations of choice. I believe this prospect has the potential to be a substantial new field discovery along this highly active trend."

Strategic American Oil Corporation President and CEO Jeremy Driver stated, "We are very pleased that Chinn Exploration has quickly moved this prospect to the drilling phase. In the meantime, gas prices have moved over $4.00. The 3D seismic showings on this prospect are incredibly attractive and we are excited about the development of the first test well."

Strategic American Oil will assign operatorship to Chinn Exploration Company, a fully licensed and bonded Texas oil and gas operator. Chinn was assigned 81.25 percent of the working interest in return for paying all drilling costs, estimated at $3 million, and will pay $200,000 to Strategic American Oil for leasing, land and geophysical work. This means that Strategic American Oil Corporation will not be required to pay any costs for drilling the first test well and has recouped its hard costs to date. When the well is completed, Strategic American Oil will pay its share of the completion costs. This aligns with the Company's existing strategy of finding partners to assume all exploration risk, while retaining a carried interest in the project.


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