Oilsands Quest Issues Ops Update, Prelim Bitumen Reserves Estimate

Oilsands Quest Inc. on Monday provided a comprehensive operations update on the exploration program conducted in Saskatchewan and Alberta, including management's preliminary estimate of original bitumen resources in place (OBIP) in the Axe Lake Discovery area.

Preliminary management OBIP estimate

The preliminary management OBIP estimate of the Axe Lake Discovery to date is as follows:

--1.25 billion to 1.50 billion barrels OBIP (High Estimate - P10)
--0.60 billion to 0.75 billion barrels OBIP (Best Estimate - P50)

Management's preliminary OBIP estimate of the Axe Lake Discovery area is based on management's assessment of the winter 2006/07 drilling program results up to and including March 25, 2007, together with the independently evaluated core and well log data from holes drilled during the winter 2005/06 drilling program (as reported on by Norwest Corporation in August 2006). The independent consultant's assessment of the Axe Lake Discovery will be completed in the fall of 2007.

The area of the OBIP estimate within the Axe Lake Discovery covers approximately 36 sections (1 township) of Permits PS00208 and PS00210 (100% Oilsands Quest) located in the north half of Township 94 and the south half of Township 95, Ranges 24 and 25 West of the Third Meridian. It is approximately 50 kilometers (30 miles) east of Suncor's Firebag operations.

OBIP is the gross volume of bitumen estimated, at a particular time, to be initially contained in a reservoir before any volume has been produced and without regard for the extent to which volumes will be recovered. The High Estimate (P10) is based on extrapolating data to approximately 1,000 meters (3,281 feet) from the well bore and the Best Estimate (P50) is based on extrapolating data to approximately 400 meters (1,312 feet) from the well bore. The estimate was made in accordance with the Canadian Oil and Gas Evaluation Handbook (COGEH), which is the primary reference for reporting resources under the National Instrument 51 - 101 Standards of Disclosure for Oil and Gas Activities. The commercial viability of the resource potential, or whether currently commercial recovery processes will be applicable, cannot be determined without further drilling, testing and analysis.

Oilsands Quest's exploration permits were granted under The Oil Shale Regulations, 1964 of Saskatchewan subject to amendments from time to time and will expire in 2009 unless converted to leases or extensions are granted.

Status of 2006/07 exploration program

A total of 150 holes have been drilled in this winter's drilling season on Oilsands Quest's permit lands in northwest Saskatchewan. Due to warm weather and associated spring thaw conditions, the company has initiated the wind-down of its winter drilling operations.

During its winter 2006/07 exploration program, Oilsands Quest has accomplished amongst other goals the following:

    -   Identification of the Axe Lake Discovery area
    -   Delineation drilling in the Axe Lake Discovery area with 116 holes
    -   Expansion of the exploration focus to the north and south of the Axe
        Lake Discovery area with the drilling of 34 holes and completion of
        57 miles of 2D seismic and 528 miles of aeromagnetic and
        electromagnetic surveys
    -   The identification of numerous significant exploration leads for
        future programs
    -   Installation and construction of significant infrastructure (road
        networks, multiple camp facilities, drilling pads, and airstrips)

Oilsands Quest is in the process of making its application to the Saskatchewan Government for permission to undertake a summer drilling program in 2007.

    Results of delineation drilling at Axe Lake Discovery area to date

    At Axe Lake Discovery, Oilsands Quest has found:

    -   thick, continuous oil sands: McMurray Formation up to 45 meters
        (148 feet) and oil sands thickness of up to 30 meters (98 feet)
    -   coarse-grained sands with very low fines content
    -   no shale intervals
    -   excellent permeability (over 5 Darcies)
    -   very good porosity (36-39%)
    -   average depths of 185 - 200 meters (607 - 656 feet)

No evidence of top or bottom water ("thief" zones) was observed at any of the drill holes in the Axe Lake Discovery area. Results of the delineation drilling indicate that the Axe Lake Discovery area extends and is open to the east, west, and south.

Management has concluded that this resource will likely be suitable for in situ recovery. In February 2007, the company initiated pre-commercialization studies. Plans for large-scale resource recovery tests and simulation studies are being developed to determine the quality of the oil sands and bitumen characteristics and to investigate alternative in situ recovery mechanisms, including an onsite pilot plant. Detailed project timelines continue to be developed.

Results of activities in new exploration areas

In the areas to the north and south of the Axe Lake Discovery, Oilsands Quest conducted exploratory drilling and extensive seismic and airborne surveys. To March 25, 2007, a total of 34 exploratory holes were drilled, 92 kilometers (57 miles) of seismic surveys (including Alberta) were completed, and 850 kilometers (528 miles) of aeromagnetic and electromagnetic surveys were conducted. A further 35 kilometers (22 miles) of seismic surveys are being conducted this week. Numerous significant exploration targets have been identified for future field programs.

Implications of the recent purchase of oil sands exploration permits in Alberta

On March 22, 2007, Oilsands Quest announced the acquisition of oil sands exploration permits covering approximately three townships in Alberta, located directly west and contiguous to the Axe Lake Discovery area and six miles from the Encana Borealis project currently under development.

Based on observations of resource extensions from the Axe Lake Discovery drill holes adjacent to the Alberta border into the Alberta lands and seismic surveys completed by Oilsands Quest on these permit lands prior to the Alberta land sale this past week, the company has assessed its Alberta permits as highly prospective. Oilsands Quest's current assessment of the resource potential of these lands is between 1.5 to 3.0+ billion barrels per township. This assessment of resource potential does not constitute an OBIP estimate. Further drilling and analysis is required to develop an OBIP estimate for these permit lands. The Company will be devoting considerable exploration efforts in the coming months to further define the structures identified by seismic surveys on these permit lands.