Eternal Ups Interest in West Ranch Oil Reservoir, Initiates Gas Deal

Eternal Energy Corp. has acquired an additional 25% working interest in the SW extension of the main body of the West Ranch Field in Jackson County, Texas. This raises EERG's total working interest in this property to 75%. The EERG acreage is believed to have reservoirs similar to those in the main body of the West Ranch Field, which is a well-known, long-standing producing field. EERG paid for this additional working interest by issuing two million shares of its common stock. EERG's valuation of these additional oil and gas reserves, based on a Ryder-Scott engineering report, substantially exceeds the value of the issued stock at its current market price.

In early 2006 Ryder-Scott Co., a Houston-based petroleum engineering consulting firm, analyzed the potential for waterflooding of the Glasscock reservoir underlying the EERG acreage. Based upon their review, Ryder-Scott attributes 900,000 barrels of proven undeveloped reserves in the Glasscock reservoir -- 675,000 barrels net to EERG's 75% interest. The incremental contribution of the recent purchase amounts to 225,000 barrels of oil net to EERG.

Eternal Energy Corp. and its West Ranch operator, PNP Petroleum of San Antonio, a privately owned oil and gas company, have begun the initial well work to implement a pilot waterflood program of the Glasscock reservoir. The initial well work commenced in early December 2007 and, by the end of January 2008, two injectors at/near the original oil/water contact and two producers updip of the these injectors are expected to become operational.

If this pilot project is successful, EERG plans to implement a full-scale waterflood program of the Glasscock reservoir by the end of 2008. This could mean that up to 15 injectors and 15 producers could be working simultaneously on the property. According to a third-party engineering study, performed by Bommer Engineering of San Antonio, Texas, the interest of EERG in this property has the potential, at current commodity prices, to generate up to approximately $650,000 to $750,000 per month of cash flow during the estimated 18-month peak production period of a successful waterflood project. EERG's total oil production program for the Glasscock reservoir could span 10-years.

EERG also announced today that it has acquired, subject to execution of formal contracts, the right to pursue a down-hole gas/water separation (DGWS) opportunity, primarily in Western Canada in conjunction with Heritage Natural Gas Company (HNG). HNG controls exclusive contracts and know-how for the DGWS technology. If the transaction is completed, EERG will own exclusive access to a proprietary and patented down-hole gas/water separation and re-injection process that has the potential to extract significant stranded gas reserves in the Western Sedimentary Basin. EERG's current analysis indicates the potential for application of this process is hundreds of shallow gas wells that have been abandoned due to water production problems but may still have economically viable stranded reserves.

In connection with the DGWS opportunity, EERG also announced that it has paid $125,000 to Westport Petroleum Company for an assignment of all of Westport's rights in six non-producing properties in Alberta that may be potential candidates for the installation of the DGWS technology.

To confirm the economic viability of the DGWS technology for natural gas production, EERG, through its newly formed, wholly owned Canadian subsidiary, EERG Energy ULC, has committed to drill two gas wells in conjunction with HNG in 2008 or 2009. EERG has agreed to pay to HNG $250,000 (in cash or in shares of EERG's common stock) on December 31, 2008 and on December 31, 2009, to guarantee EERG exclusive access and supply of needed tools for HNG's proprietary down-hole gas/water separation and re-injection process for the two gas wells. EERG has also obtained the contractual right to drill an additional eight wells with HNG prior to December 31, 2010.

EERG believes that the economic potential of the HNG transaction may be material for its stockholders. EERG assumes that at a drilling and completion cost of $525,000 per well, coupled with average production volumes of 375 mcfpd (thousand cubic feet per day) an annual return of $574,000 per well would result. The company would expect that payout would occur in less than one year and the production life of these wells could run for up to 9 years.

EERG has been granted the exclusive option to acquire all of HNG's issued and outstanding stock, as well as sole ownership of HNG materials, contracts, and licensing agreements. The option expires on December 31, 2010, and is exercisable at any time during its term, but can be terminated by EERG only after the initial two test wells have been drilled. The exercise price is the issuance of 25,000,000 shares of EERG's common stock. To maintain the option, EERG must pay HNG $20,000 every six months starting July 1, 2008 and ending July 1, 2010, which means that EERG expects to be obligated for up to five option payments.

In connection with the HNG transaction, EERG is pleased to announce that Mr. Craig Phelps has joined the Company as Vice President of Engineering. Mr. Phelps has more than 27 years of experience in the oil and gas industry, including many years of experience in assessing wellbore and reservoir performance and implementing technical approaches to maximize economic returns from the field. Mr. Phelps has worked on produced water management for reservoirs in the US, Venezuela, West Africa, the Gulf of Mexico, Canada, and the North Sea.