Canada Energy Concludes Drilling Activities in BC

Canada Energy announced the completion of drilling operations on its second horizontal Montney well located on its Peace River Project in northeast British Columbia.

The Portage 3-12-82-26 was drilled horizontally in the Upper Montney formation with a horizontal displacement of 1,750 meters and a measured lateral length of 1,862 meters within the Montney formation. The Operator was only required to drill 1,400-meter lateral under the farm-in agreement. This compares to a 1,000-meter lateral drilled in the first horizontal well on the Peace River Project (see the Company's news release dated July 6, 2010). The well has been cased pending a completion test which is expected to occur during October. The Operator has planned a 9-stage frac job, compared to a 4-stage frac on the first horizontal well (c-20-E) at Peace River. The c-20-E tested at 1.7 to 2.7 million cubic feet per day (mcf/day) with 579-1450 psi flowing casing pressure over an eleven day test or 420 mcf/d per frac treatment.

Activity at Farrell, immediately north of the Company's Peace River Project, continues at a high level. Talisman has 4 drilling rigs operating at Farrell and are expanding their gas plant, Canbriam/Canadian Spirit have 2 drilling rigs running at Farrell and recently announced test rates from their first Lower Montney well of approximately 1 million cubic feet per frac stage. On August 5th, Terra Energy announced a test rate of 13.2 million cubic feet per day on their Farrell 10-22-83-25 well from a 41.5 hour test with an 1800-meter lateral and a 9-stage frac.

The Company owns a 50% interest in a gas plant and pipeline connection approximately 7 miles southwest of the 3-12 well which can be utilized to market gas from these first two horizontal wells. Initial engineering estimates for that connection have been completed.

The Company has 42 net sections of Montney rights in northeast British Columbia, representing 168 potential net Montney drilling locations.