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Strategic Oil & Gas Ltd. Announces Year-End Reserves and Provides Operations Update

CALGARY, ALBERTA -- (Marketwired) -- 02/28/14 -- Strategic Oil & Gas Ltd. ("Strategic" or the "Company") (TSX VENTURE: SOG) is pleased to announce its year-end reserves and provide an update on its first quarter drilling program. Strategic achieved a 54 percent increase in proved and probable reserves, for a 480 percent reserve replacement ratio. The Company's latest Muskeg Stack well, 16-34, was flowing at a rate of 596 BOED (89 percent oil) on the final day of the 11 day flow back period.

HIGHLIGHTS


--  Strategic added 5.7 MMBoe of proved and probable reserves in 2013. The
    Company's reserve replacement ratio was 480 percent.
--  Proved reserves increased 67 percent to 6.7 MMBoe (61 percent oil) from
    4.0 MMBoe at year-end 2012.
--  Proved and probable reserves increased 4.5 MMBoe (54 percent) from 8.2
    MMBoe at year-end 2012 to 12.7 MMBoe (63 percent oil) at December 31,
    2013 after production of 1.2 MMBoe during 2013.
--  Pre-tax net asset value of the Company's proved and probable reserves,
    using McDaniel's forecast pricing and discounted at 10 percent,
    increased to $180 million at December 31, 2013 from $139 million at
    December 31, 2012.
--  Strategic realized finding, development and acquisition costs ("FD&A"),
    including future development capital ("FDC"), of $30.75 per Boe in 2013
    based on capital expenditures of $128.6 million.
--  Excluding $24.8 million in infrastructure capital spending for upgrades
    to oil facilities and pipelines, the Company's FD&A, including changes
    in FDC, were $26.40 per Boe on a proved and probable basis.

RESERVES

In accordance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"), the Company's oil, natural gas and natural gas liquids ("NGL") reserves were evaluated by an independent engineering firm, McDaniel and Associates Consultants Ltd. ("McDaniel") as at December 31, 2013. Gross reserves included in this release are Strategic's working interest reserves before royalty burdens. Complete NI 51-101 reserves disclosure will be included in Strategic's annual NI 51-101 filings which will be filed prior to March 31, 2014. The Company's aggregate proved and probable reserves are reported in barrels of oil equivalent (Boe). Boe may be misleading, particularly if used in isolation. A Boe conversion ratio for natural gas of 6 Mcf: 1 Boe has been used, which is based on an energy equivalency conversion method primarily applicable at the burner tip and does not necessarily represent a value equivalency at the wellhead. As the value ratio between natural gas and crude oil based on the current prices of natural gas and crude oil is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

Strategic's reserves at December 31, 2013 are summarized below.


                          Light and                      Natural
                             Medium     Heavy  Natural       Gas         Oil
                          Crude Oil       Oil      Gas   Liquids  Equivalent
Gross Reserves(1)             (Mbbl)   (Mbbl)   (MMcf)    (Mbbl)      (Mboe)
----------------------------------------------------------------------------
Proved Producing               2,991      104   10,118        63       4,845
Proved Non-Producing             112        0    3,360         0         672
Proved Undeveloped               879        0    1,787         0       1,177
Total Proved                   3,982      104   15,265        63       6,694
----------------------------------------------------------------------------
Total Probable                 3,935       39   11,979        50       6,021
----------------------------------------------------------------------------
Total Proved and Probable      7,918      143   27,244       113      12,715
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Gross reserves are the Company's total working interest share before the
deduction of any royalties and without including any royalty interests of
the Company. The December 31, 2013 reserves report has been prepared in
accordance with the definitions, procedures and standards contained in the
Canadian Oil and Gas Evaluation Handbook and NI 51-101 - Standards of
Disclosure for Oil and Gas Activities.

Approximately 74 percent of the Company's total reserves are located in the Steen River core area. Proved and probable producing reserves represent 52 percent of total proved and probable reserves, as compared to 55 percent at December 31, 2012.

Proved and probable third party reserve bookings for Muskeg Stack wells are below the Company's type curve generated from internal reservoir engineering estimates. This is typical at the early stages of an emerging resource play. The Company anticipates the difference between these estimates will narrow in future years as additional wells are drilled and more extensive production data becomes available.

McDaniel estimates the FDC required to convert undeveloped and non-producing reserves to producing reserves at $97.5 million. This includes 23 Muskeg Stack and 3 Keg River proven and probable undeveloped locations, of which 9 Muskeg Stack and 2 Keg River are booked as proven undeveloped locations. These wells are anticipated to be drilled over the next 2 years. The total booked locations represent less than 10 percent of the Muskeg Stack inventory identified on Company's land holdings in the Steen River area.

A reconciliation of the Company's reserves at December 31, 2013 to the previous year-end is as follows.


Thousand Barrels of Oil                                              Proved
 Equivalent (Mboe)                Proved         Probable      and Probable
----------------------------------------------------------------------------
Opening Balance
 December 31, 2012                 4,017            4,167             8,184
Discoveries and
 Extensions                          800            2,967             3,768
Technical Revisions                1,429           (1,695)             (267)
Acquisitions                       1,641              617             2,258
Economic Factors                       0              (35)              (35)
Production(1)                     (1,194)               0            (1,194)
----------------------------------------------------------------------------
Closing Balance
 December 31, 2013                 6,694            6,021            12,715
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Financial information is from Strategic's preliminary unaudited
consolidated financial statements for the year ended December 31, 2013, and
is subject to change. See Unaudited Financial Information in this press
release.

Strategic's light and medium oil, natural gas and NGL reserves were evaluated by McDaniel using McDaniel's product price forecasts effective January 1, 2014 prior to provision for financial risk management contracts, income taxes, interest, debt service charges and general and administrative expenses. The following table summarizes the net present value from recognized reserves at December 31, 2013, assuming various discount rates, and incorporating future development costs and abandonment liabilities. It should not be assumed that the discounted future net revenues estimated by McDaniel represent the fair market value of the Company's assets or future production from the assets.


Summary of Before Tax Net Present Value of Future Net Revenue (Forecast
 Pricing) (1)(2)
                                                               Discounted at
($ thousands)            Undiscounted          5%            10%         15%
----------------------------------------------------------------------------
Proved Producing              101,375      89,658         80,685      73,652
Proved Non-Producing            7,659       5,956          4,711       3,787
Proved Undeveloped             21,486      15,718         11,442       8,200
----------------------------------------------------------------------------
Total Proved                  130,519     111,332         96,838      85,638
Total Probable                161,174     113,126         83,248      63,540
----------------------------------------------------------------------------
Total Proved and
 Probable                     291,693     224,458        180,086     149,179
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 (1) Based on McDaniel's January 1, 2014 escalated price forecast.
(2) Tables may not add due to rounding. There is no assurance that the
forecast prices and costs assumptions will be attained and variances could
be material. The recovery and reserve estimates of Strategic's crude oil,
natural gas liquids and natural gas reserves provided herein are estimates
only and there is no guarantee that the estimated reserves will be
recovered. Actual crude oil, natural gas and natural gas liquids reserves
may be greater than or less than the estimates provided herein.

Strategic incurred capital expenditures of $129 million in 2013, of which $78 million was spent on drilling, completions and recompletions, $34 million on facilities, pipelines and tie ins, $7 million was spent on land and seismic and $10 million was spent on acquisitions. The following table summarizes Strategic's finding and development ("F&D") costs as well as FD&A costs, both before and after the inclusion of changes in FDC.



2013 F&D and FD&A costs



                                                                   Proved &
($ thousands                                          Proved        Probable
 (unaudited), except               Proved &        Excluding      Excluding
 as noted)                Proved    Probable  Infrastructure  Infrastructure

F&D Costs, Excluding
 FDC
Exploration and          118,497     118,497          93,645          93,645
 Development
 Expenditures(1)
Reserve Additions,
 Including Revisions       2,229       3,466           2,229           3,466
 - MBoe
F&D Costs - $/Boe          53.16       34.19           42.01           27.02

F&D Costs, Including
 FDC
Exploration and
 Development             118,497     118,497          93,645          93,645
 Expenditures(1)
Total Change in FDC       34,569      47,396          34,569          47,396
----------------------------------------------------------------------------
Total F&D Capital,
 Including Change in     153,066     165,893         128,214         141,041
 FDC
Reserve Additions,
 Including Revisions       2,229       3,466           2,229           3,466
 - MBoe
F&D Costs- $/Boe           68.67       47.87           57.52           40.69

FD&A Costs,
 Excluding FDC
Exploration and
 Development Capital     118,497     118,497          93,645          93,645
 Expenditures(1)
Net Acquisitions          10,098      10,098          10,098          10,098
----------------------------------------------------------------------------
FD&A Capital
 Expenditures,
 Including Net           128,595     128,595         103,743         103,743
 Acquisitions
Reserve Additions,
 Including Net             3,870       5,724           3,870           5,724
 Acquisitions - MBoe
FD&A Costs - $/Boe         33.23       22.47           26.80           18.12

FD&A Costs,
 Including FDC
FD&A Capital
 Expenditures,
 Including Net           128,595     128,595         103,743         103,743
 Acquisitions(1)
Total Change in FDC       34,569      47,396          34,569          47,396
----------------------------------------------------------------------------
Total FD&A Capital,
 Including Change in     163,164     175,991         138,312         151,139
 FDC
Reserve Additions,
 Including Net             3,870       5,724           3,870           5,724
 Acquisitions - MBoe
FD&A Costs,
 Including FDC -           42.16       30.75           35.74           26.40
 $/Boe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Financial information is from Strategic's preliminary unaudited
consolidated financial statements for the year ended December 31, 2013 and
is subject to change. See Unaudited Financial Information in this press
release.

OPERATIONAL UPDATE

Strategic has had continued drilling success with its first quarter Muskeg stack horizontal focused drilling program, with two of the four planned horizontal Muskeg Stack wells now tied-in and on stream.


--  The Muskeg Stack horizontal well located at 16-34 is a step out well.
    The well was successfully drilled to a lateral length of 1,554 meters
    and completed with a 14 stage frac. The enhanced completion techniques
    have made a significant improvement in the productivity of the
    horizontal Muskeg Stack well. The 16-34 well has been flowing back frac
    fluid, oil, water and gas up a 4.5 inch diameter frac string at rates of
    1,300-1,500 barrels per day making it one of the Company's strongest
    well to date. The well recovered mainly frac fluid during the initial 2
    days of the flow back and has been cleaning up. Over the next 9 days the
    well flowed 3,600 barrels of oil and 2,500 mcf of raw gas and has
    recovered approximately 40% of the frac fluid. At the end of the 11 day
    flow period the well was still cleaning up and was flowing of 530 BOPD
    and 400 mcfd of gas at an oil equivalent rate of 596 BOED (89 percent
    oil).

--  Muskeg horizontal well 5-33 was drilled to a lateral length of 1,506
    meters and completed with a 10 stage frac. The well averaged 260 BOED
    (94 percent oil) over the first 27 days. The well is producing at a rate
    of 238 BOED (97 percent oil) at the end of the 27 days. Strategic has
    gradually ramped up the pump speed in the well in order to mitigate any
    frac sand flow back.

--  The Company has successfully drilled Muskeg Stack horizontal well 13-24
    with a lateral length of 1,600 m. The well is planned to be completed
    with a 15 stage frac next week.

--  Strategic is currently drilling its final planned Muskeg Stack well for
    the first quarter at 10-24. The well is planned to have a lateral length
    of 1,600 m and is planned to be completed with a 15 stage frac. The 10-
    24 well is offsetting the 14-13 well, which produced an IP30 of 340 BOED
    from an 875 meter lateral completed with an 8 stage frac.

Strategic is also pleased to report its Bistcho oil pipeline project is proceeding on time and on budget. The Company expects first oil to flow in the sales line early in the second quarter of 2014. This project is paramount in terms of the Company's strategy to reduce operating and transportation costs by limiting trucking costs and enhancing the profitability of each barrel processed at Marlowe. The plant turnaround at Bistcho is ongoing and the plant is expected to be online next week.

Mr. Gurpreet Sawhney President & CEO of Strategic, states, "Everything is coming together - the team, the facility, the oil sales pipeline and the Muskeg Stack drilling. Strategic has made significant strides and improved its drilling and completion techniques to maximize well performance while managing costs in a new resource play. With over 300 Muskeg Stack locations in our inventory, coupled with high netback light oil production at Steen and a dedicated team, I believe we are continuing to build Strategic into a 'Premier Northern Operator'.

ABOUT STRATEGIC

Strategic is a junior oil and gas company committed to growth by exploiting its light oil assets in Canada. Strategic's common shares trade on the TSX Venture Exchange under the symbol SOG.

ADDITIONAL INFORMATION

Additional information is also available at www.sogoil.com and at www.sedar.com.

Unaudited Financial Information

Certain financial and operating information included in this press release for the year ended December 31, 2013, such as capital expenditures, production, F&D costs and FD&A costs are based on unaudited financial results, and are subject to the same limitations as discussed under "Forward-Looking Information". These estimated amounts may change upon the completion of audited financial statements for the year-ended December 31, 2013 and changes could be material.

Forward-Looking Statements

This news release includes certain information, with management's assessment of Strategic's future plans and operations, and contains forward-looking statements which may include some or all of the following: (i) anticipated production rates; (ii) expected results of capital programs; (iii) expected timelines for production optimization; (iv) net debt levels; (v) anticipated operating costs; and (vi) expected capital projects and associated spending; which are provided to allow investors to better understand the Company's business. By their nature, forward-looking statements are subject to numerous risks and uncertainties; some of which are beyond Strategic's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, changes in environmental tax and royalty legislation, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from internal and external sources, and other risks and uncertainties described under the heading 'Risk Factors' and elsewhere in the Company's Annual Information Form for the year ended December 31, 2012 and other documents filed with Canadian provincial securities authorities and are available to the public at www.sedar.com. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. The principal assumptions Strategic has made includes security of land interests; drilling cost stability; finance and debt markets continuing to be receptive to financing the Company, the ability of the Company to monetize non-core assets and industry standard rates of geologic and operational success. Actual results could differ materially from those expressed in, or implied by, these forward-looking statements. Strategic disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contacts:
Strategic Oil & Gas Ltd.
Gurpreet Sawhney
MBA, MSc., PEng.
President and CEO
403.767.9122 (FAX)
403.767.2949

Strategic Oil & Gas Ltd.
Michael A. Zuk
VP, Business Development
403.781.2989
403.767.9122 (FAX)

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