Strategic Oil & Gas Ltd
TSX VENTURE : SOG

Strategic Oil & Gas Ltd

November 18, 2009 11:38 ET

Strategic Announces Closing of Brokered Private Placement Financing and the Acquisition of Southern Alberta Property

CALGARY, ALBERTA--(Marketwire - Nov. 18, 2009) - Strategic Oil & Gas Ltd. (TSX VENTURE:SOG) ("Strategic" or the "Company") provides an update of its activities:

Strategic has moved forward with its previously announced plans (October 16, 2009) to: acquire and exploit a Southern Alberta property at Taber and Conrad; drill up to four wells with its partner at Maxhamish in northeast British Columbia; and raise $14,500,000 in equity for these two properties.

Strategic is in a unique position for a junior/emerging oil and gas company as it is now:

i) well financed;

ii) ready to commence drilling this winter to prove up a potential oil resource play in Western Canada (Maxhamish); and

iii) able to significantly increase oil production in the short term as a result of the acquisition, drilling and optimization work at its new Taber and Conrad property.

BROKERED PRIVATE PLACEMENT CLOSED

Strategic has completed the initial closing of its current private placement by the issue of 21,095,000 units ("Units") at $0.45 per unit, each unit consisting of one common share and one common share purchase warrant entitling the holder to acquire one additional common share for a period of one year from closing for $0.60 and 3,637,000 flow-through units ("Flow-Through Units") at $0.55 per Flow-Through Unit, for total proceeds of $11,493,100. Each Flow-Through Unit consists of one common share and one half of a Flow-through warrant, each whole Flow-through warrant entitling the holder to one additional common share for $0.70 for one year from closing. Macquarie Capital Markets Canada Ltd acted as exclusive agent for this portion of the private placement and received cash commissions of 7% and broker warrants in the amount of 10% of the Units and Flow-Through Units sold, exercisable for one year from closing. Proceeds from this closing were used to fund the Taber/Conrad acquisition and will be used for the southern Alberta work program described below; the Company's Maxhamish winter drill program and for additional working capital. The securities issued pursuant to this closing will be subject to trading restrictions ending March 14, 2010.

In addition, there is a non-brokered component of this private placement of Units and Flow-Through Units that is expected to raise an additional $3,000,000 that will be closed in the next week.

CLOSING OF THE ACQUISITION OF SOUTHERN ALBERTA OIL PROPERTIES

Strategic has also closed its previously announced acquisition of the 100% working interest medium gravity oil properties in the Taber and Conrad areas of southern Alberta.

Highlights of the acquisition



1. A purchase price of $5,100,000 paid through a combination of $4,000,000
cash and 2,444,444 Units, as described above.
2. Current production of 140 bbls/d, split equally between Taber and Conrad
properties.
3. Long reserve life index of 8.0 years, proved plus probable.
4. Extensive 3-D seismic coverage over the properties.
5. 30 producing oil wells.
6. Independent estimated reserves-based on volumes and values at December
31, 2008 (GLJ Petroleum Consultants Ltd.):
a. Proved : 339,000 boe Value-$5.6 million based on 10% PV
b. Proved + Probable: 424,000 boe Value -$6.9 million based on 10% PV
7. Acquisition of over 5,000 acres (8 sections) of land, with over 50%
undeveloped.
8. Includes 100% owned facilities, including central batteries, tanks,
water handling facilities and flow lines


Plans for development at Taber and Conrad

With the Taber and Conrad properties, Strategic acquires oil properties producing 140 bbls/d, which at current prices can provide annual cash flow of up to $2.0 million. Strategic's technical team, with its strong sub-surface technical abilities, combined with its past success at adding significant incremental reserves in mature oil properties, believes there are significant incremental reserves to be recovered. Based on preliminary studies, the Company believes there is by-passed pay at Taber from areas that have not been drained by the current well configuration that can be attained by selective drilling. Incremental oil production is expected to be added at Conrad from workovers, pump changes, selective drilling and enhanced recovery methods. Additional seismic and reservoir modelling will determine the locations, but it is anticipated that the drilling up to four wells at Taber and Conrad, combined with workovers may add over 500 bbls/d of production in the near term.

Benefit to Strategic

This acquisition fits well with Strategic's Maxhamish, northeast British Columbia horizontal oil resource play. Maxhamish is currently a winter access only area, so Taber and Conrad, with all year round access will allow for a balanced capital program. In addition, the current cash flow and low risk opportunities to significantly grow production and cash flow will be positive for Strategic.

MAXHAMISH, NORTHEAST BRITISH COLUMBIA

Strategic previously announced (October 16, 2009) that a participation agreement ("Participation Agreement") has been signed with a prominent Calgary based company who will become a partner with Strategic in this Maxhamish Farmout Agreement. The equity raise announced above will now ensure that the Corporation can fund an aggressive drilling program to prove up the tight oil play.

The terms of the Participation Agreement are:

1. Strategic and this partner will become 38.5%/61.5% partners in the Farmout Agreement.

2. The partner agrees to compensate Strategic for its extensive work done to date on the Maxhamish area by paying for Strategic's share of the costs to drill, complete and tie-in the first two wells (up to a maximum of $6,000,000) and $1,000,000 in optimization costs.

3. The partner will become operator of the area and is a leader in drilling and completing multistage horizontal wells.

Attributes of the Maxhamish Field

After payout and earning, Strategic will own a 25% working interest in the lands, its partner will own 40% and the Farmor will maintain a 35% interest. The farmout provides Strategic and its partner with:

1. A dominant land position in the area.

2. An undeveloped aerially extensive light oil play (API of 40 degrees) in the Chinkeh sand formation.

3. Untapped oil potential of over 400 million barrels of total PIIP based on Strategic's internal estimates and third party mapping of the resource.

4. Access to a significant land base in an area with natural gas potential from multiple zones, including shale zones.

5. Drill ready locations for this winter.

6. British Columbia provides an attractive fiscal regime with incentives for exploring and developing infrastructure.

7. A long tenure on the lands, with only minor land expiries before 2013.

Plans for development at Maxhamish

Plans are proceeding to commence drilling up to four wells this winter drilling season. This area is currently winter access only, so the plan is to commence construction of roads and drill by mid-December. The wells will then be completed, fracced and certain wells will be tied-in (weather permitting) prior to break-up in mid-April. Strategic has moved quickly with its partner to organize this winter's activity, including access to a drilling rig and other equipment. The plan is to develop the area by drilling horizontal wells, using multi-stage frac technology. Success in these early wells will open up an extensive regional oil development project, with over 100 drilling locations being possible.

About Strategic

Strategic is a junior oil and gas company with producing properties located in Southern and Central Alberta. Production is currently 340 to 365 boe/d with additional production expected to be brought onstream during the fourth quarter of 2009.

Strategic's highly regarded subsurface technical team is primarily focused on implementing development plans for the Maxhamish project and its southern Alberta properties, while reviewing other high impact prospects in Western Canada and international regions.

Further information with respect to the Company is available on its website at www.sogoil.com.

Forward-looking information

Certain information set forth in this document, including management's assessment of future plans and operations, contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond our control. Those risks include, without limitation, the effect of general economic conditions, risks associated with oil and gas exploration, development, production, marketing and transportation, loss of markets, industry conditions and competition, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other industry participants, the ability to access qualified personnel and oilfield services, decisions by regulators and the ability to access sufficient capital from internal and external sources. Readers are cautioned not to place undue reliance on the forward-looking statements as the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and actual results, performance or achievements could materially differ from those expressed or implied in such forward-looking statements and accordingly, no assurance can be given that any of the events anticipated by forward looking statements will transpire or occur, or if any of them do so, what benefit Strategic will derive therefrom.

Boe presentation

Barrel ("bbl") of oil equivalent ("boe") amounts may be misleading particularly if used in isolation. All boe conversions in this report are calculated using a conversion of six thousand cubic feet of natural gas to one equivalent barrel of oil (6 mcf=1 bbl) and is based on an energy conversion method primarily applicable at the burner tip and does not represent a value equivalency at the well head.

Total Petroleum Initially in Place (PIIP)

There is no certainty that any portion of the estimated PIIP will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the estimated PIIP. Additional drilling and analysis is required to develop a resource on the property.

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.

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