Arsenal Energy Inc.
TSX : AEI
PINKSHEETS : AEYIF

Arsenal Energy Inc.

October 03, 2012 16:00 ET

Arsenal Energy Inc. Drills and Tests Two Successful Horizontal Wells at Princess Alberta

CALGARY, ALBERTA--(Marketwire - Oct. 3, 2012) - Arsenal Energy Inc. (TSX:AEI) (PINKSHEETS:AEYIF)

At Princess Alberta, Arsenal has drilled and tested two 100% working interest horizontal wells. The first well flowed at an average rate of 600 bbls/d of oil and 730mcf/d of gas over a five day test period. The well has been tied in and turned over to continuous production operations. Solution gas production at Arsenal's Princess facility is capacity-limited. This limitation has required that the well be choked back to 200 bbls/d of oil. The second well tested at a rate of 170 bbls/d over a 24 hour period. It is anticipated that the second well will be tied in and placed on production by the end of October. It is expected to produce at between one half and one third of its test rate. It is anticipated that alternative processing arrangements for the solution gas should be in place by yearend. Both wells have an oil gravity of 21 API. Arsenal has approximately 20,000 net acres of land in the Princess area. Six new drilling locations at Princess are in the permitting phase. Average drill and complete costs for the first two wells was $1.7 million and each new well pays a royalty rate of 5% for the first 18 months of production.

In the Bakken of North Dakota, Arsenal has 10 gross (1.3 net) non-operated Bakken wells that have been drilled and are awaiting fracture stimulation. It is anticipated that most of these wells will be fracked and placed on production over the next two months.

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Advisory Certain statements and information contained in this press release, including but not limited to management's assessment of Arsenal's future plans and operations, production, reserves, revenue, commodity prices, operating and administrative expenditures, funds from operations, capital expenditure programs and debt levels contain forward-looking statements. All statements other than statements of historical fact may be forward looking statements. These statements, by their nature, are subject to numerous risks and uncertainties, some of which are beyond Arsenal's control including the effect of general economic conditions, industry conditions, changes in regulatory and taxation regimes, volatility of commodity prices, escalation of operating and capital costs, currency fluctuations, the availability of services, imprecision of reserve estimates, geological, technical, drilling and processing problems, environmental risks, weather, the lack of availability of qualified personnel or management, stock market volatility, the ability to access sufficient capital from internal and external sources and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel that may cause actual results or events to differ materially from those anticipated in the forward looking statements. Such forward-looking statements although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated in the statements made and should not unduly be relied on. These statements speak only as of the date of this press release. Arsenal does not intend and does not assume any obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Arsenal's business is subject to various risks that are discussed in its filings on the System for Electronic Document Analysis and Retrieval (SEDAR).

In this press release where amounts are expressed on a barrel of oil equivalent ("boe") basis, natural gas volumes have been converted to oil equivalence at six thousand cubic feet per barrel. The term boe may be misleading, particularly if used in isolation. A boe conversion ratio of six thousand cubic feet per barrel is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Estimates of future net revenue do not represent fair market values.

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