Emerge Oil & Gas Inc.

January 25, 2011 20:43 ET

Emerge Enters Into Strategic Farm-In Agreement

CALGARY, ALBERTA--(Marketwire - Jan. 25, 2011) - Emerge Oil & Gas Inc. ("Emerge" or the "Company") (TSX:EME) is pleased to announce that it has entered into a farm-in agreement (the "Agreement") with a public oil and gas company that will allow Emerge to earn an interest in certain lands in East-Central Alberta prospective for Viking light oil along the Redwater-Halkirk resource trend. The farm-in lands are in close proximity to the Company's existing acreage and operations in the Battlebend/Coronation area. Under the terms of the Agreement, Emerge will pay 100% of the costs to drill, complete and equip the earning wells to earn a 70% working interest in the earned lands.

The Agreement provides Emerge with access to approximately 30,000 net acres (approximately 47 net sections) of land, of which approximately 18,000 net acres (approximately 28 net sections) include Viking petroleum rights. Emerge has committed to drill five (5) horizontal Viking wells to earn 70% of the farmor's working interest in ten (10) net sections with a rolling option to allow Emerge to earn the remainder of the farm-in lands. The five (5) commitment wells are required to be drilled by August 31, 2011.

Emerge has existing production operations and infrastructure in the Battlebend/Coronation area, with current production of approximately 600 boe/d (Mannville medium oil), a pipeline connected oil battery/gas processing facility in the Battlebend area and three (3) smaller oil batteries in the area, all of which are Company-operated. The Company currently has a drilling inventory of up to 41 potential Viking locations on its high working interest (approximately 80%) owned lands in this area.

Emerge has a 2011 capital expenditure budget of $75 million for exploration and development activities, with approximately 66% of the budget allocated towards drilling, completions and well equipping activities. Allocation of capital for drilling will be split between our Lloydminster heavy oil drilling program and our new emerging light/medium oil program in the Battlebend/Coronation area.

About Emerge Oil & Gas Inc.

Emerge is engaged in the exploration for and development and production of oil and natural gas in Western Canada. The Company currently operates within two principal areas, namely, the Lloydminster area of West-Central Saskatchewan and East-Central Alberta and the Battlebend area of East-Central Alberta. Emerge is headquartered in Calgary, Canada.


Barrel of Oil Equivalent

The Company may present petroleum and natural gas production and reserve volumes in barrel of oil equivalent ("boe") amounts. For purposes of computing such units, a conversion rate of 6,000 cubic feet of natural gas to one barrel of oil equivalent (6:1) is used. The conversion ratio of 6:1 is based on an energy equivalency conversion method which is primarily applicable at the burner tip and does not represent value equivalence at the wellhead. Readers are cautioned that boe figures may be misleading, particularly if used in isolation.

Forward-Looking Statements and Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking statements or information. More particularly and without limitation, this news release contains forward-looking statements and information concerning: Emerge's 2011 capital budget, including allocation of expenditures associated therewith; and specific drilling plans, including the number of locations to be drilled in various areas and the number of drilling locations in inventory.

The forward-looking statements and information in this news release are based on certain key expectations and assumptions made by Emerge, including but not limited to expectations and assumptions concerning: prevailing and future commodity prices and foreign exchange rates; applicable royalty rates, tax rates and related laws and regulations; future production rates; the performance of existing and future wells; the success obtained in drilling new wells; the inventory of new drilling locations; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour and services, including but not limited to drilling and completion equipment and services; adequate weather and environmental conditions for drilling and completion activities, including the transportation of associated equipment; the receipt, in a timely manner, of regulatory and third party approvals; the timing of development and construction plans; and the ability of Emerge to secure adequate product processing and transportation and to market its crude oil and natural gas successfully.

Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties, certain of which are beyond the control of the Company. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to the risks associated with the oil and gas industry in general such as: operational risks in development, exploration and production; delays or changes in plans with respect to exploration and development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production rates, costs and expenses; health, safety and environmental risks; risks associated with adverse weather and the impact on drilling and completion activities and the transportation of associated equipment; fluctuations in foreign exchange rates and in commodity prices, and in particular in the price of heavy oil; transportation and marketing of crude oil and natural gas and the loss of markets; the impact of competitors; the ability to access sufficient capital from internal and external sources; failure to obtain required regulatory and other third party approvals; unanticipated fluctuations or declines in production; and changes in legislation, including but not limited to tax laws, royalty rates and environmental regulations. Readers are cautioned that the foregoing list of risk factors is not exhaustive. Additional information on these and other factors that could impact Emerge can be found in Emerge's Annual Information Form for the year ended December 31, 2009 which may be accessed through Emerge's SEDAR profile at www.sedar.com.

The forward-looking statements and information contained in this news release are made as of the date hereof and Emerge undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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