Quetzal Energy Ltd.

Quetzal Energy Ltd.

December 16, 2010 09:00 ET

Quetzal Energy Completes Initial Testing Operations and Begins Preparations for Long Term Production Testing of the Canaguay-1 Well in Colombia

CALGARY, ALBERTA--(Marketwire - Dec. 16, 2010) - Quetzal Energy Ltd. (TSX VENTURE:QEI) ("Quetzal" or the "Company") has initiated the process of obtaining permission to commence a long term testing program for the Canaguay – 1 well oil discovery on the Canaguaro Block in Colombia.

Long term production testing of a 5 foot perforated interval of the Lower Mirador sandstone from 14,297 – 14,292 feet, is expected to begin as soon as permission is granted by the Colombian Ministry of Mines and Energy. This interval averaged 2,225 bopd of 20.7 degree API oil during DST #5. The oil producing sandstone is interpreted as being approximately 30 feet thick.

It is anticipated that permission to conduct the long term production test will be granted in 60 to 90 days. In the intervening period work will begin to the source and install the required production equipment, contract the trucks needed to haul the oil to the delivery point and negotiate an oil sales contract.

At this time it is expected that during the long term production test the well will be produced at rates in excess of 2,000 bopd, with actual rates being determined by actual well performance and good engineering practices. It is planned to install an electrical submersible pump in the well so as to have the ability to control production rates during the long term test and afterward during sustained production. Pressure information, obtained during initial testing, indicates the well may be capable of producing at rates in excess of 4,000 bbls per day.

On December 3, 2010, the official operator of the Canaguaro block made exploration discovery declarations to the ANH (Agencia Nacional de Hidrocarburos / National Hydrocarbons Agency), for the Mirador and Une Formations in the Canaguay – 1 well.

Canaguay-1: Cased hole Drill Stem Test Summary

DST #6, Upper Mirador, perforated 14,229 – 14,249 ft and 14,256 – 14,262, 26 ft: The perforated interval produced 100% very fresh water, with an average salinity of 516 parts per million, at rates in excess of 2,000 bbls per day. The presence of very fresh water in the Upper Mirador exemplifies the challenges of well log interpretation; both fresh water and oil are electrically resistive.

DST #7, Mirador, perforated 14,340 – 14,345 and 14,350 – 14,355 ft, 10 ft: The perforated interval produced 100% water, with an average salinity of 21,700 parts per million, at rates in excess of 2,000 bbls per day. A small quantity of tar was recovered at the end of the test.

Quetzal has a 25% working interest in the Canaguaro Block and is acting as operator of the well.

Cautionary Statements

This news release contains forward-looking information and forward-looking statements within the meaning of applicable securities laws (together, "forward-looking information"). The use of any of the words "expect", "anticipate", "continue", "estimate", "believe", "plans", "intends", "confident", "may", "objective", "ongoing", "will", "should", "project", "should" and similar expressions are intended to identify forward-looking information. In particular, but without limiting the foregoing, this news release contains forward-looking information concerning the use of proceeds of the recently completed offering of units of the Corporation.

The forward-looking information is based on certain key expectations and assumptions made by Quetzal, including expectations and assumptions concerning the operational results in Colombia and Guatemala. Although Quetzal believes that the expectations and assumptions on which the forward-looking information are based are reasonable, undue reliance should not be placed on the forward-looking information because Quetzal can give no assurance that they will prove to be correct.

Since forward-looking information addresses future events and conditions, by its very nature it involves inherent risks and uncertainties. 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 inherent risks involved in the exploration and development of oil and gas properties, the uncertainties involved in interpreting drilling results and other geological data, uncertainties relating to fluctuating oil and gas prices, the possibility of cost overruns or unanticipated costs and expenses and other factors including unforeseen delays. Anticipated exploration and development plans relating to Quetzal's properties are subject to change.

The foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information contained in this press release is made as of the date hereof and Quetzal 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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