Mr. Kevin Gibson reports

PALLISER EXCEEDS EXIT GUIDANCE AND REDUCES OPERATING COSTS

Palliser Oil & Gas Corp. has provided an operations update. The company's December production, based on field estimates, averaged approximately 2,150 barrels of oil equivalent per day, weighted approximately 98 per cent to heavy oil and 2 per cent natural gas, exceeding the company's exit production guidance range of 1,800 to 2,050 boe/d. In the fourth quarter of 2011, the company grew production to an average of approximately 1,640 boe/d, up 16 per cent from the third quarter of 2011 production average of 1,418 boe/d and up 77 per cent compared with the fourth quarter of 2010 production average of 929 boe/d. The company's estimated 2011 average production was 1,372 boe/d, within its guidance of 1,300 to 1,400 boe/d, and is an increase of 115 per cent from 637 boe/d in 2010. Palliser's production has grown in each of the last 12 consecutive quarters achieving strong production per-share growth in 2009, 2010 and 2011.

The fourth quarter 2011 heavy oil capital program included 11 (11.0 net) wells drilled (or re-entered) and one (1.0 net) well reactivated with an overall success rate of 92 per cent. In addition, the company drilled one (1.0 net) and re-entered two (2.0 net) salt water disposal wells. At Edam, Sask., all three new SWD facilities were operational by the end of November and are performing at or above expectations. These new SWD facilities are expected to provide the company with enough water capacity for all existing and newly drilled wells, with spare capacity for future growth in the Edam area.

The company has realized significant reductions in operating costs largely as a result of increased production and reduced water handling costs. The company estimates operating costs, based on field estimates, are in the range of $25.00 per boe for the month of December, trending toward 2010 levels where the company achieved operating costs of $19.97 per boe.

Palliser continues to build an inventory of heavy oil prospects through the addition of new lands and the acquisition of additional proprietary seismic in the company's greater Lloydminster core area. At the present time the company's heavy oil prospect inventory has increased significantly and stands at 139 locations providing the company with a multiyear drilling inventory and significant growth opportunities for future capital programs.

Palliser expects to issue its 2012 guidance in late January.

Palliser's corporate presentation is available on the company's website. A copy of this press release is available at SEDAR or the company's website.

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