Mr. Donald Staus reports

CULANE REPORTS SUCCESSFUL OIL WELL IN SW SASKATCHEWAN

Culane Energy Corp.'s drilling operations at Notukeu in southwest Saskatchewan have resulted in a successful 100-per-cent-working-interest horizontal oil well in the Upper Shaunavon formation. Initial production rates are approximately 15 cubic metres (94 barrels) of oil per day with an 8-per-cent to 10-per-cent watercut. The Notukeu 2-6-11-17W3 was drilled in February, 2010, and following an initial completion and production testing period was shut in for most of April, May and June because of spring breakup and extended delays due to extremely wet weather and field conditions.

When recompletion work was finally able to occur, the well was sidetracked and a new leg drilled in the Upper Shaunavon. The liner in the first leg could not be removed, necessitating the drilling of a new leg from the same wellbore and the abandonment of the original leg. The horizontal length of the new leg is approximately 600 metres. A Packers Plus liner assembly was run, and the new leg was frac with a nine-stage, 135-tonne frac (15 tonnes per stage) on July 31, 2010. The well was flowed back immediately after the frac. Overnight, the well flowed back 504 barrels of 22 degrees of API oil. The single-well battery was repiped and the well was placed back on production on Aug. 6.

Initial completion attempts were unable to establish full communication with the Upper Shaunavon reservoir resulting in unusually low reservoir pressure readings and declining production rates caused mainly by drilling damage. The drilling damage has been overcome with the multistage sand frac completion that has achieved full communication with the reservoir. The well was put on production and, after a week of production, the wellbore fluid levels started to stabilize. The well is producing approximately 15 cubic metres (94 barrels) of oil per day with an 8-per-cent to 10-per-cent watercut. Water production based on analysis is substantially load fluid from the frac operation.

At Notukeu, Culane owns 13 sections of land with a 100-per-cent working interest and has identified an additional 45 drill locations. The company currently has horizontal well project approvals from Saskatchewan Energy and Resources for eight new wells and has made a horizontal well project application for another 23 drill locations. Drilling operations are scheduled to recommence at Notukeu by the second week of September. The next wells at Notukeu are expected to be drilled with longer horizontal legs which management believes will produce at higher rates than the first well at 600 m.

As previously announced, Culane has acquired a 100-per-cent working interest in close to two townships of land (69 sections) in southwest Saskatchewan. Culane acquired this land strictly for its oil potential. Culane's venture into Saskatchewan this year has been one of many technical challenges that includes the associated learning curve that is part of dealing with new technical issues. Based on initial results in this area, management believes that Culane can now move back into an organic growth phase through the development drilling program of its Notukeu property. At the same time, Culane is working its way through technical issues on other oil projects that it believes can also be economic.

Culane also expects to be conducting more exploration drilling this year and into 2011 in southwest Saskatchewan. Notukeu was only the first of a number of potential oil opportunities that Culane has identified on its lands. Management believes that Culane's entry into Saskatchewan and its subsequent oil discovery at Notukeu represents a major turning point for Culane and its shareholders as the company positions itself for the next stage of oil production growth. Culane is currently producing approximately 1,100 barrels of oil equivalent per day (77 per cent oil and 23 per cent natural gas).