Alberta Oilsands Inc. Announces Second Quarter Results and Operations Update

CALGARY, Aug. 29 /CNW/ - Alberta Oilsands Inc. (the "Company" or "AOS") (TSXV: AOS) is pleased to announce the financial highlights for the three and six months ended June 30, 2008.

Highlights

The Company made significant progress since the beginning of the year in the execution of its strategic goals and operations. Specifically the Company identified what it believes to be two 10,000 barrel per day projects on its Ft. McMurray - Clearwater project area of the Athabasca oil sands. In pursuit of these goals, the Company achieved the following:

- Completed a successful 2007/2008 winter delineation drilling program
comprising 34 core holes.
- Completed an 83 km 2D seismic exploration program.
- Raised an additional $23.6 million in the first and third quarters of
2008 to strengthen its balance sheet.
- Entered into a pooling agreement in Hangingstone East to increase its
gross acreage in that area to 38.5 sections.
- Obtained an independent resource assessment from Ryder Scott Company
Canada, Petroleum Consultants ("Ryder Scott"), an independent
petroleum consulting firm, with an effective date of June 1, 2008 that
provided a contingent (recoverable) resource increase of 119 million
barrels (a 59% increase) to an aggregate of 320 million barrels of
contingent resources compared to the 2007 assessment.
- Obtained a preliminary scoping engineering study of the Clearwater
project.
- Obtained a scoping valuation from Ryder Scott of its Clearwater
projects that indicated an unrisked total before income tax NPV10%
valuation of $750 million as detailed in the Company's July 10, 2008
news release.
- Has $21.5 million of cash in hand after proceeds from its August 2008
financing.

The above activities have positioned the Company to target a start to the
construction of a pilot project in the Clearwater lands for the first half of
2010 and the commencement of commercial production in 2012. An engineering
scoping cost estimate and timing study (pre-design basis memorandum or
"pre-DBM") was completed in June 2008. A third party scoping NPV valuation
study was completed in July indicating that a 10,000 bpd development based on
the resource levels is expected to be economic. Environmental and further
process design studies have been initiated to target for a pilot project
application submission by the end of 2008, as initial steps towards realizing
the Company's production goals.

There is no certainty that it will be commercially viable to produce any
portion of the resources described in this news release. For important
information regarding the disclosure of resource estimates and our independent
resource and NPV assessments, including the definitions of "Contingent
Resources", please see the section entitled "Disclosure of Resources" below in
this news release. For a discussion of the assumptions made and risks
associated with the development of our oil sands project, please also see the
discussion under the heading "Disclosure of Resources" as well as under the
heading "Forward-looking Statements and Information" in this news release.

Second Quarter Operating Highlights

The following tables outline certain highlights of our financial and
operating results for the three and six months ended June 30, 2008:

Three months ended June 30 Six months ended June 30
Results 2008 2007 2008 2007
------------------------------------...
Petroleum and natural
gas sales 555,333 487,642 999,669 2,006,998
Funds used in
operations (631,341) (703,819) (898,589) (98,487)
Loss for the period (1,169,247) (1,378,661) (1,949,681) (63,121)
Capital expenditures 1,805,135 4,112,925 7,698,146 7,882,007


Three months ended June 30 Six months ended June 30
Production 2008 2007 2008 2007
------------------------------------...
Oil and NGL (bbls/day) 47 75 48 166
Natural gas (mcf/day) 41 34 44 43
boe(1)/day (6:1) 54 80 56 173

Three months ended June 30 Six months ended June 30
Commodity Prices 2008 2007 2008 2007
------------------------------------...
Oil and NGL ($/bbl) 120.12 68.16 105.71 65.00
Natural gas ($/mcf) 10.17 7.92 8.91 7.20
boe(1) ($/boe) 112.62 66.69 98.84 64.09

(1) See "BOE Presentation" below.

Outlook

The Company raised $15.5 million in August 2008 to augment its working capital position and fund the 2008 fall drilling and the 2008/2009 winter drilling programs. The Company continues to maintain a strong balance sheet. With the $15.5 million equity financing in August 2008 and a focused fall drilling program designed to provide the maximum value for the capital expended the Company expects to exit the third quarter of 2008 with approximately $20.0 million cash and no debt. The Company believes this will allow it to undertake the appropriate environmental studies to progress towards a pilot project application before the end of 2008 followed by a 2008/2009 core drilling program.

The fall 2008 drilling program is expected to comprise approximately 10 wells in Clearwater West and is budgeted for approximately $3.0 million. This program is expected to provide additional data to enable us to file the application for project development by year end. Services are currently being contracted for this program.

The Company's objectives for the rest of 2008 are to pursue the goal of bringing our potential Clearwater projects to production and to advance our Hangingstone project with our new partner, an established oil sands area producer. Winter program planning is well underway and services are expected to be contracted in the near future.

The Company expects its 2009 preliminary capital budget to be in the range of $20 million and will continue to research and evaluate multiple approaches to find the best means to financing its future capital expenditures. The Company's preference is to proceed with the projects on a 100% working interest basis, provided the capital markets recognize the underlying value of the assets and facilitate the raising of the required capital at non-dilutive levels. Alternatively, the Company may seek industry or financial partners, which would reduce its working interest in the projects, but mitigate the Company's financial market risk.

The Company will file its second quarter management's discussion and analysis and interim unaudited consolidated financial statements and notes thereto as at and for the three and six months ended June 30, 2008 in accordance with National Instrument 51-102 - Continuous Disclosure Obligations adopted by the Canadian securities regulatory authorities. Additional information about the Company, including the audited consolidated financial statements and notes thereto and management's discussion and analysis as at and for the year ended December 31, 2007, are available on the Company's SEDAR profile at www.sedar.com.

(x) (x) (x) (x) (x) (x) (x)

BOE Presentation - Production information is commonly reported in units of barrel of oil equivalent ("boe"). For purposes of computing such units, natural gas is converted to equivalent barrels of oil using a conversion factor of six thousand cubic feet to one barrel of oil. This conversion ratio of 6:1 is based on an energy equivalent wellhead value for the individual products. Such disclosure of boes may be misleading, particularly if used in isolation. Readers should be aware that historical results are not necessarily indicative of future performance.

Disclosure of Resources - "Resources" are quantities of petroleum that are estimated to exist originally in naturally occurring accumulations, including the quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production, plus those estimated quantities in accumulations yet to be discovered.

"Contingent resources" are defined as those quantities of petroleum estimated, on a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. It is also appropriate to classify as "contingent resources" the estimated discovered recoverable quantities associated with a project in the early project stage.

"Undiscovered resources" are defined as that portion of undiscovered petroleum initially-in-place which is estimated, as of a given date, not to be recoverable by future development projects. A portion of these quantities may become recoverable in the future as commercial circumstances change or technological developments occur; the remaining portion may never be recovered due to the physical/chemical constraints represented by subsurface interaction of fluids and reservoir rocks.

There is no certainty that it will be commercially viable for the Company to produce any portion of the bitumen resources detailed in this news release. The estimated future net revenues and values contained in this news release do not necessarily represent the market value of such resources. The high level of uncertainty associated with the Company's possible recovery of any of these resources is the result of various risks and uncertainties including: current uncertainties around the specific scope and timing of the development of the Company's Fort-McMurray properties; the ability of the Company to finance any potential oil sands projects at its Fort-McMurray properties; proposed reliance on technologies that have not yet been demonstrated to be commercially applicable in oil sands applications; lack of regulatory approvals; the uncertainty regarding marketing plans for production from the subject areas; and improved estimation of project costs. There are a number of inherent risks and contingencies associated with such development, including commodity price fluctuations, project costs and those other risks and contingencies discussed in more detail in the sections entitled "Forward-looking Statements and Information" in this news release.

Resources, undiscovered resources and contingent resources do not constitute, and should not be confused with, reserves.

Forward-looking Statements and Information - Certain information regarding the Company set forth in this news release, including management's assessment of the Company's future plans, operations, properties, production and prospects contains forward looking information and statements that involve substantial known and unknown risks and uncertainties. In some cases, forward looking information and statements can be identified by terminology such as "may", "will", "should", "intends", "expects", "projects", "plans", "anticipates", "targets", "believes", "potential", "estimates", "continues", "designed", "objective", "maintain", "schedule" and similar expressions or statements that certain events or conditions "may" or "will" occur. In particular, this news release contains forward-looking statements and information with respect to: (i) possible in-situ development (including the timing of such development) on the Company's oil sands properties, including in respect of pilot projects and further development in respect of its Clearwater East and Clearwater West project areas located in its Fort-McMurray properties and the joint development of its Hangingstone East project area with its pooling partner in the area; (ii) expectations regarding future developments costs and the ability to fund such costs; (iii) future values that may be attributable to the Company's oil and gas properties, including in respect of net present value calculations in respect of its Clearwater East and Clearwater West project areas; (iv) the ability of the current working capital levels of the Company to maintain future capital expenditures; (v) the Company's projected capital budget; (vi) successful results from the Company's 2008/2009 winter core drilling program; (vii) crude oil, natural gas and bitumen production levels; (viii) the continued economic viability of the Company's projects; (ix) a regulatory regime that will be conducive to the Company completing its projects (including in respect of environmental regulation and royalty rates); and (x) projections of market prices and the demand for the commodities the Company produces or intends to produce. Such forward-looking statements and information are based on the opinions, assumptions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements and information. These factors include the inherent risks involved in the exploration and development of oil sands properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating oil prices, the possibility of project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future and other factors including unforeseen delays. As an oil sands-focused enterprise, the Company faces risks, including those associated with exploration, development, approvals and the ability to access sufficient capital from external sources. Anticipated exploration and development plans relating to the Company's properties are subject to change. For a detailed description of the risks and uncertainties facing the Company and its business and affairs, readers should refer to the Company's annual financial statements, management discussion and analysis and annual information form for the year ended December 31, 2007 as well as the Company's management discussion and analysis for the period ended June 30, 2008, all of which are available at www.sedar.com. The Company undertakes no obligation to update such forward-looking statements or information if circumstances or management's estimates or opinions should change, unless required by law.

Statements relating to "resources" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the described resources exist in the quantities predicted or estimated, and can be profitably produced in the future. See "Disclosure of Resources" in this news release.

In assessing the feasibility of potential oil sands projects and in estimating the value of and the projected start-up dates for pilot projects and commercial in-situ operations in the Company's Clearwater East and West project areas located within its Fort-McMurray properties, management of the Company has made numerous assumptions including: those noted above in respect of Ryder Scott's NPV calculations; that the Company will be able to obtain regulatory and other required third party approvals in a timely manner; that the regulatory framework representing royalties, taxes and environmental matters will continue to support such projects; that the Company will be able to generate sufficient cash flow, access capital markets on competitive terms or find strategic partners in order to enable it to fund such projects; that future prices for crude oil, bitumen and refined products will continue to be at levels which support such projects; that the results from the Company's 2008/2009 winter core drilling program will be favourable; that the Company's independent resource estimates are accurate; and that the Company will be able to obtain qualified staff and equipment in a timely and cost efficient manner. In the event that such assumptions are not accurate, this could have an adverse effect on the ability of the Company to commence such projects within the noted timelines, or at all.