TORONTO, ONTARIO--(Marketwire - Feb. 28, 2012) - Quetzal Energy Ltd. (TSX VENTURE:QEI) ("Quetzal" or the "Company") is pleased to provide the following operational update and budget for 2012:

Llanos 27 Block

Mani-1 Exploration Well

On January 16, 2012, Quetzal announced an oil discovery in the Mani-1 exploration well. Initial production rates from the test were 1,510 bbls/d of fluids with a 32% watercut equating to approximately 1,025 boe/d of 14 degree API oil. During the course of the following 57 hour test, fluid and oil production rates improved to 2,310 bbls/d of fluids and a 16% watercut equating to approximately 1,940 boe/d of 16 degree API oil. Following the initial test, the well was suspended while regulatory approval was applied for to place the well on extended test. All applications and submissions have been made and Quetzal expects the extended test approval to be granted in the next one to two weeks. Production under the extended test will commence immediately following receipt of the approval.

Flami-1 Exploration Well

On February 3, 2012, negotiations were completed for land access at the Flami-1 exploration location and preliminary construction has begun to prepare the location for drilling. Subject to rig availability, Quetzal and its partners expect to spud the Flami-1 well by May 1, 2012. Once drilling begins, management expects to reach target depth of approximately 10,000 feet in 45 days. Prospective targets include the oil bearing intervals in the Mirador and Une Formations, with the Carbonera formation representing a secondary target. The current well budget for the Flami-1 well is $11,000,000 for drilling and casing and Quetzal will pay 50% of the cost and have a 45.275% revenue interest in this block before payout, and a 34.25% private participating interest following payout. The Flami-1 well sits on Block 27's Prospect D location. Quetzal management estimates that Prospect D has a P50 area of approximately 350 acres, compared to a P50 area at Mani-1's Prospect B of approximately 75 acres.

Canaguaro Block

Canaguay-1 Well

On October 20, 2011, the Company and its partners shut in the Canaguay 1 well to service the well by conducting a clean-out of the well, replacing the ESP, and placing the new ESP at a deeper depth in the well closer to the producing zone. Management's expectation was that this would lead to increased fluid production and a resultant increase in oil production as well. One of the objectives of this job was to remove a considerable amount of high viscosity emulsion that was plugging the well and limiting its productivity. The second objective was to run a new ESP design to ensure more effective drawdown on the well. On October 29th the well was put back on production and since that time production has averaged between 900-1,000 boe/d of oil with a watercut of approximately 35%.

In early February, the ESP began to run into complications due to the same high viscosity emulsion that was addressed in the October 2011 workover. Due to this, the well has been suspended in order to run a second workover of the well to remove the emulsion. Quetzal and its partners are also reviewing other pump design options that may be better suited to address the production challenges that come from the emulsion factor. Management estimates Quetzal's share of the current workover to be approximately $250,000 and should take approximately two to three weeks to complete.

Canaguay-2 Well

In late 2011, Quetzal and its partners received approval for the Evaluation Program at the Canaguaro Block. The commitment under the Evaluation Program is to shoot 20 km2 of 3D seismic and to drill another well by February 3, 2013. Planning has commenced to complete the 3D seismic survey in the summer of 2012 and plans are being made to drill the Canaguay-2 well in Q4 of 2012. Quetzal currently has the financial resources to meet its share of commitments under the evaluation program.

Quetzal has a 25% private participating interest in the Canaguaro Block.

Block 21

Following the Mani-1 oil discovery at Block 27 and the successful workover completed at the Canaguaro Block, Quetzal has re-evaluated its spending and investment priorities and has decided to focus capital expenditure activity on Block 27 and the Canaguaro Block. As a result, the Company has entered into an agreement with Omega Energy Colombia to renegotiate its farm-in arrangement at Block 21, whereby Quetzal will cap its capital expenditure commitment to an agreed amount in return for a reduced production income participation.

Under the terms of the original farm-in agreement, Quetzal was to pay 50% of two wells in exchange for an income production participation of 35%. Under the new arrangement, Quetzal will pay a maximum of $3,875,000 towards the two wells and will have the option, following the completion of those wells to: a) waive any right to an income production participation going forward and have no further financial obligations; or b) retain a 24.75% income production participation in the block by reimbursing Omega Energy Colombia for its incurred cost in the two wells, such that Quetzal will have paid 50%.

Block 36

Quetzal has been advised by Montecz, the operator of Block 36, that it has made an application to the ANH for an extension of the Phase 1 exploration deadline and is awaiting a decision on that application.

2012 Budget

Management and the Board of Directors of Quetzal are pleased to provide the recently approved budget for the 2012 fiscal year:

Notes:

1. Assumes average gross production from Canaguaro of 821 boe/d and from Mani-1 of 1,266 boe/d (assumes 9 months).

2. Includes cash received from sale of Horden Lake Mining property, sale of Guatemala division, recovery of ANH warranty from Block 27 Phase 1, and GST recoveries.

Updated Website and Management Presentation

Quetzal management is pleased to announce that a new company website will be launched on February 29, 2012 and can be found at www.quetzalenergy.com. In addition, a new management presentation has been updated and will be available in the Investor Relations area of the new website.

About Quetzal Energy Ltd.

Quetzal is a junior oil and gas company with private participating interests in 4 blocks in the Llanos Basin of Colombia.