Alberta Oilsands Inc. updates conventional operations and announces expansion
to farm-in agreement

    
    /NOT FOR DISTRIBUTION TO THE U.S.A. NEWS WIRE SERVICES OR FOR
    DISSEMINATION TO THE U.S.A./
    

CALGARY, Sept. 30 /CNW/ - Alberta Oilsands Inc. (the "Company" or "AOS") is pleased to provide an operations update regarding the farm-in agreements with two separate oil and gas producers and also announces an expansion to the farm-in agreement with AOS' partner in the Ladyfern discovery, which was originally mentioned in the Company's news release issued on January 28, 2009.

In the Peace River Arch region of northwest Alberta, AOS and the operator have deferred the drilling of the two Hines Creek wells, one located at 06-30-85-03W6 and the other at 09-13-086-02W6M, given the weaker than expected natural gas prices over the summer. The 09-13 well is now expected to spud in October 2009, followed by the 06-30 location in November 2009. AOS will earn a 50% working interest in each of the wells as well as a total of 17 sections of land once the wells are drilled.

AOS has also expanded the farm-in agreement that it had originally announced on January 28, 2009, whereby AOS secured increased access to option lands and exploration prospects in northwest Alberta and northeast British Columbia, subject to certain conditions. A minimum of three drilling prospects, both natural gas and light oil targets, have been identified within the area. One of the three, the Ladyfern South prospect is a follow-up to the Ladyfern 13-29-95-12W6M discovery well drilled in February 2009, which came on production April 1, 2009 and is currently producing at a gross raw gas rate of 3 million cubic feet per day (MMcfpd). The Ladyfern South prospect is located about 5 miles south of the 13-29 discovery well and has similar seismic features as the 13-29 discovery with slightly larger areal extent. The expanded farm-in agreement invokes a right of first refusal which provides AOS with the option to drill and participate in at least three prospects. Offsetting Slave Point pools in the Chinchaga/Ladyfern area, have cumulative production ranging from 5 to 20 billion cubic feet (Bcf)* (in respect of all wells producing from such pools) of natural gas. Slave Point light oil pools offsetting another prospect have produced 15.8 million barrels (MMB)* (in respect of all wells producing from such pools) of oil. The expanded farm-in agreement provides AOS with a reduction in the share of exploration costs compared with the original farm-in agreement announced on January 28, 2009.

AOS's investment in conventional oil and gas prospects is an interim strategy, initiated in November 2008, in the midst of the global financial downturn. It enabled the Company to participate in high impact, short time to cash flow exploration opportunities prior to bitumen production. To date, the strategy has been successful in yielding a producing gas well with liquids in the Ladyfern area of northwest Alberta.

Alberta Oilsands Inc. is a technically driven high growth energy company focused on the development and conversion of the company's oil sands resources to reserves and the creation of long term sustainable value by increasing production and cash flow on relevant conventional oil and natural gas assets.

    
    * From IHS Accumap - represents historical production data to June
        2009. This information is provided for comparison purposes only and
        the Company does not give any assurances that the results from its
        oil and gas properties will be similar to other properties in its
        operating areas. Readers are cautioned that the Company provides the
        third party historical production data without it having been
        prepared by a qualified reserves evaluator nor auditor nor in
        accordance with the COGE Handbook.
    

Forward-Looking Statements and Information: This press release contains certain forward-looking statements and information ("forward-looking statements") within the meaning of such statements under applicable securities law including management's assessment of the Company's properties, production and prospects. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed", "scheduled" and other similar words, 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 the development of and the ability to realize any additional future production from the Company's farm-in lands and other conventional oil and gas properties described in this news release, including the Company's ability to fund future developments. These statements are only predictions. Forward-looking statements are based on the opinions 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. These factors include 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, the possibility that royalties and other government levies could be increased, 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, 2008 as well as the Company's management discussion and analysis for the period ended June 30, 2009, 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. Barrels of oil equivalent ("boe") may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

    
    Neither the TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release.
    

%SEDAR: 00020297E

SOURCE ALBERTA OILSANDS INC.

For further information: For further information: Alberta Oilsands Inc., Suite 2800, 350 - 7th Avenue S.W., Calgary, Alberta, T2P 3N9, Shabir Premji, Executive Chairman, T: (403) 232-3341, F: (403) 263-6702, spremji@aboilsands.ca, or Chad Dust, Executive Vice President Finance and Business Development, T: (403) 538-3191, F: (403) 263-6702, cdust@aboilsands.ca; Company website: www.aboilsands.ca

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ALBERTA OILSANDS INC.

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