Upper Lake Oil and Gas Ltd. announces 2008 capital budget and $3.2 million acquisition of oil and gas assets



    CALGARY, Jan. 28 /CNW/ - Upper Lake Oil and Gas Ltd. (TSX:UP) ("Upper
Lake" or the "Company") announced today that its Board of Directors has
finalized the Company's budget for 2008. In addition, Upper Lake announced
that it has exercised an option to acquire certain oil and gas assets in
central Alberta and northeast British Columbia from Crocotta Energy Inc. for
$3.2 million.

    Certain information included in this News Release constitutes
forward-looking information, including information concerning Upper Lake's
plans to finance the acquisition of assets from Crocotta Energy Inc., the
timing of closing of that acquisition and anticipated average production for
2008. Readers should review the cautionary statement that appears at the end
of this News Release.

    Operational update

    Upper Lake estimates that its year-end exit production for 2007, based on
field estimates, was approximately 820 barrels of oil equivalent per day
(70% natural gas), exceeding the Company's year-end exit production guidance
of 700 to 800 boe/d. In the fourth quarter, Upper Lake drilled two (1.48 net)
wells, with a success rate of 100%, including a new pool discovery. The
Company's current production, based on available field reports, is estimated
at 1,000 boe/d, which includes flush production from the previously announced
15-04-43-28 w4 oil well in Ferrybank, Alberta and a gas well drilled in a
newly discovered pool in the Ferrybank area.

    Asset acquisition

    Upper Lake also advises that it has exercised rights available to it
under an agreement with Crocotta Energy Inc. to acquire certain oil and gas
assets in central Alberta and northeast British Columbia for $3.2 million in
cash, before closing adjustments. The assets include one (16.67% net)
producing well at Tupper in northeast British Columbia, five (3.2 net) cased
and tested wells awaiting tie-in in Alberta, and varying working interests in
16,000 acres of land in Alberta and British Columbia, including a one-third
working interest in the Tupper area. The Tupper lands are in the vicinity of a
developing Montney resource play. Upper Lake expects to finance the
acquisition through its existing credit facilities. Closing of the acquisition
is expected to occur by the end of February 2008, subject to the satisfaction
of certain customary conditions.

    Capex budget for 2008

    On November 2, 2007, the Board of Directors of Upper Lake approved a
preliminary 2008 capital program of between $9 and $12 million. That
preliminary budget has been revised to a "cash flow" budget of $7 million plus
the above noted $3.2 million acquisition of assets from Crocotta Energy Inc.
The 2008 capital program assumes the drilling of eight (5.78 net) wells, and
is based on an average natural gas price of $6.00 per gigajoule at AECO and
$80 WTI per barrel for oil and liquids. Any significant variations from these
assumed commodity prices may result in decreased or increased activity by the
Company and the budget is subject to adjustment as circumstances dictate.
Upper Lake believes the wells selected for drilling in connection with the
2008 capital program are consistent with management's medium-risk philosophy.

    Guidance

    Based on the Company's approved capital budget, average 2008 production
is expected to be 1,000 boe/d, weighted approximately 70% to natural gas
production.
    Upper Lake Oil and Gas Ltd. is a Calgary-based company active in the
exploration, development and production of oil and gas in Western Canada. The
Company commenced active operations on October 12, 2007 when shareholders,
optionholders and warrantholders of Diamond Tree Energy Ltd. ("Diamond Tree")
approved an arrangement involving Upper Lake, Diamond Tree and Crocotta Energy
Inc. at a special meeting. In connection with the arrangement, certain oil and
gas properties of Diamond Tree in central and eastern Alberta consisting of
exploration assets, producing properties, related tangibles and undeveloped
lands were transferred to Upper Lake. Additional information concerning Upper
Lake is available on the Company's website at www.upperlake.ca or on SEDAR at
www.sedar.com.

    Certain information set out in this News Release constitutes
forward-looking information. Forward-looking statements are often, but not
always, identified by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "intend", "could", "might",
"should", "believe" and similar expressions. Forward-looking statements are
based upon the opinions and expectations of management of the Company as at
the effective date of such statements and, in certain cases, information
received from third parties. Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions and that information received from third parties is
reliable, it can give no assurance that those expectations will prove to have
been correct. Forward-looking statements are subject to certain risks and
uncertainties that could cause actual events or outcomes to differ materially
from those anticipated or implied by such forward-looking statements. These
factors include, but are not limited to, such things as the volatility of
prices for oil and gas and other commodities, commodity supply and demand,
fluctuations in currency and interest rates, inherent risks associated with
the exploration and development of oil and gas properties, ultimate
recoverability of reserves, timing, results and costs of exploration and
development activities, timing and costs of facilities and pipeline
construction, availability of financial resources or third-party financing,
availability of drilling and related equipment and new laws and regulations.
Accordingly, readers should not place undue reliance upon the forward-looking
statements contained in this News Release and such forward-looking statements
should not be interpreted or regarded as guarantees of future outcomes.
Forward-looking information respecting the use of the Company's current credit
facility to finance the acquisition of assets from Crocotta and the timing of
closing of the acquisition transaction is based upon the current capital
budget developed for the Company (which is subject to change), the terms of
the agreements governing the Company's credit facility with its principal
lender, the terms of the governing agreement between the Company and Crocotta
Energy Inc., advice received from Crocotta Energy Inc. with respect to the
timing of closing and the satisfaction of all applicable conditions to
completion of the transaction. Forward-looking information respecting
anticipated 2008 production is based upon the assumptions noted above in this
News Release and current production from the Company's oil and gas properties,
anticipated exploration and development drilling activities for the balance of
2008, historical success rates associated with exploration and development
drilling in the areas in which the Company proposes to drill oil and gas
wells, management's prior experiences with the tie-in of successful wells in
various areas, the availability of transportation and processing
infrastructure, management's evaluation of the individual wells to be drilled,
historical production rates and other data associated with prior wells drilled
in the areas in which the Company proposes to drill oil and gas wells in 2008
and industry conditions including the applicable royalty structure. The
forward-looking statements of Upper Lake contained in this News Release are
expressly qualified, in their entirety, by this cautionary statement.
Additional information concerning the various risk factors to which Upper Lake
is exposed in the conduct of its business (and which may affect the
expectations or outcomes reflected in the forward-looking statements contained
in this News Release) are described in publicly available documents filed by
or on behalf of Upper Lake with certain securities regulatory authorities in
Canada, which are available through SEDAR at www.sedar.com, including the
September 12, 2007 Management Information Circular and Proxy Statement
prepared by Diamond Tree Energy Ltd. in connection with the special meeting of
the securityholders of Diamond Tree Energy Ltd. held on October 12, 2007.
    A barrel of oil equivalent (boe), derived by converting gas to oil in the
ratio of six thousand cubic feet of gas to one barrel of oil, may be
misleading, particularly if used in isolation. A boe conversion is based on an
energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.





For further information:

For further information: Kelly J. Ogle, President and Chief Executive
Officer, kogle@upperlake.ca; Upper Lake Oil and Gas Ltd., 1200, 111 - 5th
Avenue SW, Calgary, AB, T2P 3Y6, Phone: (403) 237-9141, Fax: (403) 237-9140,
www.upperlake.ca

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UPPER LAKE OIL AND GAS LTD.

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