Culane Initiates Review of Strategic Alternatives

Culane Energy Corp. (TSX VENTURE:CLN) ("Culane" or the "Company") announces a
decision by its board of directors (the "Board") to initiate a review of
strategic alternatives.


After a thorough review of the Company's current share price, reserves,
production, and operations, the Board has concluded that Culane trades at a
substantial discount to the net asset value of its underlying assets at a time
when oil prices have exceeded $100 per barrel with future oil prices trending
higher. Accordingly, the Board has decided to initiate a process to identify,
examine and consider a range of strategic alternatives available to the Company
with a view to enhancing shareholder value. Such strategic alternatives may
include, among other alternatives: a sale of a material portion of the assets of
the Company; a sale of the Company, either in one transaction or in a
combination of transactions; or a merger or other business combination. There
can be no assurances that the process will result in a transaction of any form.
The Company has not set a definitive schedule to complete its evaluation and,
notwithstanding the above, no decision on any particular alternative has been
reached at this time.


In connection with this mandate, the Company has retained FirstEnergy Capital
Corp. as its financial advisor to assist in this process.


COMPANY FOCUS

Alberta

Killam remains the primary focus for the Company. Culane commissioned a
reservoir simulation study to evaluate the Killam reservoir for Primary,
Secondary (waterflood) and Tertiary (Surfactant Polymer flood) recovery. The
work was carried out by Reservoir Modelling and Management Inc. (RMM) over a 4
year period. RMM has been involved in approximately 100 waterflood programs
around the world. Modeling work was extensive with geological models being built
based on all Killam Pool well logs, drill cores acquired from several Culane
vertical wells in the Killam pool, petrophysical data, 3D seismic coverage over
the entire pool, structural deterministic mapping in the Petrel geological model
and then upscaled into the IMEX black oil simulator. Wells were history-matched
to gas, oil and pressure data.


For the Tertiary (Surfactant Polymer flood) part of the study, reservoir
simulation work was also carried out which included linear core flood work and
fluid compatibility work for various surfactant polymer blends. The surfactant
polymer flood facility to implement the Tertiary flood has been designed. This
facility will cost approximately $4.7 million and is scheduled for construction
in the second half of 2012. Field injectivity testing in selected wells is
planned for July 2011.


After a 16 month regulatory delay, Culane received its waterflood approvals in
November of 2009. Without regulatory approvals Culane could not inject water
into the reservoir to maintain reservoir pressure which in turn caused a gradual
decline in oil production rates. Water injection commenced in November 2009 in
section 16-46-12 W4M and in February 2010 for sections 9 and 10. As of January
2011, water injection rates into the Killam Pool increased to approximately
6,500 barrels of water per day. Cumulative water injected into the Killam Pool
to date is estimated at approximately 2.4 million barrels. With the sustained
water injection into the Killam Pool, Culane is observing full-field response
which has been confirmed by Culane's independent engineering evaluator. Culane
has 31 multi-leg horizontal producing oil wells at Killam and 13 water injectors
that are a combination of both vertical and horizontal wells and 12 vertical
water source wells. Approximately $110 million has been spent to date at Killam
which includes the drilling, completion and equipping of all oil, water and
injection wells, source water well pipelining, natural gas pipeline
infrastructure and the construction and commissioning of the water injection
facilities. The Killam project is now fully capitalized and implemented for the
waterflood stage of oil recovery.


The "Discovered Petroleum Initially-In-Place" at Killam (net to Culane) is
estimated at approximately 42 million barrels of 24 degrees  API oil. Culane
maintains 100% ownership in this asset and is the operator. To date only 5% or
2.1 million barrels of oil has been produced under Primary production (which
equates to approximately $84 million dollars in net cash flow to Culane) since
January of 2005. Based on oil recoveries derived from the Killam reservoir
simulation described above and comparison with analogous waterfloods, oil
recoveries of 22.5% for the waterflood stage could be achieved. 


The surfactant polymer reservoir simulation described above and analogous
surfactant polymer floods indicate that total oil recoveries of up to 48 percent
can be achieved. The next stage of constructing a central battery will also
include the construction and implementation of the surfactant polymer facilities


In summary, for the additional cost of approximately $10 million for the
construction of a central facility and the implementation of the surfactant
polymer facilities, significant incremental oil reserves can be achieved above
the 5 percent of oil already produced, based on the waterflood and surfactant
polymerflood reservoir simulation results and further supported by analogous oil
reservoirs currently under waterflood and surfactant polymer flood. Operating
costs are expected to drop by several dollars a barrel with the construction of
a central battery and an additional 5% tertiary government royalty decrease will
come into effect with the construction and implementation of the surfactant
polymer facilities.


Culane's Killam Pool development project is a reserve-based play whereby the
main oil reserves growth of the Company has come through the development and
implementation of the waterflood and surfactant polymer floods over the past 6
years. Actual production at Killam has been history-matched in the existing
reservoir simulation in late 2010, and results are closely matching predictions.



A new independent engineering reserve report effective December 31, 2010 is
expected to be completed in late March 2011.


Saskatchewan

As previously announced Culane has acquired just under two townships of land in
southwest Saskatchewan, most with multizone potential. Culane has completed its
initial phase of exploration which focused mostly on the Birdbear and the Upper
Shaunavon formations. Results are promising but in the early stages. At Notukeu
future Upper Shaunavon oil wells require longer horizontal sections with more
frac intervals of larger size. Oil rates of 200 barrels per day were initially
achieved on the first test horizontal well with production eventually declining
to 20 barrels per day. It is believed that frac sand has flowed back into the
well bore and needs to be removed to increase the production rate. Culane owns
13 sections of land at Notukeu with 45 potential horizontal drilling locations.


On January 26, 2011 Culane announced the drilling results on its Kerrobert
property. A well drilled at 16-10-34-22W3, reached total depth of 1,463 meters
and was logged on January 13, 2011. The Kerrobert well is a vertical
stratigraphic test well with two target formations in the Devonian. First, an 18
meter drill core was retrieved from the Devonian Birdbear formation and sent for
analysis. Results of this analysis were encouraging with oil saturation,
permeability, and porosity better than expected. Over a 5 meter dolomite
interval, porosities ranged from 20 to 26 percent and oil saturations ranged
from 40 to 77 percent. Permeabilities in this interval ranged from 34
millidarcies with a 40 percent oil saturation to 635 millidarcies with a 69
percent oil saturation. These permeability and oil saturations exceed core
results published on the A12-4-39-27 W3M vertical test well located in the
center of the oil producing Hallam North Birdbear pool located in S.W.
Saskatchewan. Culane has applied for an HWP (Horizontal Well Project) approval
to drill horizontal wells into the Birdbear formation.


In Saskatchewan, Culane will pay a 2.5% Crown royalty on the first 100,000
barrels (16,000 m3) of oil produced from any horizontal wells drilled in the
Birdbear formation on Saskatchewan Crown lands. The economics show that the
internal rate of return for a successful Birdbear well exceeds 200%. Culane owns
a 100% working interest on approximately 44 sections of land in Kerrobert. 


About Culane Energy Corp.

Culane Energy is a junior oil and gas company engaged in the exploration,
development and production of oil and natural gas in Alberta and Saskatchewan.


27,189,754 Common Shares

Reader Advisories

Forward-Looking Statements: This news release contains certain forward-looking
statements, including management's assessment of future plans and results from
operations including results and costs of waterflood and polymer flood programs,
that involve substantial known and unknown risks, uncertainties and assumptions,
certain of which are beyond Culane's control. Such risks, uncertainties and
assumptions include, without limitation, those associated with oil and gas
exploration, development, exploitation, production, marketing, processing and
transportation, loss of markets, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental risks, competition
from other producers, inability to retain drilling rigs and other services,
delays resulting from or inability to obtain required regulatory approvals and
ability to access sufficient capital from internal and external sources, the
impact of general economic conditions in Canada, the United States and overseas,
industry conditions, changes in laws and regulations (including the adoption of
new environmental laws and regulations) and changes in how they are interpreted
and enforced, increased competition, the lack of availability of qualified
personnel or management, fluctuations in foreign exchange or interest rates,
stock market volatility and market valuations of companies with respect to
announced transactions and the final valuations thereof, and obtaining required
approvals of regulatory authorities. Culane's actual results, performance or
achievements could differ materially from those expressed in, or implied by,
these forward-looking statements and, accordingly, no assurances can be given
that any of the events anticipated by the forward-looking statements will
transpire or occur, or if any of them do so, what benefits that Culane will
derive there from. Readers are cautioned that the foregoing list of factors is
not exhaustive. Additional information on these and other factors that could
affect Culane's operations and financial results are included in reports,
including Culane's annual information form for the financial year ended December
31, 2009, on file with Canadian securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com). All subsequent
forward-looking statements, whether written or oral, attributable to Culane or
persons acting on its behalf are expressly qualified in their entirety by these
cautionary statements. Furthermore, the forward-looking statements contained in
this news release are made as at the date of this news release and Culane does
not undertake any obligation to update publicly or to revise any of the included
forward-looking statements, whether as a result of new information, future
events or otherwise, except as may be required by applicable securities laws.