Online Energy Inc. Announces Second Quarter 2012 Financial Results

Online Energy Inc. ("Online" or the "Company") (TSX VENTURE:ONL) announces its
financial and operating results for the three and six months ended June 30,
2012. Selected financial and operational information is outlined below and
should be read in conjunction with the unaudited condensed interim financial
statements for the three and six months ended June 30, 2012, which are available
on the SEDAR website at www.sedar.com and on the Company's website at
www.onln.ca.




FINANCIAL AND OPERATING HIGHLIGHTS                                          
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                       Three months ended June 30  Six months ended June 30 
                               2012          2011         2012         2011 
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Financial - Canadian $                                                      
Petroleum and natural                                                       
 gas sales                1,086,232     1,197,639    2,373,596    1,910,160 
Net loss and                                                                
 comprehensive loss        (668,580)     (423,194)  (1,199,595)  (1,403,104)
Per share - basic and                                                       
 diluted                      (0.01)        (0.01)       (0.03)       (0.04)
Capital expenditures                                                        
 Property, plant and                                                        
  equipment                  35,209     1,351,554      150,709    7,145,013 
 Exploration and                                                            
  evaluation              1,611,874       733,180    4,293,046    1,846,301 
Working capital                                                             
 (deficiency)            (1,759,375)    8.545,447   (1,759,375)   8,545,447 
                                                                            
Common shares                                                               
 outstanding             45,768,089    41,309,889   45,768,089   41,309,889 
                                                                            
Operating                                                                   
Average Daily                                                               
 Production                                                                 
 Crude oil - Bbls/d              78            38           81           28 
 Natural gas liquids -                                                      
  Bbls/d                         80            78           79           67 
 Natural gas - Mcf/d          1,482         1,191        1,540        1,005 
 Total - Boe /d                 406           315          417          263 
                                                                            
Average Sales Prices                                                        
 Crude oil - $/Bbl            66.53         91.76        73.10        88.89 
 Natural gas liquids -                                                      
  $/Bbl                       46.79         63.59        51.62        59.46 
 Natural gas - $/Mcf           1.84          3.95         1.99         3.89 
 Total - $/Boe                29.43         41.82        33.31        40.19 
                                                                            
Operating Netbacks(1)                                                       
 Oil - $/Boe                  22.28         11.36        25.42        11.65 
 Gas - $/Mcfe                 (0.84)         1.09        (0.11)        1.24 
 Total - $/Boe                 0.76          7.02         4.59         7.85 
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(1) Refer to Cautionary Statements.                                         



Results of Operations

Production of crude oil and natural gas for the three and six months ended June
30, 2012 (the "Quarter" and the "First Half", respectively) were significantly
higher than the comparable periods in 2011, primarily as a result of production
additions from acquisitions, work-overs and drilling.


Crude oil prices received by the Company for the Quarter and the First Half
declined 27% and 18%, respectively from the comparable periods in 2011. The
decline was a result of lower WTI prices combined with increased differentials
on Canadian oil due primarily to refinery outages and upgrades, oil production
growth in both Canada and the United States and pipeline infrastructure
bottlenecks in the mid-western region of the United States.


Natural gas liquids prices for the Quarter and the First Half declined 26% and
13%, respectively from the comparable periods in 2011 as a result of an
increasing supply of liquids from drilling activity focused on liquids-rich gas.


Natural gas prices for the Quarter and the First Half declined 53% and 49%,
respectively from the comparable periods in 2011 as a result a surplus of
natural gas in Canada and the United States.


Despite increased production volumes for the Quarter, the decline in commodity
prices resulted in a 9% decrease in total revenue for the Quarter compared to
the second quarter in 2011.


Revenues increased 24% for the First Half compared to the first half in 2011 as
the 59% increase in production volumes exceeded the impact of the 22% decline in
overall commodity prices.


The net loss and comprehensive loss for the Quarter and the First Half of
$668,580 and $1,199,595, respectively were primarily a result of the lower
commodity prices coupled with non-cash charges relating to depletion and
depreciation, stock based compensation, accretion and offset by a deferred tax
benefit. The net loss and comprehensive loss for the first half of 2011 included
an impairment provision of $1,121,013 in addition to non-cash charges relating
to depletion and depreciation, stock based compensation, accretion and a
deferred tax benefit.


Crude oil netbacks for the Quarter and the First Half increased 96% and 118%,
respectively, from the comparable periods in 2011. The increases were a result
of the inclusion of netbacks of approximately $30.00 from the Company's initial
Ostracod horizontal oil well that commenced production in February 2012.


Natural gas netbacks for the Quarter and the First Half were both negative as a
result of decreased natural gas prices. The Company continues to monitor natural
gas prices and is shutting-in gas wells where appropriate.


Total capital expenditures for the Quarter and the First Half were $1,647,083
and $4,443,755, respectively, with the majority of these expenditures directed
towards the Company's Ostracod project.


As at June 30, 2012, the Company had a working capital deficiency of $1,759,375
and a credit facility with a Canadian chartered bank consisting of a revolving
operating demand loan to a maximum of $4,750,000 and an acquisition development
demand loan to a maximum of $1,250,000. As at June 30, 2012, no funds had been
drawn on the credit facility.


The Company raised $1,220,792 during the Quarter, issuing 2,916,700 common
shares at a price of $0.26 per share and 1,541,500 flow-through common shares at
a price of $0.30 per share. Share issue costs were $260,275.


Outlook

The Company anticipates the recently completed Paddle River 1-5-56-7W5M Ostracod
horizontal oil well will commence production by September 15, 2012 at an initial
rate of approximately 400 boe/d (80% oil and Ngls). The two week delay from
previous guidance is a result of the heavy rains that have impacted the
Company's operations in the Greater Paddle River area for most of the summer.
While there currently is not an established decline curve for the Ostracod
horizontal oil project due to the lack of data, the Company has budgeted that
the 1-5 well will decline approximately 50% from its initial rate by December
31, 2012. Based on these estimates, the Company has budgeted production of 450
boe/d and 675 boe/d for Q3-2012 and Q4-2012, respectively (43% and 53% oil &
liquids, respectively).


Online controls approximately 43 net sections of prospective lands on the
Ostracod oil trend in the Paddle River area.


The Company has successfully assembled an extensive land position of 140 net
sections in the Greater Paddle River area of west-central Alberta. This
concentrated acreage position supports a large inventory of horizontal
multi-frac well locations on a variety of resource plays including the
Notikewin, Wilrich, Ostracod, Rock Creek, Nordegg and Duvernay formations.
Online also maintains a growing inventory of low-risk vertical oil locations
targeting the Viking and Nordegg formations as well as a number of low- cost
re-entry opportunities.


Interested parties are invited to view the Company's corporate presentation
which is periodically updated on its website at www.onln.ca.


Cautionary Statements:

This press release contains certain forward-looking statements (forecasts) under
applicable securities laws relating to future events or future performance.
Forward-looking statements are necessarily based upon assumptions and judgements
with respect to the future. In some cases, forward-looking statements can be
identified by terminology such as "may", "will", "should", "expect", "projects",
"plans", "anticipates" and similar expressions. These statements represent
management's expectations or beliefs concerning, among other things, future
operating results and various components thereof affecting the economic
performance of Online. Undue reliance should not be placed on these
forward-looking statements which are based upon management's assumptions and are
subject to known and unknown risks and uncertainties, including the business
risks discussed above, which may cause actual performance and financial results
in future periods to differ materially from any projections of future
performance or results expressed or implied by such forward-looking statements.
Accordingly, readers are cautioned that events or circumstances could cause
results to differ materially from those predicted. These statements speak only
as of the date specified in the statements.


In particular, this press release may contain forward looking statements
pertaining to the following:




--  the performance characteristics of the Company's oil and natural gas
    properties; 
--  oil and natural gas production levels; 
--  capital expenditure programs; 
--  the quantity of the Company's oil and natural gas reserves and
    anticipated future cash flows from such reserves; 
--  projections of commodity prices and costs; 
--  supply and demand for oil and natural gas; 
--  expectations regarding the ability to raise capital and to continually
    add to reserves through acquisitions and development; and 
--  treatment under governmental regulatory regimes. 



The material assumptions in making these forward-looking statements include
certain assumptions disclosed in the Company's most recent management's
discussion and analysis included in the material available in this press
release.


The Company's actual results could differ materially from those anticipated in
the forward looking statements contained throughout this press release as a
result of the material risk factors set forth below, and elsewhere in this press
release:




--  volatility in market prices for oil and natural gas; 
--  liabilities inherent in oil and natural gas operations; 
--  uncertainties associated with estimating oil and natural gas reserves; 
--  competition for, among other things, capital, acquisitions of reserves,
    undeveloped lands and skilled personnel; 
--  incorrect assessments of the value of acquisitions and exploration and
    development programs; 
--  geological, technical, drilling and processing problems; 
--  fluctuations in foreign exchange or interest rates and stock market
    volatility; 
--  failure to realize the anticipated benefits of acquisitions; 
--  general business and market conditions; and 
--  changes in income tax laws or changes in tax laws and incentive programs
    relating to the oil and gas industry. 



These factors should not be construed as exhaustive. Unless required by law,
Online does not undertake any obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise.


Natural gas reserves and volumes are converted to barrels of oil equivalent
(Boe) on the basis of six thousand cubic feet (Mcf) of gas to one barrel (Bbl)
of oil. Oil and natural gas liquid reserves and volumes are converted to a
thousand cubic feet of gas equivalent (Mcfe) on the basis of one barrel (Bbl) of
oil and natural gas liquids to six thousand cubic feet (Mcf) of gas. Boes and
Mcfes may be misleading, particularly if used in isolation. A Boe conversion
ratio of 6 Mcf to 1 Bbl and a Mcfe conversion ratio of 1 Bbl: 6 Mcf is based on
an energy equivalency conversion method primarily applicable at the burner tip
and does not represent a value equivalency at the wellhead.


Estimated values contained in this press release do not represent fair market value.

This press release uses the term "netback" which is a term that does not have
standardized meanings under GAAP and this non-GAAP measurement may not be
comparable with the calculation of other entities. The Company uses this measure
to analyze operating performance.


The term "netback", which is calculated as the average unit sales price, less
royalties and operating expenses, represents the cash margin for every barrel of
oil equivalent sold. The Company considers this a key measure as it demonstrates
its profitability relative to current commodity prices. This term does not have
any standardized meaning prescribed by GAAP and, therefore, might not be
comparable with the calculation of a similar measure for other companies.