Online Energy Inc. Provides an Operations Update

Online Energy Inc. ("Online" or the "Company") (TSX VENTURE:ONL) is pleased to
provide an update on the testing and evaluation of its 100% working interest
horizontal Paddle River 8-31-055-07W5M Ostracod oil well and on the status of
its four other resource plays in the greater Paddle River area of Alberta.


Online Hz Paddle River 8-31-55-7W5M Ostracod Oil Well

As previously reported on November 29, 2011, extended testing of the 8-31 well
was hampered by an influx of water and wellbore blockages. In order to address
these issues, the ball seats within the horizontal section of the wellbore were
milled-out, the wellbore was cleaned-out and an evaluation with a packer
assembly was undertaken. 


Since November 29, 2011, the Company has continued to test and evaluate the
well. Its performance has continually improved since the completion of the
downhole work to the point that it is capable of flowing unassisted. The well is
currently shut-in and being re-configured to accommodate anticipated future
pumping requirements. Prior to being shut-in, the well flowed over a three day
period at an average rate of 129 bopd (27.6 degree API) and 81 mcf/d of gas
(total of 142 boe/d) with water cuts averaging 50%. Over the final eight hours
the well flowed at an average rate of 149 bopd and 94 mcf/d of gas (total of 164
boe/d) with water cuts averaging 33%. The well appears to have continued to
clean-up while flowing and performance is expected to improve further,
particularly when the benefit of pumping equipment is realized. The Company
plans to equip the well over the coming weeks and production is expected to
commence in late January 2012. 


The 8-31 well is the first horizontal Ostracod oil well drilled and fracture
stimulated in the Paddle River area. The Company is very encouraged by the
recent performance of the well and is preparing to drill additional wells on the
project utilizing knowledge gained throughout the 8-31 drilling, completion and
evaluation operations. 


Online has 37.5 net sections of prospective lands on the Ostracod oil trend in
the Paddle River area. 


Greater Paddle River Area Resource Plays

The Company has successfully assembled extensive land positions on four
additional resource plays in the greater Paddle River area.


At Niton, Online has 18.5 net sections of land within the Notikewin sand trends
charged with liquids-rich gas (28 bbls/mmcf). The Company has defined the
reservoirs with 3D seismic and is currently producing from vertical wells.
Online's first horizontal multi-frac well on this project at 102/5-27-56-12W5M
is currently being licensed and is expected to be drilled early in 2012.


The Company's lands include 106 net sections on the liquids-rich gas (up to 40
bbls/mmcf) Wilrich sand trends. Several offsetting operators are successfully
developing this play through the application of horizontal multi-frac
technology. Online is focusing on two locations to test the play concept on its
lands in 2012.


The Company currently produces liquids-rich gas (up to 70 bbls/mmcf) from the
Nordegg horizon in vertical wells in the Leaman, Greencourt and Paddle River
areas. Recently acquired data suggests that recoveries may be significantly
improved by exploiting lower quality portions of the reservoirs that remain
relatively undepleted. Online has recently been successful in recompleting a
100% working interest vertical well to test the concept. This well will be
evaluated on an ongoing basis to assess the viability of proceeding to
horizontal technology on this project. Online currently has 118 net sections of
Nordegg rights in the greater Paddle River area.


The Duvernay shale resource play is currently capturing much attention in west
central Alberta. Online controls 90 net sections of Duvernay rights (all 100%
working interest) that are within the Duvernay west shale basin. Thermal
maturation mapping suggests that the lands are also in an area that is prone to
be liquids-rich gas charged.


Outlook

Online's fourth quarter 2011 average production is estimated to be approximately
425 boe/d. Production is expected to increase significantly in Q1-2012 when the
8-31 horizontal Ostracod oil well comes on-stream. 


The Company will exit the year with positive working capital and no debt.

Online is very encouraged by the results of the 8-31 well and will continue to
direct its efforts to advancing its resource plays, including the Paddle River
Ostracod asset in 2012. 


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 judgments
with respect to the future including, but not limited to, the outlook for
commodity markets and capital markets, the performance of producing wells and
reservoirs, well development and operating performance, general economic and
business conditions, weather, the regulatory and legal environment and other
risks associated with oil and gas operations. 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.


In the interest of providing Online shareholders and potential investors with
information regarding the Company, including management's assessment of Online's
future plans and operation, certain statements throughout this press release
constitute forward looking statements. All forward-looking statements are based
on the Company's beliefs and assumptions based on information available at the
time the assumption was made. The use of any of the words "anticipate",
"continue", "estimate", "expect", "may", "will", "project", "should", "believe"
and similar expressions are intended to identify forward looking statements. By
its nature, such forward-looking information involves known and unknown risks,
uncertainties and other factors that may cause actual results or events to
differ materially from those anticipated in such forward looking statements.
Online believes the expectations reflected in those forward looking statements
are reasonable but no assurance can be given that these expectations will prove
to be correct and such forward looking statements contained throughout this
press release should not be unduly relied upon. 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 on 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.


Barrels of oil equivalent (boe) may be misleading, particularly if used in
isolation. A boe conversion ratio of six thousand cubic feet (mcf) of natural
gas to one barrel (bbl) of oil is based on an energy conversion method primarily
applicable at the burner tip and is not intended to represent a value
equivalency at the wellhead. All boe conversions in this press release are
derived by converting natural gas to oil in the ratio of six thousand cubic feet
of natural gas to one barrel of oil. Certain financial amounts are presented on
a per boe basis, such measurements may not be consistent with those used by
other companies.


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