Birch Lake Energy Inc. provide an operational update at its Lochend property and has entered into a letter agreement with Sundance Energy Corporation with respect to a joint venture and a proposed business combination.

The Company announces that production has recently commenced. The 14 stage fracture stimulation completed on the well was successful; however, it has been established that there was a collapse in the casing in the horizontal portion of the well. As a result, the swab rates reported December 21, 2012 represent production from only an estimated 5 of the 14 fracs completed.

An assessment of similar casing failures within the industry indicated that remedial operations would be expensive and were rarely successful. In light of this, it was decided to put the well into production from the limited interval. Although the Company is disappointed the full potential of the well was not realized, it is encouraged by the swab results from the limited portion of the well, and will advise on IP30 rates following the first month of stabilized production. More importantly, the geological success of this well in encountering a porous oil productive Cardium sand at the southern extent of the Company's lands has significantly de-risked future drilling of these lands.

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