Kallisto Energy announced that wells three and four of the planned water-flood scheme at Pembina, Alberta have been drilled, completed and placed on production. The horizontal wells, located at 102/04-04-048-03 W5M and 100/05-04-048-03 W5M, were completed using multi-stage fracture stimulations. The drilling of the first two wells of the water-flood scheme was announced on August 13, 2012. Production from the four new horizontal wells is in line with historical performance from previous wells. Kallisto now has an interest in twelve producing Cardium oil wells at Pembina.

The water-flood scheme is expected to result in the drilling of a total of five horizontal oil wells in section 4-048-03 W5M, four in 2012 (which have now all been drilled, completed and are on production) and one in 2013, bringing the total number of wells in the section to seven. The new wells are expected to be produced through the 5% royalty period for horizontal oil wells (the earlier of two years or 60,000 bbl). Three of the seven wells in the section will be converted to water injection wells; the first well in Q4 2012 and the next two wells in 2014/2015. Kallisto's share of the water-flood project costs is estimated to be approximately $4.2 million.

Following a successful evaluation of the results of the water-flood in section 4, the water-flood project is expected to be expanded to include part or all of the remaining two sections of land in the Pembina project.

The development of its Pembina lands has added significant reserve value and cash flow to the company. Since the beginning of production operations in November 2009, the first ten Pembina wells have produced a total of approximately 460,000 BOE, including 392,000 bbl of oil. Initial 30 day field production rates from the first ten wells averaged approximately 230 BOE/d (69 net), including 210 bbl (63 net) of oil. Kallisto has a 30% working interest in the Pembina project.