Online Energy Inc. (TSX VENTURE:ONL) provide an update on the completion and testing of its Paddle River 1-5-55-7W5M Ostracod horizontal oil well.

The 1-5 well is the second Online 100% W.I. horizontal well on its Paddle River Ostracod oil project. It was drilled in March and reached a total depth of 3,089 metres, including a 1,254 metre horizontal trajectory. Completion operations, including a 14-stage multi-frac program, were recently completed. A total of 4,250 barrels of load fluid was pumped during the completion process. The well was subsequently production tested for a total of seven days. The well was swabbed-in for the first four days and was flowing for the final three days.

During the seven day period, a total of 3,300 (78%) barrels of the water based load fluid was recovered. During the final three days of the test the well flowed I oil and associated solution gas at an average rate of 438 boe/d (73% oil). During the final 24 hours the well flowed at an average rate of 417 boe/d (70% oil).

The well is currently shut-in. Operations to equip the well and tie-in the solution gas to existing Online facilities will commence as soon as ground conditions permit. The Company anticipates the well will commence production by September 1, 2012 at an initial rate of approximately 400 boe/d (80% oil and Ngls).

While the Company is very encouraged by the initial results from the 1-5 well, it cautions that these results may not be indicative of its long-term performance. Ongoing technical work continues to improve the Company's understanding of its Paddle River Ostracod oil play and the ultimate potential of the project.

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

Outlook

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.

The Company estimates its working capital deficiency will be approximately $3.3 million as of September 30, 2012. This includes all costs to drill, complete, equip and tie-in the 1-5 well. Completion costs for this well were higher than anticipated as a result of additional costs incurred to overcome wellbore integrity issues that were encountered. The Company has a credit facility consisting of a revolving operating demand loan to a maximum of $4,750,000 and an additional acquisition or development demand loan to a maximum of $1,250,000.

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.